SIF Portfolio Half-year Review: Go-Ahead Group, Persimmon And Dividends

26th Oct '16 by Roland Head

8 comments 7951 reads

It’s now been six months since I added the first stocks to the Stock in Focus Portfolio on 27 April. In this week’s article I’m going to review the portfolio’s progress during its first half year. Has my experience so far suggested any changes I should make?

I’ll also review the SIF Portfolio’s two oldest holdings, Go-Ahead Group and Persimmon. As these are now six months old, both are due for review. If they no longer qualify for my screen, they’ll be sold.

Finally, I’ll tot up the dividend payments for the shares in the portfolio over the last six months, and add this to my portfolio return.

Progress in an odd market

Since April, I’ve added a total of 17 stocks to the SIF portfolio. You can see how things look on the SIF Portfolio page.

The value of the portfolio -- including uninvested cash but excluding dividends -- has risen by 5.6%. Over the same period, the FTSE All-Share has risen by almost 10%. In other years, a 5.6% gain over six months might have been enough to beat the portfolio’s FTSE All-Share benchmark. But 2016 has been exceptional for the rapid gains seen in certain sectors of the market.

I chose the FTSE All-Share for my benchmark as the portfolio is open to stocks of all sizes. But one downside of this benchmark is that it is very heavily weighted towards the FTSE 100. The big cap index has delivered rapid gains for natural resources stocks and defensive businesses whose earnings are mainly generated outside the UK.

These sectors aren’t proportionately represented in the SIF portfolio, as they haven’t qualified for my SIF screen. I believe this is one of the main reasons why the portfolio has lagged the benchmark over this relatively short period. A second factor limiting potential returns is that the portfolio also contained a high level of cash for the first few months of its life.

I’m hopeful that over longer periods, these effects will fade. In any case, I’m not too distressed by a 5%+ gain in six months.

Go-Ahead Group disappoints

My purchase of Go-Ahead stock was poorly timed. Soon after the bus and train operator joined the portfolio, it issued an update warning that profit margins on its troubled Govia Thameslink franchise would be lower than expected…

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Ken Lowes

26th Oct '16

Hi Roland
I understand that this portfolio was created on a rules based basis---- could you direct me to the rules please?
Ken

Should have mentioned I appreciate that you are applying screen rules but are there other rules such as review every six months which is deciplined but possibly pointless as the period is too long / short to be really valid

1James1n1

Hi Ken,

I found them in paragraph 4 under "Progress in an add market" by following the link at the end of the sentence that read, "These sectors aren’t proportionately represented in the SIF portfolio, as they haven’t qualified for my SIF screen. "

James

Roland Head

Hi Ken,

Here's the link to my Google Docs file listing the screening criteria.

https://docs.google.com/document/d/1LklAxJBB3uveCnxWUui7KiDiRbGWOqdzO5EV90H-SMU/edit?usp=sharing

Regards,

Roland

Hi Ken,

I accept that the six month period is fairly arbitrary. Depending on your investment/trading style, it's probably either too short or too long.

The challenge here was that I had to specify a minimum period. Realistically the choice was 6 months or one year. If I decide that six months is too short, I may extend it in future. But for now, I'm using the original rules to give them a chance to work (or not!).

Hope this makes sense.

Regards,

Roland

Roland --This is all supposed to be constructive---- The RS 1 Year is only really telling you how that share is performing against the market, not a lot of use really, you can ignore it or act upon it, but if you act and sell the damage could have been done over a long period of time and recovery could be just around the corner, the only question at that 1 year stage is "would you buy it"? . I think you need a counter balance so you only sell when both of them are going in the same direction-- how about Sp 3 months and Rs 6 months or even 1 month and 3 although you might consider that to be too short. That having been said your objective appears to be long term so why worry about momentum at all. If you are running quality the only thing that should make you sell is a change in fundamentals and that will occur quarterly or warnings. So you will still need to monitor the portfolio on a weekly / monthly basis. If you can only monitor on six monthly basis, because of time constraints, perhaps you should be in collective investments where the volatility will be less and so will the gain/loss. Perhaps the rules that are sacrosanct could be alarmed and you only act when they are broken. Obviously you may wish to rebalance but that is a different discipline for different reasons. I appreciate that you know perfectly well what you are doing and I am not suggesting otherwise just offering a different perspective.
Regards
Ken

Howard Adams

Roland

Many thanks for your review and previous postings. I have read each with interest to learn how you are applying a disciplined quants/factor-based investing approach to designing and administering a portfolio.I have learned quite a few pointers to adopt, so thank you for those.

Also, I appreciate you articulating your intellectual struggles with some of the choices you are facing. These have also informed me about applications of rules and implementation of personal disciplines.

Like you, I think the 5.6% (6.1% with dividends) is a respectable return for the first six months, because none of it was by accident or luck, but rather it is an outcome of systematic investing and thus from a foundation from which you can refine. To me this is a particularly valuable goal from this exercise, recognising of course that the time period is understandably short.

I look forward with interest to further updates and the end of year review. I will even go so far as to say, I believe that you are very likely to outperform the FTSE All-share index you are assessing the portfolio against.

Regards
Howard

JFK

Hi Roland,

I was fortunate to buy GOG after the 15% drop and it appears to me that the shares will only improve further IF and when the Southern Rail/Govia problems are addressed positively. It appears that the problems are priced in and hence the share hovers around the 2000 mark. The bus franchises are excellent and the new Singapore bus franchise may add further to this line. It seems that the bidding for the West Midlands line and if they are able to keep the Southern line or are paramount to a share price boost.

I would welcome your views on how you value the share based on the bus line alone.

Thanks for your posts and previous email response.

Kind regards

JK

SIF Portfolio half-year review: Go-Ahead Group, Persimmon and dividends

Progress in an odd market

Go-Ahead Group disappoints

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Roland Head

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