International SIF: Strategy update + three Euro stocks head for the exit

Tuesday, Sep 18 2018 by
14
International SIF Strategy update  three Euro stocks head for the exit

As promised a few weeks ago, this week I want to provide an update on my International SIF virtual portfolio.

I’m going to make some changes in response to reader feedback in August. Plus I’m going to review the five stocks that are up for eviction this month.

Strategy changes

After receiving a fantastic response from readers in August, this week I want to share with you a summary of your comments and the changes I’m planning.

Geographic changes: Most comments related to the folio’s geographic focus. There was a strong preference for US stocks, with Europe in second place. This is no surprise, as the US is generally the most popular foreign market for UK-based investors. The reasons for this are fairly obvious -- the US market is broad, deep, and very liquid. Company reporting is consistent and reliable and there’s no language barrier.

However, Stockopedia also has a number of subscribers who are based overseas in countries such as Australia and India, where local web services are more limited.

A number of readers suggested multiple regional portfolios. Although this would be interesting, I just don’t have time to do this at the moment. So I’ve come up with a compromise solution that will hopefully satisfy a majority of readers, without excluding anyone.

I’m going to change the geographic allocation of the folio so that it’s weighted more heavily to the most popular foreign markets. I’m also going to exclude all UK stocks, as there’s no point in duplicating the stocks I hold in the main UK SIF fund.

Here’s a comparison between the current allocations and my new fixed allocations. I’ll gradually migrate to the new allocations as stocks are bought and sold:

5ba0b60085705S1.png

Costs, dividends and total return: A number of readers suggested I should include total return, not just price returns.

I’m a big fan of total return and include this in my UK stock write ups. However, tracking dividends on overseas stocks is a bit more complicated, in my experience. And transaction costs vary widely on foreign stocks.

For these reasons, I’m going to continue to ignore dividends and costs. I’ll focus on price return only for international stocks.

More detailed analysis: So far, my analysis of the foreign stocks chosen for the portfolio has been pretty limited. I’ve…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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HKG Price
HK$6.86
Change
1.0%
Mkt Cap (£m)
4,823
P/E (fwd)
6.1
Yield (fwd)
7.8

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LSE Price
$29.2
Change
 
Mkt Cap (£m)
21,774
P/E (fwd)
0.9
Yield (fwd)
43.4

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PAR Price
€35.9
Change
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Mkt Cap (£m)
4,349
P/E (fwd)
6.4
Yield (fwd)
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8 Comments on this Article show/hide all

TheShareWhisperer 18th Sep '18 1 of 8

Roland,
What do you think is going wrong with Derichebourg

It has attractive multiples, strong ROCE, increasing sales, improving margins, decent covered divi resulting in good Quality and Value metrics

Yet momentum and hence shareprice continues down

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brileen 18th Sep '18 2 of 8

Roland
Thank you as always for a very interesting article.
May I ask on this forum whether you have considered a purchase of Gazprom Neft Pao for your UK portfolio. As you say the stock still looks cheap and it has performed relatively well on your international portfolio.
I would be very interested in your answer.
Regards
BB

| Link | Share | 1 reply
Roland Head 18th Sep '18 3 of 8

In reply to post #399639

Hi BB,

I've experimented with owning Russian stocks in my UK portfolio before and after mixed results (https://www.stockopedia.com/content/sif-portfolio-october-review-air-flo-hydr-and-tcs-232558/) I decided not to buy anymore.

These firms almost always appear cheap, but I fear that political interference and vested interests mean that the Russian market doesn't operate in quite the same way as western stock markets.

As this is something I just don't understand, I no longer buy these shares.

Regards,

Roland

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Roland Head 18th Sep '18 4 of 8

In reply to post #399599

I don't really know what's gone wrong (if anything) at Derichebourg.

A number of the International SIF's European stocks seem to have been big fallers without any financial deterioration. Perhaps these markets are taking a more cautious view of the future than UK/US markets? I hope to see some recovery by the time I have to consider disposing of this stock!

Regards,

Roland

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timarr 18th Sep '18 5 of 8
1

In reply to post #399654

The big move back in May was because Derichebourg disappointed on margins at the half year, leading to a suspicion that they'd overpaid for non-earnings enhancing acquisitions, and a potential deteroriation in earnings growth. As we've seen over the last six months in the UK, companies that disappoint even mildly tend to get hammered.

timarr

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Roland Head 18th Sep '18 6 of 8

In reply to post #399759

Hi timarr,

Many thanks for this extra info on Derichebourg. It sounds like outsourcing/support service companies in France may be suffering from similar problems to those which have plagued their UK peers...

Hopefully things won't get worse. A 40%+ drop still seems severe given the TTM ROCE of almost 17%.

Cheers,

Roland

| Link | Share | 1 reply
herbie47 19th Sep '18 7 of 8

In reply to post #399764

I have some european shares, I will say that last year was a good year but this year has been difficult in europe, I would say they have underperformed the UK which is rather surprising, there have been some big pullbacks on high ranked Stockopedia shares for no apparent reason. This is born out if you look at the screens such as CAMSLIM and Jim Slater Zulu. The problem with euro shares is the lack of information, often you just get a couple of lines at quarterly results. Maybe Brexit is affecting the markets over there.

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TheShareWhisperer 21st Sep '18 8 of 8

In reply to post #399759

Thanks for that, I haven't researched Deriche in depth, it just popped up as a good looking stock in screening.

Having said that it has bounced dramatically since my post a few days ago. Up 10% since then. Seems there is value there.

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About Roland Head

Roland Head

I'm a private investor and writer on stock markets, with a particular fondness for free cash flow, dividends and value. I also have an interest in commodity stocks.  I hold the CFA UK Investment Management Certificate (IMC). One of my investment interests is developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. In earlier life, I worked as an engineer in telecoms and IT. The rules-based approach required for this kind of work undoubtedly influenced my investing style. I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a large and now defunct Canadian firm.  more »

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