My StockRanks £20k Portfolio 2 years on (Part 2) - The Rebalancing
Introduction
My StockRanks £20k Portfolio 2 year on (Part 2) - The Rebalancing is part of a series of posts about adopting the Stockopedia StockRanks system into a real money test portfolio. With a starting balance of £20, 000 I wanted to test the system over a number of years. After an undetermined period of time and if I become more comfortable with my rules set, it is my aim to completely adopt a StockRanks system into my discretionary portfolio.
I have now completed my second year of the journey now ready to rebalance the portfolio. The results of the second year can be found here.
My StockRanks £20k Portfolio 2 years on (Part 1) - Results
At the bottom of the page is links providing a history of the journey so far.
My Rules
Here is a recap of the rules.
- The Stockopedia QVM Recipe (Quality > 66, Value > 66, Momentum > 66)
- Dividend Yield 12 month rolling > 0
- Market Cap > £20m
- Spread (bps) < 500
- Sector includes - One screener for each sector (10 sectors in total)
- Rebalance every 12 months
I will try to pick stocks that have the Rank 90 or above and quoted in GBP.
While I try my best to balance over all sectors I may reserve the right to ignore a sector or adding a more stocks a single sector should I feel this is appropriate. This may be due to no stocks qualifying in any particular sector and I wish to keep around 10 stocks invested.
Exit Plan
A stock will leave the portfolio when it goes below StockRank 90 and a more suitable qualifying stock can take its place. Once the Stock is part of the portfolio the Quality, Value or Momentum figures may go below 66. That is ok as long as the Stock remains above 90 at the time of rebalancing
Stop Loss
During the past two years I have felt uncomfortable with not having a stop loss plan integrated into this portfolio. A stop loss is integral throughout all my investing strategies and placing a stop loss is a system that works for me and one that I do trust. I can leave all my portfolios when I work offshore with the comfort that they do not need constantly monitored and stop losses protect me during these period of absences.. I want a reasonable exit plan put in place to protect me from the unexpected both in individual stocks but also from full market forces.
As such I will now place a fixed stop loss in all these stocks. The stop loss will remain where it is throughout the year and shall not be trailed. As such I am allowing for initial move upwards and room for the share price to breath once it is clear from the buy price.
The Portfolio (1st November 2016)
The stocks in the portfolio were purchased on the 27th and 28th October 2016. £EMR stays in as the only real stock to qualify. However you may be surprised to see NWF (LON:NWF) as part of the portfolio despite being StockRank 89. This is explained later.
Stop loss Positions
3IN = 178p, BWY = £20.75, BXP = 42.5p, CAML = 155, EMR = 87,
KCOM = 104p, MCLS = 144p, NUM = 172p, NWF = 135p, SSY = 80p
The screening process - difficulties, emotions and unwritten rules
Throughout my journey I need to be as honest with readers as I possible can. The screening process should be as mechanical as possible with the only intervention from myself in choosing what I think may be the most suitable Stock from the screener. This thought process implies that I look at the individual categories of the StockRanks. I try not to go further into the details of accounts as this could introduce more of my emotion into the system.
The ENERGY and UTILITIES sectors were my biggest challenge to both sticking with the rules and battling my emotions. The thought of investing especially into energy always makes me feel uncomfortable. Most of the stocks that qualified in the screener were Russian oil producers. At the moment I have an unwritten rule not to invest in any Russia or Russia influenced related stock and combing this with Oil and I admit my emotions got the better of me. I simply couldn't invest in them. I am sorry for readers who think this may defeat the purpose more of my system but I simply couldn't ignore my emotions on this. I accept that I may not be part of the share price gains of the Russian Oil stocks.
So I only had the one choice in the energy sector and that was TTA. I decided however to break my rule from the outset when I saw NWF was only one stock rank down and decided after selling NWF to put her back in the portfolio. On the Utilities sector I decided against the two qualifying stocks ELSA and HYDR
I hope my readers can be a little forgiving this year.
Stockopedia Analysis Tools
Below are some screen grabs of the wonderful portfolio tools available to help in diversification and sector weightings.
Bubble Chart
My favourite is the bubble chart and as expected my stocks are grouped into the 'Good, cheap stocks tend to outperform'.
Sector Analysis
As seen here I decided to allocate the investment that should have been used to buy a Utilities sector stock into the Financials Sector. The market is weighted towards the Financial sector allowing me to add in two stocks. Numis (LON:NUM) was my first choice and then I added in £3IN.
Sector Weights vs Market
I am happy with the weights here. I am overweight a little on the Technology and Telecoms Sector. I reduced the holdings a little on KCOM (LON:KCOM) and increased Numis (LON:NUM) a little.
Portfolio Weights vs Limits
All reasonably balanced.
Forecast Ratios vs Market Averages
Conclusion
The rebalancing wasn't so straight forward this year and I took quite a few days to decide which stocks to invest in. Over the next few years the markets are going to be so uncertain due to the ongoing geo political matters including Brexit, wars, oil price etc. I believe however this period of uncertainty is an excellent test for the StockRanks system and this portfolio itself.I will continue to tweak the rules as necessary going forward until I find a system that I am reasonable comfortably with and one that can be adopted fully into all my portfolios.I am much more comfortable now that I have included Stop Losses. Stop Losses are part of me and now that they are part of this portfolio I can be satisfied fully with my exit plans.Take care everyone and I'll see you next year with this update.Happy Investing
Ian M-Smith @GrindertraderUK www.GrindertraderUK.com
Links:- My StockRanks £20k Portfolio 2 years on (Part 1) - Results
- My StockRanks £20k Portfolio 1 year on (Part 2) - The Rebalancing
- My StockRanks £20k Portfolio 1 year on (Part 1)
- My Stockopedia 20k Farmed Portfolio - The PLUS500 effect and why I am happy
- My StockRanks Farming Approach - a 20k Real Money Test Portfolio
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
2 comments
Hi r,
Thanks for the kind comments. It sounds like you have a good plan in place and of course if it works for you that's great. I am very much a medium to long term trader/investor. While I pick my stocks based on fundamentals I used charts and ultimately stop losses my preferred method of protection. This does mean that while I could pick a stock that in theory that could be held for years, I use charts to determine a reasonable entry point and stop losses as a protection against any over confidence that could blind my choices. I enjoy stock picking but as the years go on I want to find a method that gives me some control but allows me to spend less time on the computer and to force my lazy ass into something more active.
I hope finding a decent set of rules based on the StockRanks system will allow that to happen. It might take a few years to fine tune my rules but I am enjoying the process.
I decided to make the process public as a way to discipline myself and stick to the plan. I was also surprised by the interest of this portfolio when I first declared it on the Stockopedia forums. I also decided that £20K would be a good starting point and segregated this money from my main holdings into a separate account. £
Thanks again and good luck with your investing.
best wishes Ian
Hi Ian
I enjoyed reading that very much, mainly because it is the opposite of what I try and do!
For instance I'm happy to run a very skewed portfolio, e.g. no financials and c.45% industrials, I also have no stop loss as I tend to buy low p/e cash rich divi payers that are inherently less volatile and emotionally driven as adrenaline junkies buy other stuff. I sell when my original buy thesis falls apart in a bad way by RNS or analyst presentation.
Position sizes for me are a moving feast as well varying from 0.2% of portfolio to 16%.
What I love is that you're doing your thing in real time & publicly and creating a permanent record.
Thanks & good luck