SIF February review: Rio Tinto, Standard Life Aberdeen, RM & Redrow

Tuesday, Feb 27 2018 by
23
SIF February review Rio Tinto Standard Life Aberdeen RM amp Redrow

Brexit is making headlines again this week, along with the ‘The Beast From The East’, a Siberian blast which appears to be bringing us another cold snap.

Appropriately enough, the stock market seems determined to ignore both the non-event of winter weather and the major but unknown outcome of Brexit. Instead, the major indices are making a steady recovery from the correction seen at the start of February, as this chart shows:

Several of the SIF portfolio holdings have benefited from this rebound. This includes those which are up for review this week, at the end of their nine-month holding period:

5a952d285f74eS1.png

Here’s how these stocks have fared so far during their time in the portfolio:

5a952d50478b2S2.png

Three of these four stocks are showing profits from their time in the SIF, but only those which still qualify for my SIF screen will be allowed to remain in the portfolio.

Rio Tinto

FTSE 100 miner Rio Tinto has performed well during its time in the portfolio, rising by 35%. As I suggested at the time, the shares were cheap at under £30 in May 2017.

This month’s full-year results confirmed that the business is firing on all cylinders. Underlying free cash flow rose by 64% to $9.5bn last year, providing support for a record dividend of $5.2bn and share buybacks totalling $3bn. (There was also an additional $2.5bn buyback executed with the proceeds from the sale of the group’s main coal assets).

Net debt has fallen to $3.9bn, representing 0.2x underlying EBITDA. So borrowing is no longer a concern. Indeed, the group clearly has the firepower to start expanding again.

The shares also offer an attractive rolling forecast yield of 4.9%, and the technical picture also looks supportive to me:

5a952d6b3c8adS3.png

What could go wrong? I think it’s worth asking if profitability is already peaking. Rio generated an operating margin of 35% last year. The group’s earnings yield, at 13%, is now higher than when I added the stock to the portfolio. How much higher can these figures go?

A return to expansion could put pressure on…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

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. ?>


Do you like this Post?
Yes
No
24 thumbs up
1 thumb down
Share this post with friends



Rio Tinto plc is a mining and metals company. The Company's business is finding, mining and processing mineral resources. The Company's segments include Iron Ore, Aluminium, Copper & Diamonds, Energy & Minerals and Other Operations. The Company operates an iron ore business, supplying the global seaborne iron ore trade. Its Iron Ore product operations are located in the Pilbara region of Western Australia. The Aluminium business includes bauxite mines, alumina refineries and aluminum smelters. Its bauxite mines are located in Australia, Brazil and Guinea. The Copper & Diamonds segment has managed operations in Australia, Canada, Mongolia and the United States, and non-managed operations in Chile and Indonesia. The Energy & Minerals segment consists of mining, refining and marketing operations in over 10 countries, across six sectors: borates, coal, iron ore concentrate and pellets, salt, titanium dioxide and uranium. more »

LSE Price
4600p
Change
1.2%
Mkt Cap (£m)
75,200
P/E (fwd)
10.8
Yield (fwd)
5.4

Standard Life Aberdeen plc, formerly Standard Life plc, is a United Kingdom-based global investment company. The Company operates through four segments, which include Aberdeen Standard Investments, Pensions and Savings, India and China, and Other. The Aberdeen Standard Investments segment provides a range of investment products for individuals and institutional customers through various investment vehicles. The Pensions and Savings provide a range of long-term savings and investment products to individual and corporate customers in the United Kingdom, Germany, Austria and Ireland. The businesses included in India and China offer a range of insurance and savings products and comprise its life insurance associate in India, its life insurance joint venture in China, and operations in Hong Kong. Its Other segment primarily includes the corporate center and related activities. more »

LSE Price
280.3p
Change
1.2%
Mkt Cap (£m)
6,890
P/E (fwd)
13.5
Yield (fwd)
8.1

RM plc is engaged in supplying products, services and solutions to the United Kingdom and international education markets. The Company operates in three segments: RM Resources, RM Results and RM Education. The RM Resources segment consists of TTS Group Limited (TTS), which provides resources used in schools mainly through a direct marketing business model with goods supplied from centralized distribution centers. The RM Results segment provides information technology (IT) software and services to exam boards and professional awarding bodies to allow e-assessment through the use of on-screen exam marking (e-marking) and on-screen testing (e-testing). The RM Education segment is a United Kingdom-focused business supplying IT software and services to schools and colleges. The Company's products include RM Integris, the Company's cloud-based school management system, as well as offerings include RM Unify, RM Easimaths and RM Easiteach. more »

LSE Price
231.5p
Change
-1.7%
Mkt Cap (£m)
189.5
P/E (fwd)
8.8
Yield (fwd)
3.7



  Is LON:RIO fundamentally strong or weak? Find out More »


2 Comments on this Article show/hide all

Melvyngd 5th Mar '18 1 of 2

Hello Roland,
Very good article, is there anyware on the website that shows your SIF screen parametres.
Regards
Melvyngd

| Link | Share
Roland Head 6th Mar '18 2 of 2
1

Hi Melvyn,

You can see the screen I use for the SIF here:

https://www.stockopedia.com/screens/stock-in-focus-screen-113218/

Regards,

Roland

| Link | Share

Please subscribe to submit a comment




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 a lingering interest in commodity stocks. 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.  My investment focus is increasingly on 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. more »

Follow



Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis