SIF Folio: 2021 Performance Review

4th Jan '22 by Roland Head

26 comments 5227 reads

At the start of 2021, I reported that the events of 2020 had “reinforced my faith” in the benefits of having a systematic approach to picking stocks. 2021 was a very different year, but my conclusion is the same. For me, a consistent and objective methodology delivers better results than relying on subjective decision-making.

I wasn’t sure what to expect from the markets in 2021. But as it turned out, last year was the best year in the history of the SIF folio, the systematic portfolio I’ve been running here since 2016.

SIF 2021 performance

The SIF model portfolio gained 29.3% in 2021 (31% including dividends). This was comfortably ahead of the performance of the FTSE All-Share index, which returned 14.6% (18.3% including dividends).

lmpNUFC1nLfoIb1mkQg9P7QYg8kpWD9906uy8NlT

As regular readers will know, I use a portion of my personal portfolio to mirror the SIF. This sub-portfolio delivered a real-money gain of 32.8% last year, including dividends, stamp duty and commission. I see this as reassuring evidence that the virtual trading I undertake here can be translated into real-world results, at least with smaller position sizes.

Putting this gain in perspective

The SIF portfolio is a systematic virtual portfolio I’ve been running since April 2016. Shares to buy are selected from a stock screen which includes rules designed to highlight affordable growth opportunities – a blend of value, quality and momentum. I then apply a manual overlay of diversification on top of these rules, to ensure the portfolio does not become concentrated in too few sectors.

Share sales are triggered when a stock has exceeded a minimum nine-month holding period and no longer satisfies certain tests.

SIF’s 29% gain in 2021 was clearly quite good, but as most investors know, portfolio growth is rarely delivered in a straight line.

Overall, the SIF portfolio has delivered a gain of 77% (10.6% annualised) since its launch in April 2016. The FTSE All-Share index has delivered a 20% capital return (3.6% annualised) over the same period. All of these figures exclude dividends.

ww0O3Jf4142n-EztWR7-h_r40L0j-6O82JWKIf3E

The chart above shows two clear periods of outperformance from SIF in 2017/18 and 2020/21. From mid-2018 to mid-2020, the portfolio only really tracked the market.

My view on this is that the SIF system can struggle to…

Unlock with Email

Unlock with Google

Already have an account?
Login here

paulhunt999

4th Jan '22

Over the last 12 years i have had a small PF of 6 to 10 stocks investing mainly in small caps. Buying rules. Profitable and rising. Little debt. Trustworthy MT who own some stock not options. Uk based. Some moat. Diversified customer base. With these rules it is sometimes difficult to find new companies. Also with so few shares it is easier to track them. I am a full time investor but only need to spend a couple of hours a day checking and researching. Average annual return over 25 % and only 1 negative year. I try to run my winners and only sell them if the position size goes above 20%. I only sell if the story changes negatively. I trade about 5 to 10 times a year

Will Marsh

Happy New year, I love the simplicity and discipline of the SIF approach and really enjoy the blog. I suppose most people are wrestling with the invest or not conundrum at the moment. My personal opinion is be very selective, (which SIF is anyway), invest by sector and buy cash generative stock. I would anticipate the market will punish super speculative stock this year at some point and we will see a correction . That said I would probably have some cash but not as much as you have.

Like you I hold BXP and CAML and wish I held TAM. Still hold GLTR though which did ok in 2021 and I am happy to hold for another year.

PS do any of you guys have a view on HOLCO (Holland Colours). I've been an investor for some years and now have quite a big holding?

Rusty2

Stop losses or trailing stop losses can take you out of the big winners also or reduce your profits, I have done some studies on NAPS and found they did not really work. It is easy in hindsight to say a stock would have saved from further losses but many people don't look at the winners that may also have been stopped out. Some shares often fall back 10-20% before bouncing upwards, trailing stop losses I feel are difficult to pitch. Best to look at charts of your holdings which is easy to do on Stockopedia, but I think Stockopedia only has the daily close prices not the days low, which on some stocks can be considerably different.

Roland Head

Bluesky Ventura,

The cash is probably beginning to drag on the portfolio's performance, but my system works with fixed position sizes and doesn't allow me to add cash to existing holdings. This means that there's not much I can do about the cash position in the short term.

Cash has risen sharply this year as I've taken profits on some stocks but been unable to redeploy much of this cash on new holdings. I'm hoping to see cash return to more normal levels this year -- ideally around 10%-20%, for the SIF strategy.

Regards,

Roland

Boon

Thank you for your SIF articles! I've found them really useful in the past year, and gotten some good investment ideas too. I've been reading The Little Book of Behavioural Investing by James Montier, and the SIF system seems perfect to address the emotional, X-System decision making that is the root cause of so many bd investments.

None of the SIF rules are groundbreaking, nor will the SIF system win you a Nobel Prize. But by taking emotion and spur of the moment decision making it of the equation, the system prevents human mistakes/errors.

Hi Steve,

In February 2020 I published a piece which revisited the main concepts behind the portfolio* here:

https://www.stockopedia.com/co...

*One caveat is that my rules for selling have subsequently changed - you can find details here:

Stop-loss rule: https://www.stockopedia.com/co...

General selling rules: https://www.stockopedia.com/co...

Hope this helps. I may publish a summary of the SIF system at some point in the coming months to bring all the latest information together in one place.

Glorenfeld

5th Jan '22

I think the proposal here is a little different, in that the trailing stop loss is only added once a decision to sell has already been made. i.e. you've already decided to sell out of a potential big winner, but want to give yourself a little wiggle room to see if it appreciates further.

There are lots of ways to use trailing stop losses, but it in this case it would seem sensible to widen the gap as a share continues to appreciate (if you take the view that its continued rise is increasing evidence that your sell decision may have been mistimed).

GrahamF

”only a couple of hours a day” - that actually sounds like a lot of time for a small portfolio of 10 stocks or less.

abtan

Hi Will

I used to hold Holland Colours, but regrettably sold out many years ago.

I think it was due to concerns over their gross margins one year.

In hindsight that was an error as it seems like a quality company with high management ownership and decent cash generation.

In fact, I'm going to put it back on my watchlist, so thank you for bringing it up.

Good luck with the holding!

Thanks for the update Roland, these write-ups are always much appreciated

aflash

Cash is an asset.

Stocks fall faster than they climb and one wants to be ready.

Inflation is a threat but there are some excellent products now to replace bonds and money market funds. GILI (London) might be one (i hold).

Then there are actively managed, low cost ETFs with a core portfolio of shares or bonds that write covered calls and use other options strategies.

Total Return funds too, based on alternative assets. Costs are a bit higher.

Inflation-linked UK Savings Certificates and US TIPS address the problem.

I hedge with some X-1 contra ETFs on some index or asset.

It is pointless to buy a share on low conviction just to stay invested.

Opportunities arise such as March 2020. Then, instead of looking at how much our portfolio has dropped we need to be investing. It takes courage and cash provides that. Sure, the structured products crash with everything else in a melt-down and the contras run losses when the market is rising. However, I want the flexibility to take a small loss (or gain from a contra) on a liquid product and move it.

It takes some time to find them and they are mainly on North American markets. You could do some research and write a column on the subject.

Bronstein

Sadly the only one I bought in 2021 was Synthomer. Nevertheless, still find your approach most appealing of the bloggers here. I look at the p/e ratios in NAPS and think it's not for me. Also watched Paul Scott's small cap round up for the years and feel positively nauseas at the ups and downs there. So, still watching carefully here, wish I had got in early on VTU but can 2nd car dealers really be the way to secure my long term future? Also almost hit buy on AAF back in the summer but could not quite reconcile myself to the ownership structure - regretting it now. Is it too late? I will keep watching and thanks for sharing.

6th Jan '22

Thanks Abtan, its a company very few people have heard of but has done very well and I can't see why I should not continue to hold. Div's about 2.5% now which is decent but not as good as it was

The Phoenix

Hi Roland,

Any thoughts on the recent public riots in Kazakhstan due to fuel inflation and the possible issues this might cause for Central Asia Metals (LON:CAML): moving forward ?

I sold on Monday but more luck than judgement.

Regards Andy

Jonniegul

I see Steppe Cement (LON:STCM) is down 5% today, a similar amount. The protests started in Mangystau region and are over, called off by the protesters themselves. Hopefully other regions will soon follow. I doubt any long term impact to the companies, but the general situation remains volatile and the scars left by the deaths will inevitably lead to resentment and potential for further unrest.

7th Jan '22

Hi dahokolomoki,

Thanks for your comment!

> But by taking emotion and spur of the moment decision making it of the equation, the system prevents human mistakes/errors.

That's my aim. I'm not trying to be an investment rock star. My goal is simply to try and avoid the easy mistakes and hope that the winners will take care of themselves. So far, this seems to have worked.

turbo

1st Feb '22

Roland, any thoughts on why Beximco Pharmaceuticals (LON:BXP) is down nearly 8% today? Could this be a buying opportunity, or is there something else going on that we should be looking into before diving in....

stupormundis

22nd Mar '22

I hold Finsbury Food and am increasingly concerned at the outlook for this sector - Ukraine press coverage (FT 6/3/22) states that Exports of Wheat from Russia and Ukraine are down and prices up as exports grind to a halt. I am actively considering selling Finsbury Food (LON:FIF) as I question its ability to pass on price rises and see problems ahead.

BouncingBack

29th Mar '22

K3C was doing very well in the middle of 2021, then the share price plummeted. I've just sold at a gain of £300 rather than £3000. Why the share price fell is not something I've found a reason for :(

SIF Folio: 2021 performance review

SIF 2021 performance

Putting this gain in perspective

Unlock the rest of this article with a 14 day trial

About the Author

Roland Head

26 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...