SIF Folio April Review: Drax Is A Double Bagger + Airtel Africa

26th Apr '22 by Roland Head

23 comments 3227 reads

It’s the final week of April, so it’s time for my monthly portfolio review. The markets have been fairly quiet over the last few weeks, and this has been reflected in the portfolio’s performance.

Despite this, I’ve been able to add a new stock to the portfolio that I’ve coveted for a long time. I’m also pleased to be celebrating another portfolio double bagger, power group Drax.

SIF trades in April

After a busy March, my SIF buying screen has not provided many new ideas in April. I’ve added just one new stock to SIF, soft drinks group A G Barr (LON:BAG) - the owner of Irn-Bru. You can read my buy report here.

I also reviewed FTSE 100 defence group BAE Systems earlier in the month, but decided not to buy the shares. Find out why here.

Portfolio stocks under review

All stocks in the SIF folio have a default holding period of nine months, after which they’re reviewed to see if they still pass my screening tests.

You can see the criteria I use to decide whether to keep holding a stock here. They’re a little different to the rules I use for buying shares. In brief, if a stock passes these tests, it stays in the portfolio.

This month the portfolio’s top two performers are up for review. Both have delivered gains over more than 90% since they joined the portfolio:

Drax (LON:DRX) - the former coal power group has made a successful switch to biomass, aided by vast government subsidies. Drax has been a double bagger for SIF, but should I keep holding?
Airtel Africa (LON:AAF) - I remain excited about the medium-term growth potential for mobile telecoms and banking in Africa. Airtel shares still look affordable to me, but I’m concerned momentum may be slowing.

I’ll look at each of these stocks in more detail in a moment. First, here’s a quick review of the portfolio’s performance in April.

April performance update

So far in April, SIF has lagged slightly behind its FTSE All-Share benchmark.

This continues the trend we’ve seen so far this year. After a strong 2021, progress has slowed somewhat in 2022. I think this is largely because the index has been buoyed by gains for miners and oil stocks – sectors where…

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Rusty2

26th Apr '22

This is the one: https://www.stockopedia.com/sc...

where is the sell screen?

Marcus Deva

Hi, Roland's selling screen was linked in with his 29th June 2021 report, as follows:- "New stocks are normally held for a minimum of nine months. They’re then reviewed against the criteria in my selling screen (here). Slightly confusingly, stocks must pass all the rules in my selling screen to remain in the portfolio".

OK, thanks, so the rules are weaker. But why hold when after 9 months, it does not qualify, as a buy but another stock £SSE in the same sector does?

I would be comparing against stocks in the buy screen.

batt

I have held Drax for a very long time. The one thing in its favour is that it supplies something renewables do not ie base load generation. Burning wood should only release the carbon absorbed during the growth of the tree. Shipping the stuff across the atlantic is not carbon neutral of course. They have plans for carbon capture which would more than address this problem. The main worry is a policy change of a cash trapped government.

Roland Head

Hi Rustbucket,

Thanks for your comments. My approach is based on the idea of running winners.

The idea is that while an existing holding continues to perform, it may make sense for me to keep hold of it, even if I wouldn't buy the shares as a new position.

I admit there's some potential inconsistency here; if I wouldn't buy the shares, then why am I still happy to hold them?

For me, it's about balancing potential risk and reward. With an existing holding, I have some profit in the bank. I also have an acquired level of understanding that's greater than I might have with a new position. I see this as de-risking the stock slightly, making it worthwhile to hold out for further gains.

Naturally, people's strategies will vary in this regard. What I do with SIF is not intended to be advice or suitable for anyone else. It's just an example of how I've used Stockopedia's screening and data tools to create a systematic strategy.

I hope this helps to provide some context to my decision to keep Drax.

Regards,

Roland

(Disc: I hold Drax)

doug2500

The main worry is a policy change of a cash trapped government.

True, but energy security must up front right now and may even trump environmental concerns in the short and medium term? If I was in charge I wouldn't be shutting drax anytime soon.

I do this all the time, my pf is full of expensive shares that I wouldn't buy but am happy to hold and run. Your explanation makes sense to me although I appreciate some will find it odd.

doctor dave

I cannot fathom how Drax presents itself as “Renewable Energy”. It produces wood pellets for burning. That’s as “renewable” as coal or oil. Bonkers.

illiswilgig

27th Apr '22

How wood pellet burning is presented as renewable is simple - whether you agree with it or not is much more complicated.

Trees grow. They also fall over and die releasing co2 and other gases in the process. As a fallen tree is replaced by another tree the carbon store is renewed and maintained. In this sense the burning of the fallen tree is renewable. After a period of time.

At the level of the woodland/forest it happens at the same time. Tree growth increases stored carbon by a few per cent a year. A few percent of the trees in the woodland can be removed each year and carbon levels are maintained or grow slightly. Some of these trees would have died anyway as plantations are thinned out (like vegetable patches). Drax will no doubt claim that their wood is primarily from thinning of plantations. They will claim that the net additional co2 released is zero or even negative. Calculations will support this. Something that clearly can't be the case with burning fossil fuels extracted from millennia old stores. Whether the calculations are right remains a question.

The calculations are complicated. There is energy in cutting, transporting, processing. drying, storing....... and the woodlands are often treated like factories with little care of the environment. Quite possibly the carbon store in the soil is degraded rather than improved in the process. So overall there is debate upon whether burning wood in such large quanitities it has to be transported halfway around the world is carbon neutral in practice.

FWIW I have always been slightly sceptical of Drax claims and the exporting of the carbon accounting to North America. Even if its renewable I am not sure that its sustainable or environmentally positive. And I thought that the subsidies would be reduced before now. I sold my drax shares some time ago on that basis - and missed out on the growth. I guess with nuclear base load disappearing Drax has become ever more important to energy security and not too many questions are asked to rock the boat in the meantime. But if nuclear becomes resurgent and/or any other baseload contributions increase I can see Drax's becoming more of a white elephant- its just taking a lot longer than I expected.

cheers

…..which is exactly the same as coal. Trees die, get compressed, turn into coal, get eroded and exposed and release CO2 again. The only difference is the time-scale. The Drax story is a total fabrication; the maths a myth. You can’t burn wood, claim carbon neutrality and expect to be taken seriously. Emperor’s new clothes and all that…..

The problem is young trees store very little carbon, so cutting down old trees will release carbon, which will take many years to replace, which won’t happen as these trees will be cut down again. There are several campaign by environmental groups against this. Here is one: https://www.biofuelwatch.org.u...

Another: https://www.biofuelwatch.org.u...

racthompson

29th Apr '22

It's a complete nonsense to invest in a company that relies on government subsidies for its profitability. What's green about transporting wood pellets all the way from north America to feed its hunger for renewable, sustainable fuel. Not a viable policy for the long term.

Roodini

1st May '22

well said.

did you see the film Planet of humans.

It plainly lays out the renewable energy scam. It’s a superbly done if not depressing to realize the brainwashing done to the population. Burning tyres, creosote soaked railway sleepers all “renewable energy”. Clear cutting trees for Drax.

All the renewable tech needs Gas powered backups to run them or start up the systems.

bullhead

Have to admit the standard of responses to the post regarding Drax (LON:DRX) is very very poor and seems to go from one poster getting his knickers in a twist that a share he holds wasn’t picked instead to someone saying burning coal is the same as burning wood pellets

I will post a link to DRAX report from February detailing the where the waste wood comes from that is turned into the wood pellets for power generation

Read the operational review

https://www.drax.com/wp-conten...

They are not cutting down virgin forests to make wood pellets waste wood would have rotted and produced carbon anyway if you don’t agree with their operational review maybe put a case together against them for false reporting

Not confident of many rational replies

the only thing “renewable” is the regularity of the cash bungs handed out from the taxpayer to Drax

https://bylinetimes.com/2020/1...

https://pulitzercenter.org/sto...

https://www.nrdc.org/experts/e...

https://edition.cnn.com/intera...

Plenty of reports of large areas of hardwoods being cleared and many not being replanted.

Plenty of reports the moon landing where not real doesn’t mean it’s true

Why are you so bothered anyway about a share you don’t own ??

Are you anti oil gas and coal companies ??

Or just in a bad mood because Drax has outperformed SSE recently

Just checked and £DRX has not outperformed Sse (LON:SSE) since I’ve held it. I’m not bothered anyway. I’m more bothered about the environment, cutting down ancient forests and burning them in a different country, does not make sense to me. Cutting down ancient trees and replacing them with conifers I’m opposed to as well. How would like it if all our ancient trees were cut down and replaced with conifers?
It’s estimated that Drax burns around 25 million trees a year, these take around 100 years to replace, this is an environmental disaster. Trees produce less energy than coal so you need to burn around 50% more to produce the same energy. There is also some energy used in the processing to produce pellets and then there is all the transportation. Drax is the biggest CO2 emitter in the UK. It just does not add up to me.
Im not keen on coal, should be replaced by clean energy, almost has been in the UK now.
This is not some bulletin board where posters ramp up shares, if you want that I suggest to go there.

I see Biden is doing something to try to stop this destructive of forests, so there maybe changes in the US soon.

You do seem strangely obsessed with Drax you have posted 6 times in this one thread you come across as a sad little troll

It’s pointless pointing out to you again and again that the trees would be cut down if Drax use the waste or not

It has nothing to do with you if I want to own Drax or if anyone else does or for that matter any other share I suggest you concentrate on the shares you do own and leave the shareholders of other shares alone

Haha, quality posting. You can buy what stocks you like I don’t give a monkeys. If you bothered to read the reports you will see many trees are being cut down because of Drax that would not have been, hopefully Biden will put an end to this nonsense. As for obsessed with Drax (LON:DRX), all your last 10 posts seem to be about Drax (LON:DRX) at least I’m posting about other stocks.

For some one who doesn’t care what other people own do wonder why you keep posting about a share you don’t own

Think you and Biden seem to have a lot in common

SIF Folio April review: Drax is a double bagger + Airtel Africa

SIF trades in April

Portfolio stocks under review

April performance update

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About the Author

Roland Head

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