SIF Folio February Review: Should I Persist With Beximco And Secure Trust?

1st Mar '22 by Roland Head

6 comments 1976 reads

February turned out to be a difficult and uncertain month. From an investment perspective my rules-based SIF folio was quite active, adding three new stocks during the period. My hope is that this reflects a broader rotation in the market towards value stocks and cyclical sectors that have been out of favour.

We shall see. In the meantime, this review of the month will cover recent portfolio activity and stocks that have reached the end of their default holding period.

SIF trades in February

Improving momentum for unloved big cap value stocks meant that my SIF buying screen provided some interesting new choices during the month. I added three new shares to SIF in February – the same high rate of portfolio additions as in January.

The new stocks were:

British American Tobacco (LON:BATS) - this choice flagged up some ESG concerns among subscribers. My write-up (and reader comments) are here.
Shell (LON:SHEL) - the oil and gas giant is riding high once more. Can it continue? I reviewed Shell here.
Beazley (LON:BEZ) - specialist insurers are reporting stronger market conditions after a difficult few years. I think Beazley could be poised for a decent run of growth.

These stocks have skewed the portfolio’s average market cap higher and boosted its dividend yield. My hope is that they’ll also help to offset flagging earnings growth elsewhere.

Portfolio stocks under review

For the benefit of newer subscribers, the SIF folio is a virtual portfolio that’s run using a rules-based trading strategy. It’s outperformed the market by around 50% since its launch in April 2016.

_TNlv0zYANNUtl5JkulDqOsPp8cf-_fxx3mEfdOgaGaMM6qE3U07AV53FRvt46TyE24PMDoDotJOg6Bu6NA-x6IxIAO18lEqzc8qKt_H1-nyO39MESgqzHTfCX0UiKxSU2eO7lBs

All stocks have a default holding period of nine months, after which they’re reviewed to see if they still pass my screening tests. This month there are two stocks that have been in the portfolio nine months or more:

Beximco Pharmaceuticals (LON:BXP) - this Bangladeshi has a quirky dual listing but has performed well over the last two years
Secure Trust Bank (LON:STB) - a specialist lender with a mixed track record on the stock market. Interestingly, former shareholder Arbuthnot Banking (LON:ARBB) recently completed the sale of a major holding in Secure Trust.

SIF Folio: February performance update

After outperforming the market by almost 15% in 2021, SIF has got…

Unlock with Email

Unlock with Google

Already have an account?
Login here

BattleOfBrit

1st Mar '22

I admire the mechanical nature of your investment decisions; e.g. with £STB.

topvest

I would guess the outlook for STB may be due to the exceptional ECL provision releases in 2021 - most banks will have lower profits in 2022 than 2021 due to very high bad debt provisions (Covid-19 related) made in 2020 that were released in 2021. The underlying business though should be performing better and the net interest margin widening.

1James1n1

Roland, as a holder of Beximco Pharmaceuticals (LON:BXP), your decision to sell was interesting, but my perception is that it is more a function of short term trends than underlying value, although perhaps that is the mechanical driver of your screening aproach.

That said, I would draw you attention to the fact that there appear to be rogue estimates in the forecasts that Stokopedia pulls and there has been for some time, which distorts forward valuation calculations and metrics.

SP Angel who act as the company's UK broker provided updated forward forecasts in December (in a report available via Research Tree) and estimate 2022E revenue at 33.23M BDT, PAT of 5.31M BDT & EPS of 11.8 BDT. Clearly, they are estimating more modest growth than in recent years, but still increasing, versus the data in the Stock Report. The broker also estimates a flat dividend for the present year and then rises in each of the 4 subsequent years.

I am personally expecting the company to perform to the upside of these forecasts, but time will tell...

andywillz94

I reckon you've probably sold a bit prematurely on Secure Trust Bank (LON:STB) based on your analysis. I am still holding my position as its a fairly strong choice whilst inflation is going up. However, the SIF rules are the rules and a 12% profit is nothing to turn your nose up at!

Roland Head

2nd Mar '22

1James1n1,

I often say in these articles that in a long-term/buy-and-hold strategy I would not make the same decisions as I do for SIF. It is a relatively short-term trading strategy, which requires a slightly different approach.

Beximco Pharmaceuticals (LON:BXP) is an example of this, in my view. Personally, I wouldn't sell the shares if I was holding them as a long-term investment.

As with all things in investing, I think it's important to have a clear framework for decision making. The right decision for one person may be wrong for another.

Regards,

Roland

Bouden54

Secure Trust Bank (LON:STB) looks very attractive to me so would have been reluctant to sell, even if it did fail one of the rules. As a specialist lender with a good track record and very prudent approach, it typically generates a return on equity of around 15% yet trading at a c 20% discount to book value. The expected fall in earnings next year is purely because last year was boosted by the release of provisions taken during Covid - really nothing to worry about. Should also benefit from rising rates.

SIF Folio February review: Should I persist with Beximco and Secure Trust?

SIF trades in February

Portfolio stocks under review

SIF Folio: February performance update

Unlock the rest of this article with a 14 day trial

About the Author

Roland Head

6 comments

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

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