This hot, dry weather appears to be affecting my stock market activities, which have also dried up. Just 11 stocks qualify for my SIF screen. And almost 40% of the SIF fantasy fund is now held in cash. The part of my personal portfolio which mirrors the SIF is also running an unusually high cash balance.

I don’t have a problem with this in principle. I’ve written before about my hope that when the market looks overvalued, the SIF screen will detect the warnings signs and move progressively into cash.

So far in 2018, this hasn’t happened. I’ve added 14 stocks to the portfolio and sold 14. But new buying opportunities have become fewer recently, so the next couple of months could see a more decisive shift to cash.

In any case, I’m in no rush to buy stocks, as I think that much of the market is fully priced. What I would welcome is the chance to pick up a couple of defensive dividend payers at sensible valuations. My exposure to defensive companies is pretty minimal at the moment:


Because of this, I was interested to see that Tesco now qualifies for the relaxed version of my stock screen. (This is a fork of my main screen that accepts stocks with slightly more demanding valuations, as long as they satisfy all of my other rules.)

As the UK’s largest supermarket, Tesco could provide an attractive defensive backstop and a growing dividend income. The shares aren’t obviously cheap, but both the share price and the business appear to be performing well. Stockopedia also likes the shares, awarding them a StockRank of 81. So I thought it would be interesting to take a look at both this week in order to get a better understanding of what’s on offer.

Value lies in the future

Tesco shares are delivering almost indecent levels of earnings growth at the moment. Last year saw headline earnings climb 62.7% to 11.88p per share, as the group’s recovery continued. Further progress is expected this year, some of which has already been priced into the stock. All of this means that value isn’t the stock’s strongest suit:


The shares may look pricey, but I don’t think there’s nothing obviously wrong here. One attraction for me is that earnings and free cash…

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