SIF June Review: Taking Profits Against The Trend (VLX, TAM, STCK)

29th Jun '21 by Roland Head

6 comments 4667 reads

It’s the end of June, so time for my monthly review of stocks that have been in my virtual SIF folio for at least nine months. There are three companies in the spotlight this month:

Volex (LON:VLX) - is growth about to slow at this AIM-listed cable manufacturer?.
Tatton Asset Management (LON:TAM) - this financial group has just published a strong set of results
Stock Spirits (LON:STCK) - the drinks group proved its defensive credentials last year, but the outlook is fairly flat.

As usual, I’ll also take a look at the performance of the portfolio over the last month. However, before I get started, I’m going to take a quick look at how I run this rules-based portfolio.

Disclaimer: I’d also like to emphasise that the trading decisions I discuss in SIF articles are not stock tips or advice. My comments represent my opinion only and are intended to illustrate how I use Stockopedia’s tools and data to run a rules-based portfolio. Please DYOR (do your own research). I am often wrong!

How does SIF work?

A comment from Paul last week reminded me that it’s been a while since I discussed the system I use to run SIF. I’ll try to do that here, briefly.

SIF (Stock In Focus) is the name of a £1m virtual portfolio I’ve been running here at Stockopedia since April 2016. As I write, SIF is valued at £1.65m plus dividends, so to date it’s been moderately successful.

bGSQDEkrGMBysInxs0TfFLEL_GRCLzou0LTlVxE9

(SIF vs FTSE All-Share index)

I also own all of the SIF shares personally, in a portion of my own portfolio.

When I launched SIF, the challenge I agreed with Ed was to see if I could beat the market with a rules-based portfolio.

The rules are fairly simple. I select shares to buy from the results of my buying screen, which you can see here. Broadly speaking, my rules are aimed at finding stocks which offer affordable growth and are showing positive momentum.

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.

SIF…

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JayJenny

29th Jun '21

Thanks for the great review, which I enjoyed to read.

I have 2 questions if you could be kind to explain:

1, "stocks must pass all the rules in my selling screen to remain in the portfolio", so the stocks in the selling screen are not for selling but to remain?

2, " New stocks are normally held for a minimum of nine months", any reasons for 9 months? if within 9 months the share price changed dramatically , do you still hold or sell?

Jenny

Roland Head

Hi Jenny,

Thanks for your comments.

My selling screen has been badly named, I think! What it means is that if the stock still passes all the screening rules, then it can be kept. If it fails, it should be sold. I should probably have named the screen 'the holding screen'. That's what it's for -- to see if I can continue to hold a stock.

I wrote in more detail about the selling screen in this piece, when it was first introduced:

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

Re. nine months. There is a bit of history to this. I started at six months originally, but I increased it to nine fairly quickly as I felt it was just too short - for a couple of reasons

- churn in the portfolio was too high. Replenishing stocks was difficult and I felt I was selling before any positive momentum had had a chance to play out

- I wanted to be sure that I would hold each share long enough for the company to publish a set of accounts. That gives me something tangible I can use to re-evaluate the stock before selling. The gap between interim and full-year results for some companies can be more than six months.

At a later date (hindsight bias!) I also did some basic analysis which suggested that selling at nine months was working reasonably well for the stocks I picked:

Hope this helps!

Roland

30th Jun '21

Many thanks Roland, that helps.

TheHitman

Hi Roland, many thanks for the article, informative and interesting.

I had a question around position sizing in the SIF portfolio. Do all holdings have an equal weighting when being added to the portfolio? How has this worked over time as the value has increased by 65% over the years?

Barry5

8th Jul '21

Hi Roland, I've got a couple of questions if you have time to reply.

1. I noticed that your BUY Screener has a Rule for Net Debt< 4 x Net Profit but it's not being used. Is that an old Rule or one that you sometimes use?

2. I was kind of surprised that the BUY and SELL screens used some slightly different rules. I understand that the SELL screen has more relaxed rules for keeping a stock but

- why exclude Sucker Stocks and Momentum Traps stocks from the SELL screen while the BUY screen would allow you to buy them?

- why drop the EPS Growth rule from the SELL screen?

- and why include SP v 50d & 200d Moving Average Rules in the SELL screen but not include them in the BUY screen

I have to say that I really like the idea of what you've done. For me I've been setting up numerous checklists over the last 9 months to try and make stock selection easier as I have not got enough time to devote to research but i do enjoy Scotty's and Jack's SCVRs.

Thanks. Barry

Sorry but just one other observation. SHG is on your SCREEN but (because it fails one of the new SELL rules) is not on your SELL screen. So if you bought it, it would immediately fail the SELL screen test.

Barry

SIF June review: Taking profits against the trend (VLX, TAM, STCK)

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Roland Head

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