I decided last week to follow Jim Slater’s example and relax my valuation criteria slightly. This left me with a choice of five stocks to consider adding to the SIF Portfolio this week.

If you missed last week’s article, I’m experimenting with reducing the minimum earnings yield of my SIF screen from 8% to 6% and increasing the maximum rolling PEG ratio to 1.3. No new stocks have qualified for my screen for four weeks, and the portfolio’s cash balance is becoming excessive.

You can see the results of the relaxed screen here.

Too much overlap

One of the companies which qualifies for the relaxed version of the screen is steelworks group Severfield. Last week’s comments suggested that this is a popular pick with Stockopedia users. The shares have nearly doubled since July and boast a StockRank of 95. The outlook is still improving, but the SIF portfolio already has five industrial stocks.

Of these, John Laing operates in the same Construction & Engineering industry sector as Severfield, while Flowtech Fluidpower is also exposed to the construction market cycle. I’ve had to rule out Severfield to avoid excessive duplication. Engineering services group Renew Holdings was also dismissed, for similar reasons.

Of the remaining three options, wealth management group Brewin Dolphin Holdings was easily ruled out for its overlap with portfolio stock Miton.

Two strong contenders

AIM-listed business park and shared workspace operator Sirius Real Estate was harder to dismiss.

Although classed as a financial stock, it’s a real estate business that operates in Germany. So it provides attractive exposure to a major EU economy other than the UK.

The overlap with my three current financial stocks, (H&T, Miton and TCS Holding) should be limited, barring a major meltdown.

Sirius also has a StockRank of 93, making it the second-highest eligible stock in this week’s expanded screen results. It’s tempting, especially as I don’t currently have any property stocks in the portfolio.

Equally tempting is FTSE 100 mining group Rio Tinto, which pipped Sirius to the post with a StockRank of 95.

Rio’s 2016 results last week were very strong. Reduced costs and rising commodity prices mean that cash generation was ahead of expectations last year. Net debt is down and the dividend…

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