SIF Q1 review: with the ISA deadline looming, I need more stocks!

My rules-based SIF portfolio has been less volatile than the market over the last few months. That’s hardly surprising given that more than 60% of the portfolio is in cash.

The end result hasn’t been too bad, though. The portfolio’s performance has only fallen 2% short of the market so far this year, with none of the fuss:

I should point out that this hasn’t been a deliberate strategy on my part. My stock purchases for this model portfolio are dependent on the feed of new ideas supplied by my SIF buying screen.

The rules used in this screen are built around the concept of looking for companies offering affordable growth and near-term momentum. In recent months, there just haven’t been many stocks that have satisfied my rules. Most of those which have are already in the portfolio.

For example, four of the six stocks that qualify for the screen as I write are already in SIF. Of the remaining two, Wentworth Resources (LON:WEN) is under offer and Kaspi.kz AO (LON:KSPI) is a foreign stock that’s outside my investable universe:

In fact, I’ve only bought six stocks for SIF since September last year. That’s low for this portfolio, which is more of a trading strategy than a buy-and-hold approach.

With the ISA deadline looming, I’m feeling a subconscious urge to act. I’d like to buy more stocks. I mirror SIF with a portion of my own real-money portfolio, so I’m sitting on a lot more cash than I’d normally choose to have in my investment accounts.

Of course, there are worse problems to have. And it may well be that my rules are right. In the past, following my screen and allowing the portfolio’s cash balance to fluctuate has helped me to preserve past gains while waiting for new opportunities.

Since its inception in April 2016, the portfolio has delivered an annualised return of 7.9%, or 10.4% including dividends. That’s left it nearly 50% ahead of the FTSE All-Share index over the same period:

As we’ve now reached the end of the first quarter, I’ll use the remainder of this piece to review the portfolio’s current composition and my SIF trades since the start of 2021.

SIF trades in Q1 2023

I sold three shares from SIF during the first quarter and bought two. This left the portfolio holding eight shares at the end of March 2023.

New stocks

Trading rules: As a quick reminder, the shares I buy are selected from my main SIF buying screen. If I’ve been unable to buy a share for at least four weeks, then I allow myself to use the relaxed version of this screen, which has looser valuation criteria.

In either case, I give some consideration to diversification and avoiding any obvious duplication in stocks and sectors.

I added the following new stocks to SIF in Q1:

Inchcape (LON:INCH) - this FTSE 250 company is one of the world’s largest automotive distributors. Through partnerships with car manufacturers, it handles regional distribution, marketing, and aftersales support. Inchcape’s data and insight also feeds into manufacturers’ product planning and pricing.

The company has worked with some of its largest customers for more than 50 years:

Source: inchcape.com

The shares fell heavily after last month’s full-year results, but the numbers looked pretty solid to me and appeared to be broadly in line with forecasts:

The outlook remains positive, according to the broker trend chart:

Inchcape’s valuation also continues to look reasonable to me…

… and the StockRanks also view the shares favourably:

Although there’s clearly some room for disappointment if the global economy slows, I remain comfortable holding Inchcape.

I added Inchcape to SIF on 16 January 2023 at 918.5p.

Moneysupermarket.Com (LON:MONY) - this well-known price comparison website appears to be executing a turnaround without cutting its dividend (so far).

February’s full-year results were better than I expected, with revenue up 22% and pre-tax profit up 33% to £69.3m. There was also a useful reduction in net debt.

Trading has been disrupted by events including the pandemic, rising interest rates, and by the effective shutdown of utility switching. The business is benefiting as these factors gradually normalise, but I still have some concerns about where future growth will come from.

However, current performance seems encouraging. I don’t think the shares are especially expensive for such a profitable and cash-generative business.

I added Moneysupermarket.com to SIF on 21 February at 225p.

Stocks sold

Trading rules: all shares are held for a default holding period of nine months, I test each stock against the rules in my SIF sell screen.

Slightly confusingly, if a share passes all of these tests, it can remain in the portfolio for a further month.

However, I may also sell shares within the nine-month period if they issue a profit warning or fall more than 25% below my original purchase price.

I sold the following shares from SIF during Q1:

British American Tobacco (LON:BATS) - rising interest rates and a stagnant share of its core cigarette market left the FTSE 100 tobacco group out of favour with investors in January.

When I reviewed the shares their nine-month review at the end of January, they failed on a number of counts:

The share price has continued to fall since my sale, so my decision looks good on a short-term view. I think the shares probably do still offer value at some level, but with net debt of nearly £40bn, there could be headwinds too.

Bought: 8 February 2022 at 3,188p

Sold: 31 January 2023 at 3,087p

Total return: +2.9% (including some big dividends)

A G Barr (LON:BAG) - I’m a long-term fan of this soft drinks group, which owns the Irn-Bru brand among others. My decision to sell was marginal and made purely because the stock failed two of my tests at its nine-month review:

However, the company has since warned of temporary pressure on profit margins in its annual results – and announced the retirement of family patriarch Robin Barr, after 58 years. The shares have fallen by a further 10% since my sale.

Despite these headwinds, I see this as a quality business for a long-term portfolio.

Bought: 20 April 2022 at 541p

Sold: 31 January 2023 at 548p

Total return: +4.4%

Standard Chartered (LON:STAN) - before Silicon Valley Bank blew up, FTSE 100 emerging markets bank StanChart was the portfolio’s second largest position. After that, not so much.

In fairness, I thought the bank’s 2022 results were solid enough and suggested a positive outlook for this year.

It’s also worth pointing out that – so far – events in the US and Swiss banking sectors do not seem to have had any direct effect on FTSE 100 banks.

However, the stock’s slump over the last month meant that it no longer passed all of my tests, so was sold.

Bought: 10 May 2022 at 547p

Sold: 31 March 2023 at 614p

Total return: +14.5%

SIF portfolio: current positions

At the end of the first quarter, the SIF portfolio had shrunk to just eight shares. Here’s how things stood at close of business on 31 March 2023:

Finally, just for the sake of completeness, here is a snapshot showing SIF’s cash and equity weightings. Remember, this is a virtual portfolio - not real cash:

I look forward to seeing what the next quarter has in store and will report back at the start of July. Hopefully, I’ll have news of some exciting new share buys.

In the meantime, please share your thoughts below and let me know what you think!

Disclosure: At the time of publication, Roland owned all the shares listed in the SIF portfolio.