Mining giant Rio Tinto has become the fourth most valuable company in the FTSE 100 in recent weeks, as soaring iron ore prices have boosted the group’s profits. Although the shares are trading close to record highs, the stock still offers a forecast yield of nearly 8%.
Rio is a new arrival in my SIF stock-buying screen this week, so I plan to take a closer look. I also want to revisit my decision last week to sell Morgan Sindall Group days before the FTSE 250 firm published its results. This cost SIF several thousand (virtual) pounds.
Morgan Sindall: good process, bad result
Regular readers may remember that I opted to sell construction group Morgan Sindall from my SIF folio last week, a few days before the company’s annual results were due.
The results were good and included a strong outlook statement. Morgan Sindall shares promptly rose, meaning that I could have sold for around 12% more if I’d held on a week. I didn’t, because doing so would have broken my rules-based process.
Instead of following the process, I’d have been speculating and allowing my subjective judgement to influence my decision making. In this case, I’d have come out of it with a little extra cash. But it could have gone the other way.
As it happens, even after last week’s gains, Morgan Sindall still triggers my sell rules -- the share price still lags the wider market on a one-year view.
Even a good process will sometimes deliver a bad result. As a systematic investor, that’s something I just have to accept.
Rio Tinto (LON:RIO): More to come?
Rio Tinto has been a SIF portfolio stock once before. Back in May 2017 I added the shares to the portfolio at under £30, before selling at £40 for a quick 35% profit in February 2018.
I’d like to think that my new selling rules might have helped me keep hold of this stock for longer. Because if I had held on, my original Rio holding would have doubled by now.
I’d also have enjoyed some massive dividend payouts. In its recent 2020 results, the company declared a $6.5bn of dividends, bringing the total payout for last year to a record $9bn. That’s equivalent to a trailing yield of around 6.5%.
Rio Tinto is…
