Stock in Focus: My (no) selling strategy + international SIF update

Tuesday, Aug 20 2019 by
19
Stock in Focus My no selling strategy  international SIF update

The FTSE 100 is showing signs of life, but the big cap index is still about 7% (500 points) lower than it was three weeks ago. Judging from my Twitter feed, many investors have sold into this market wobble. Some are hoping for bargains, while others are fearing worse to come.

I thought I’d start this week’s piece with a brief look at how I approach selling in my portfolios, before going on to take a look at the (battered) state of my International SIF folio.

How I sell

As a general rule, I never sell during market wobbles. There are four reasons for this:

1. It’s too hard: I’ve learned over the years that I’m not particularly good at the kind of rapid, instinctive decisions needed to trade in and out of the market. 

2. It’s too expensive: Trading stocks costs money. I’ve no desire to pay my brokers any more than necessary.

3. Lost dividends: A second consideration for me is that being out of the market means missing out on dividends, which form a big part of my personal investing strategy.

4. It’s against the rules: In recognition of my own strengths and weaknesses, I’ve developed two investing strategies. Neither of these require me to sell shares on an ad hoc basis.

Income: The larger of my portfolios is focused on high yield income and is normally fully invested. I very rarely sell stocks from this folio, and only then for serious fundamental reasons. Market movements are irrelevant to me here, as they don’t affect my dividend income.

During market sell offs, the only strong emotion I feel is frustration at not having enough cash available to top up my holdings. However, I feel that my decision to remain fully invested is justified by the minimal returns available on cash. 

SIF Folio: My second portfolio is a mirror of the SIF Folio fantasy fund I run here at Stockopedia. This is a rules-driven portfolio where my stock picks are drawn from the results of a screen

I only sell shares at predetermined times, when they no longer pass all of my screening tests. The only exception to this is that I now also sell stocks after a profit warning.

Stocko fantasy funds are currently only visible on the old version of the site, but here’s a snapshot of…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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7 Comments on this Article show/hide all

Benson 20th Aug 1 of 7
3

Hi Roland
Sorry to hear about the performance of your international portfolio. I started an international portfolioat about the same time as you and at that time my performance was abysmal.
I persevered and since Christmas I have managed s 15% gain
My system was to pick stocks that popped up on the improving lists on "Stocko" and then to research further. I had no fixed criteria but look for stories where there was evidence that the management delivers on there forecasts

Please do not give up on European stocks

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Roland Head 20th Aug 2 of 7

In reply to post #506346

Hi Benson,

Congratulations on the strong recovery of your international PF since Christmas. That sounds like a decent performance to me.

My international portfolio was always an experiment - luckily no real cash is involved, so it's been educational... (as the saying goes, experience is what you get when you didn't get what you wanted)!

Thanks for your feedback re. European stocks, I'll keep that in mind.

Regards,
Roland

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herbie47 20th Aug 3 of 7
1

In reply to post #506436

The US market is up strongly since Christmas time although it has fallen back in the last week or so, my US shares have outperformed my UK and European shares considerably. The best performer has been TradeDesk which is up 66% in 6 months. I did consider FootLocker but fortunately I did not buy any. Kirkland Lake Gold has also performed well with the price of gold soaring. My Euro shares did well a few years ago but have been poor this year. I don't think I will renew my Euro subscription next time. But difficult to draw a conclusion when only buying a relatively small number of shares in each market as one share can make a considerable difference, swap FL with SHOP and see how that changes things.

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stephencrane 21st Aug 4 of 7
3

Hi Roland

Personally I would love to read commentary about a USA version of the SIF portfolio. 

Thanks for the no selling comments also. I agree with this view, but find it so difficult to adhere to it! 

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Carey Blunt 23rd Aug 5 of 7
1

Personally it seems like it would be a shame to ditch the portfolio entirely just because its not working. I think you should consider adjusting it to try and find something that does work instead. Even if that means throwing away the existing portfolio and rules and starting with a new set but keeping the same stock universe.

As a Stockopedia subscriber, i'm interested in what didn't work but even better would be to keep experimenting until we find something that does work (better) or to understand what works in different market conditions.

How about a portfolio based on changes to Style or Stockrank. Something that's even more mechanical than you have already. Same universe of stocks though preferably although I would be happy to see US versions running in parallel.

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Roland Head 24th Aug 6 of 7

In reply to post #507506

Hi Carey,

Thanks for your feedback. I certainly agree that it's important to understand what doesn't work and why this might be.

I haven't made any decisions yet -- feedback from subscribers is really valuable to me, so thank you.

Regards,
Roland

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Howard Adams 25th Aug 7 of 7
1

In reply to post #507656

Hi Roland (& Carey post #5)

I have mentioned before on your International SIF posts that, in my experiences, screenings and thus testing metrics seem to work with different outcomes in different markets.

For example UK versus US.

The trading volumes and company sizes are so different in the US to those in the UK that a screening of one presents very different numbers of options than that for the other.

For example I have quite stringent screens which return no results in UK, but quite a few in US.

The metrics suggest that the US has many more 'better quality' companies than the UK. But applying a more logical line of thought might suggest that the nature of the US market with its large companies, high trading volumes, and quarterly reporting simply provides data more favoured by the metrics.

For example if the UK screen passes one stock with say a 98 stock rank (with other screening metrics), is that company better than say 10 returned in the US market with the same screen (because the UK company is the very best in the market)?

Are all ten of the US companies as good as, or better than, the single best in the UK? Or, should the US screen have had more stringent tests in order to find the single best in the US?

If you favour the latter this suggests not all metrics are equivalent measures across different markets, thus screeners need tweaking for specific market conditions (a point made by Carey).

Notably with me experiences, my screeners seem to present similar levels of results across UK and European markets, but always provide very different levels of hits across the US.

This is why I sense, but do not really know, that screeners ought to be tweaked to recognise some differences within markets.

Regards
Howard

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About Roland Head

Roland Head

I'm a private investor, analyst and writer on stock markets, with a particular fondness for free cash flow, dividends and value. My main interests are UK and US stocks. I also have an interest in (profitable) commodity stocks.  I have passed the CFA Level 1 exam and hold the CFA UK Investment Management Certificate (IMC). One of my investment interests is developing rules-based strategies such as my Stock in Focus portfolio. This reflects a significant part of my personal portfolio and is the subject of my weekly column here at Stockopedia. In earlier life, I worked as an engineer in telecoms and IT. The rules-based and quantitative approach required for this kind of work undoubtedly influenced my investing style.  I also learned a lot from seeing the tech bubble deflate in 2000-1, when I was working for a very large and now defunct Canadian telecoms firm.  more »

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