SIF August Review: Can H&T And Vitec Stay In The Folio?

29th Aug '18 by Roland Head

5 comments 4529 reads

I’d like to start thanking the many readers who completed my International SIF survey last week, or left comments sharing their views. I really appreciate your feedback.

Happily, 75% of you were keen for me to continue experimenting with rules-based investing in foreign stocks. However, only 51% thought I should include stocks from all of the markets available on Stockopedia.

About one quarter of you said you’d prefer me to focus only on European and/or US stocks.

The final 25% said they were only interested in UK stocks.

Many of you also took the time to make thoughtful suggestions about how I could make the International SIF folio more relevant. There were several recurring themes, especially around changing the mix of geographic coverage.

I’m now planning some changes as a result of your feedback, and will reveal these with my next portfolio update in September.

Shares Awards: Before I get back to my main UK SIF fund, I’d just like to remind you that there are only a few days left to vote for Stockopedia in this year’s Shares Awards. We’re in categories 15 and 17 -- you can vote here.

Two stocks up for eviction

It’s the end of another month. That means it’s time to review any stocks that have spent nine months or more in the SIF folio, to see if they still qualify for my screen.

There are two stocks up for review this month:

Vitec Group - this photography and videography equipment firm has had a good run but has slipped back recently. Does this High Flyer still pass all of my tests?
H&T Group - pawnbroker and personal loan group H&T is expanding steadily and delivering a solid 10% return on equity. But the market is out of love with the group, perhaps because of regulatory risks. Should I hold on for a turnaround, or sell at a loss?

Here’s how the two companies have fared during their time in the SIF fantasy fund:

Not exactly record breaking. But not disastrous either. Let’s find out more.

Vitec Group

Original coverage - 01/11/2017

Vitec Group joined the SIF folio in November 2017. This firm makes products such as autocues, tripods, portable power packs and baggage for carrying camera…

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AlanJenkins2

29th Aug '18

Holding on to my HATs..Think the company might benefit a bit as WONGA runs out of wonga,and other payday lenders suffer from restrictions and bad publicity.

wallywoos

30th Aug '18

For those seeking income, HAT is still a good play.

Howard Adams

Hi Roland

A good article as ever.

I note that, I think for the first time since you began the SIF, that the portfolio has under-performed your tracking index for 6mth, 3mth, 1mth and 1 wk.

I also note that five of the SIF holdings are negative by greater than 10%, indeed BNC by 20.4%.

I wonder, as you relaxed your buy rules slightly in the bull market period as you explain above, might you consider adjusting your sell rules in a similar manner as the market down turns?

For example augment the nine month reassessment rule with an extra rule which triggers a reassessment, against your screening rules, at say negative 15% (or some other percentage). Then exit if the rules fail even it it is earlier than nine months.

I pose this question because the SIF has operated during quite a nice market upturn but has not yet been tested in a down turning market. It seems that staying rigid to the nine month assessment period could be an over excessive exposure to overall portfolio performance in a sustained down turning market.

Regards
Howard

brileen

Hi Roland
As always great article and a timely reminder to me weed out the less well performing stocks particularly where some of the metrics have changed. It is tempting to leave things unchanged where the overall value of my portfolio is increasing.

Roland Head

Hi Howard,

It's certainly true that SIF (like many portfolios) has only operated in strong market conditions. So we don't really know how it will perform in a downturn.

My hope is that my rules will prevent me buying outright dogs and limit the potential portfolio damage to a de-rating, rather than a structural collapse. I also hope that my momentum criteria (e.g. relative strength) will keep me from buying too much when everything is falling.

I'm not overly concerned about a short period of underperformance -- the numbers involved are pretty small so far and I expect this (and worse) from time to time.

I have considered the idea of additional sell rules, perhaps in the form of a stop loss at a certain percentage. One reservation I have is that a number of the smaller stocks in the folio are capable of quite sharp price movements. So I could be stopped out prematurely.

Personally I've never had any success with stop-loss rules and do not use them at all. Your mileage may vary - I know they work for some people, but I prefer to focus on stock selection and take my chances on being on the receiving end of Mr Market's bad moods...!

Regards,

Roland

SIF August review: Can H&T and Vitec stay in the folio?

Two stocks up for eviction

Vitec Group

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Roland Head

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