2022 was the year when gravity finally reasserted itself on the stock market. Rising interest rates and inflation introduced new variables to equity valuations. The impact wasn’t pretty.
The FTSE 100 was propped up by a motley crew of mega-cap stocks including Shell, Glencore and BAE Systems. But elsewhere, double-digit declines were the norm, rather than the exception.
Against this uncertain backdrop, how did my systematic SIF portfolio perform? Let’s take a look.
SIF 2022 performance
The SIF “Stock in Focus” portfolio is a rules-based virtual portfolio I’ve been running here since April 2016. Shares are selected from a stock-buying screen and then subjected to additional manual screening to ensure a basic level of diversification.
My screen seeks to identify stocks that offer affordable growth with near-term upside. In other words, the emphasis is on value and momentum.
Stocks are held in SIF for a default period of nine months, before being screened again. If they still pass, then they’re kept in the portfolio on a rolling one-month basis.
The only exceptions to this are if a company issues a profit warning, or if its shares fall by more than 25%. In either of these cases, I sell immediately.
The value of the SIF model portfolio fell by 6.1% in 2022. This includes notional costs, but excludes dividends. The portfolio’s benchmark, the FTSE All-Share index, fell by 3.4%.
Taking a long-term view
Last year’s results saw a partial reversal of the 29% gain SIF delivered in 2021. But one year is a short time. The portfolio’s long-term performance trend is still very positive.
SIF has outperformed the FTSE All-Share in four of the seven years since its inception in April 2016. In total, the portfolio has outperformed the FTSE All-Share index by around 50% over this period:
This performance translates into an annualised return (excluding dividends) of 8.0% per year since inception.
Including dividends, my records suggest the annualised total return has been 10.6%.
As I’ve said many times before, my experience with SIF has reinforced my view that for me, systematic investing is the best way to approach the market. The other big lesson…
