SIF Folio Q3 Review: I’m Preparing For A Recovery

3rd Oct '23 by Roland Head

4 comments 1617 reads

After nine months, my rules-based SIF model portfolio is now dead level with its FTSE All-Share benchmark so far this year.

An encouraging period of outperformance during the summer has withered away, leading to a fall of around 3% during the third quarter. One reason for this may be the portfolio’s lack of exposure to the energy sector – Shell (LON:SHEL) and BP (LON:BP.) made decent gains in Q3 and are large enough to move the whole market:

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However, I see this as a short-term headwind. I remain comfortable with the longer-term results my system has provided.

SIF has delivered an annualised gain of 7.3% since its inception in April 2016, compared to 2.2% for the FTSE All-Share index (both figures exclude dividends):

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My main concern at the moment is that performance may be being held back by the portfolio’s heavy cash weighting – about 50%.

While I’ve previously viewed cash as a comfortable form of downside protection, I fear that I may have become too comfortable with cash. SIF is meant to be an equity portfolio, after all. Holding too much cash effectively limits the portfolio’s upside potential.

In the remainder of this piece, I’ll review the portfolio trades I've made over the last three months. I’ll then explain how I’m planning to deploy more cash and position the portfolio more aggressively for a potential upturn.

SIF portfolio review

I added four new shares to SIF during the third quarter and also sold four shares. So the portfolio has a somewhat different makeup to when I last reported on progress at the start of July.

Here’s how SIF looks at the time of writing:

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(SIF folio positions on 2 October 2023)

Note: As a quick reminder, SIF is a virtual portfolio, but I mirror all the SIF positions in smaller size in my own real-money portfolio.

One thing that hasn’t changed over the last three months is the name of the portfolio’s least-loved stock.

International automotive distributor Inchcape (LON:INCH) remains unloved by investors, despite a reassuring set of results in July. The group’s half-year accounts showed pre-tax profit up 9% to…

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GloucesterBob

4th Oct '23

Roland, when you buy a position, do you go all in on day one, or have multiple purchases?

I tend to buy once a month over a 10 month period. You hold for a minimum of 9 months, so our initial holding periods are similar, but are there any stats proving which is the better purchasing method?

Chris1011

Thank you Roland - I always look forward to your quarterly reviews.

FREng

Thanks, Roland. I find that your SELL screen used as a checklist helps in deciding whether and when to sell.

Roland Head

5th Oct '23

Hi GloucesterBob,

I buy the position for SIF (and my own portfolio) in one single transaction.

I think the pros and cons of each approach depend on several variables, for example:

dividends paid during the accumulation period
what happens to the share price in the meantime
and how long the shares are held for

I'm not sure it's possible to make a generalised comparison, as every situation is likely to be different.

Roland

SIF Folio Q3 review: I’m preparing for a recovery

SIF portfolio review

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Roland Head

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