Market volatility has surged recently, for reasons you’ll have read about elsewhere. By the time this article is published, the picture may have changed again, so I won’t make any attempt to guess at what happens next.
The underlying story seems to be that the UK (and global?) economy is probably slowing into a recession. However, the forward-looking nature of stock markets means that downside is often priced in well before the real-world economy starts to recover.
My rules-based SIF portfolio has become somewhat depleted over the last quarter. But with valuations down, I’m hopeful that my screen will present more buying opportunities over the coming months.
Here’s a summary of the portfolio’s performance and stock trades over the last three months.
SIF folio performance
SIF’s performance during the third quarter left my model portfolio marginally ahead of the FTSE All-Share index, which I use as a benchmark.
The decline over the last quarter meant that SIF fell by around 12% during the first nine months of 2022, leaving it marginally behind the FTSE All-Share on a YTD view:
I’m not too concerned about this. SIF has broadly followed the wider market and such reversals are a normal part of investing life.
On a longer-term view, SIF has held on to most of its outperformance versus the FTSE All-Share index. The SIF portfolio is up by 57% since its launch in April 2016. That's equivalent to a 7.2% annualised return, excluding dividends. In contrast, the All-Share is only around 10% higher than it was in April 2016.
Cash weighting: A shortage of new buying opportunities has left SIF with a stubbornly high cash weighting this year. Recent sales and a dearth of new buys have not improved this situation, despite my decision to increase the standard position size:
However, the portfolio’s large cash weighting has probably benefited its performance so far this year. In a falling market, cash outperforms!
SIF’s big (virtual) cash pile also means that I will be able to add stocks to the portfolio without being constrained by liquidity, when my screen starts to provide a greater number of new buying opportunities.
SIF trades in Q3
I sold six shares from SIF during the third quarter and added three new companies.…
