My portfolio top ups for December + new momentum rules

In November I promised further news on my top-up decisions before the end of the year. In October, I flagged up some changes to my plans for position sizing and buying shares.

This update will bring these various threads to a conclusion. To start, I'll explain how I've now incorporated a modest momentum weighting to my scoring system – the first change since its inception.

I'll follow this with a summary of the top ups share purchases I plan to make later this month in the model dividend portfolio and my own personal holdings.

As a quick reminder, my model dividend portfolio broadly mirrors the shares in my main personal portfolio, although position sizing and cost will vary for practical reasons.

Please note that my comments reflect my personal views and are not investment advice or recommendations. Please do your own research and seek professional advice if needed. Full disclaimer here.

Adding a Momentum score to my system

You can read a full description of my new position sizing framework here. The short version is:

My aim will be to try and increase the portfolio's weighting to a group of stable and well-understood core positions, with smaller starting [satellite] positions that either gradually become core or are traded out more readily.

How does momentum fit into this? As I explained in my third-quarter update, I believe most of the portfolio's largest losses to date have resulted from me entering new positions at the wrong time, in the face of negative momentum.

To help me select shares to buy (and for top ups), I use a set of screening rules to generate a list of stocks that I can score for attributes such as dividend culture and profitability. There's a simple summary of the rules I use and my scoring criteria here.

Until now, my rules have focused on quality and value measures alone. As a long-term investor I thought I could do without explicit momentum measures, instead relying on absolute valuation and my own judgement of the outlook.

This view has changed somewhat over the last year. To reflect this, I have added four fairly simple momentum criteria to my scoring system:

Trailing 12-month (TTM) dividend yield as a % of 5yr average yield

Technically this is more of a valuation metric, but I think it indicates the likely direction of travel of the underlying business.

In my view, the ideal scenario here (for a buyer) is that the yield should be slightly lower than the five-year average, or else only slightly higher. This is likely to suggest some combination of progressive dividend growth, stable or positive earnings or share price growth.

If a stock's yield is much higher or lower than its five-year average, then something disruptive has probably happened (good or bad). This kind of situation deserves closer inspection. It might be an opportunity, or it might be a reason for caution.

2yr forecast EPS as a % of 1y forecast EPS

This is more straightforward, simply comparing forecasts earnings growth for the next two years. An ideal long-term income investment will deliver steady incremental earnings growth each year.

1yr forecast EPS as a % of TTM EPS

Similar to above, but this compares the current year forecast earnings with earnings over the previous 12-month reporting period (i.e H1/H2 or H2/H1).

50-day share price moving average as a % of 200-day moving average

This final measure is pure technical momentum, but I find it a useful measure of whether a share price is trending higher or lower.

The 50-day moving average is a faster moving measure than the 200-day moving average. For a stock in an uptrend, the 50dMA will normally be higher than the 200dMA.

Scoring: how I'm using these measures

I've added these stocks to my screening rules, but without any minimum or maximum thresholds. The reason for this is that I'm not using them to include or exclude stocks from consideration.

Instead, I'm using these measures to score stocks for momentum, with the resulting output ranked by my system against a pre-determined scoring framework.

As an approximation, I've allocated a 20%-25% weighting to momentum-related factors in my overall dividend share scores.

In terms of impact, what I've observed is a modest tilt to my scoring results, rather than a wholesale change. This is what I hoped to see.

While I am not able to back-test scientifically to calculate the optimum weightings to use, empirically I am comfortable with the changes so far.

Top Ups: December 2025

The model portfolio's cash weighting has risen to 11%, even before adding Q4 dividend income. That's too high for me, as my general policy is to remain largely invested at all times.

As a result, I've been reviewing each of the current holdings to identify potential top-up candidates.

I've settled on seven choices that will collectively reduce the portfolio's cash weighting to around 4%. When Q4 dividends are added in, that should still leave me sufficient cash to fill the vacant 20th slot in the portfolio, if I should decide to.

I'm mulling over some options for a new stock, but am not in a big rush to fill this vacancy.

I've listed each of the model portfolio holdings I plan to top up below, with a brief comment on my current thinking about each company.

I'll aim to make each model portfolio trade in the final week of December 2025 and will make similar trades in my own real-money portfolio. Details of each top up will be added to the portfolio page after completion.

As always, these are personal decisions, reflecting my personal circumstances and views alone. They aren't recommendations to buy or sell stocks.