Stockopedia Subscriber Performance Survey 2018
There’s just no getting around it - British stock markets have performed dismally in 2018. The black clouds of Brexit and political incompetence have hammered the indices with the FTSE All Share down more than 12% year to date at the time of writing. But there is one bright note. Savvy private investors have been beating the market handsomely.
Last year in 2017 we sent out a Performance Survey to all Stockopedia Subscribers in which subscribers reported a strong outperformance versus the indices. But there was a tailwind last year - rising stock markets, and significant strength for high StockRank shares. This year, it’s been much tougher going with more moderate StockRank outperformance and a falling market. So tough that we even considered not polling subscribers on their performance. But we deftly sidestepped that possible act of cowardice and are glad to report some really excellent results from a survey of more than 1,220 subscribers.
Since subscribing to Stockopedia has your performance outperformed, matched or underperformed the market?
This was the same question as asked in 2017 when only 6% of subscribers reported underperforming the market since subscribing. A significant new cohort of subscribers joined in 2018 during falling markets, so there’s no surprise that those numbers are up, but it’s clear the majority of subscribers are still well ahead of the benchmarks.
What has your 2018 performance been as a percentage year to date?
In spite of the common StockRank & Ratings systems published on the Stockopedia website, subscribers have wildly diverging portfolios and styles. So whenever we ask this question, we discover a wide variability in the distribution of returns. As you can see below the range of outcomes has been anywhere between -50% and +50%. The outliers have most likely being in highly concentrated portfolios, with more diversified portfolios clustering between -20% and +20%.
But what is most startling is the level of average outperformance versus the market averages. This survey has been open for 2 weeks during which time we’ve seen some big swings in the market. The FTSE All Share (the broadest UK market index ) has been down for the year between -8% and -12% over this period. So to create the next chart we calculated the weighted average FTSE All Share performance based on the survey completion dates (so that like for like is compared).
This shows a remarkable level of outperformance. It is worth considering whether investors are being over-optimistic in their performance reporting, and also whether they are including dividend returns (which aren’t included in the FTSE All Share performance). But even taking both these factors into account it’s likely that the average performer has significantly beaten the market.
Which features have most impacted your returns?
The standout feature on the site is still the StockRanks with 73% of subscribers saying it had had the highest impact on their returns. But in contrast to 2017, where the top 20% ranked stocks dramatically outperformed the index, in 2018 there has been a much more moderate outperformance. 80+ ranked stocks in the UK have sunk 8% year to date.
This year we’ve seen more adoption and interest in the RiskRatings, with a growing understanding that adding lower volatility stocks to your portfolio can help reduce drawdowns.
Meanwhile, the community around the Small Cap Value Report continue to prosper. Paul & Graham have highlighted a number of outstanding winners this year, as we’ll see in the next section, as well as helping navigate & spot opportunities in treacherous waters.
What has been your biggest winner year to date?
This always fascinates me, and what a massive array of names were returned. There was far less clustering this year and the sources of people’s ideas proved very diverse.
- The most popular winner held was Games Workshop (GAW)… which tripled in 2017 and rose strongly again in 2018. It was well flagged both by the StockRanks and the Small Cap Value Report. 6% of subscribers named it as their biggest winner.
- The second most widely held winner was Sopheon (SPE) absolutely crushing the market by rising 245%. This was picked up in particular by more systematic investors by screens and rankings. 4% of subscribers named it as their biggest winner.
- Similarly the much unloved Plus500 (PLUS) rising 67% year to date was well flagged in the NAPS Portfolio at the start of the year. Many sensible investors avoided it due to a perceived suspect business model. Occasional non rational investing can pay dividends indeed. 4% of subscribers named it as their biggest winner.
But beyond these top three most widely held winners were a range of others. I’ve posted a table of them below. The colour coding maps to the self-professed investing style of the average holder. Systematic investors in blue, Quality Investors in yellow, and Active Stock Pickers in Red.
The Small Cap Value Report community have seriously profited from lower ranking names like Sosandar, Boohoo, Burford Capital and the like, while the offline Mello community have had some great success following Leon Boros into Bioventix. It just goes to show that great ideas are born from all kinds of sources.
While the following chart does show some fallers for the year, it’s worth pointing out that they are multi-year winners for the holders.
(Note - Boohoo and Sosandar have had a further tumble after the ASOS results yesterday, so please bear that in mind while reviewing the above).
What’s the biggest problem right now in your investing?
No surprises here… the typical issue for most investors is not losing money, having more sell discipline, or knowing when to sell. It’s emotionally very difficult to see big profits slip away from your grasp. We certainly want to improve the level of tooling to help investors with these difficult decisions. Here’s a word cloud that shows the general themes we heard in response to this question.
The above was backed up in the biggest feature request named in the survey. 31% of subscribers responding asked us to publish buy/hold/sell recommendations. I’m not sure whether we’ll ever do that as we are aiming for a self-advisory service, but it does show how much trouble we’re all having deciding when to sell.
Do you feel more or less confident in your understanding of the stock market since using Stockopedia?
The good news is that in spite of the really bad stock markets in 2018, more than 75% of subscribers are feeling more confident in their understanding of the stock market since using the site.
And this comes through in the aspects of our value proposition that are most appreciated by the community. It’s not just about discovering new stock ideas. It’s about an enhanced ability to avoid risky stocks, improved investment discipline and a reduced reliance on others. We've just got to do a better job of helping subscribers avoid downturns. I do have a plan for that.
Thanks to everyone who has participated in this survey. I know everyone will be checking their own performance against these benchmarks - so your contributions are greatly appreciated. Many of you have said we can follow up and find out more about your performance in person - we’ll try to make sure we get back in touch on this in the New Year.
In the meantime, I’d love to hear your thoughts on this survey in the comments below.
As ever - Safe Investing !
About Edward Croft
I'm the co-founder and CEO here at Stockopedia.com - with one goal - to help private investors beat the market. I've a passionate belief that the use of data-informed investment processes are the best way to improve investment results. I've a background in science and wealth management and have spent years building a superb cross-functional team here to deliver on our vision. We aren't finished yet - there's so much to deliver. These days, other than managing the business, I spend a lot of my time on educational activities, researching markets and sharing learnings. Do connect with me here in the comments section or at Twitter/X.
Disclaimer - This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
"Also as shine66 says I do wonder how people measure it? I am about to be able to deploy a chunk of cash (after a sale of my business and savings that it would have been imprudent deploy). If I had this cash back into my “original” capital figure in my spreadsheet, then my returns mentioned above would be not nearly so impressive but until now these funds were not available to invest. I would be interested to know how people keep track of their performance? Does Sharepad do this well?"
I suggest you read the following April 2015 post on the Monevator website (the comments are essential reading too, particularly #20 by John Hill):
Sharepad handles investment performance pretty well - it uses the Modified Dietz method, which is one of the methodologies of calculating returns recommended by the Investment Performance Council as part of their Global Investment Performance Standards (GIPS). The year-to-date performance of my portfolio shown on Sharepad is virtually identical to that shown on my own private spreadsheet, which uses a unitised approach.
It's actually not that difficult,
I used to try and include cash in my calculations but I realised that was confusing the issue. I've always registered every single buy and sell I've made off my own back on a spreadsheet as well as the value of current holdings, so I just have a pivot table around this (categorized) list to give me a simple to read summary of how much each share has lost or gained as well as a bottom line overall p&l - and that's my kpi. I keep a month by month account of values. Calculating a percentage gain or loss overall is one element I havent got my head around though as that would have to encompass cash somehow (my cash wanders its way between shares, long term funds, etfs, and err.. cash !).
Not sure if that helps but that's the way I go about it
purpleski - Agree with your point about the benchmark. The All-Share is not something I would ever invest in. The best benchmark is the best opportunity cost i.e. next best alternative.
In my view, the best market to track would be the S&P 500 - a tracker of this is up 3.8% year to date in sterling terms There are also some good quality managers with you having highlighted one of them. The one you highlight, Fundsmith, is up 5.5% year to date.
The most appropriate benchmark should be what you would do if you weren't investing directly yourself.
The FTSE 100 is mostly low quality (miners, banks, oil). Why anyone would invest in it is beyond me. I am also surprised that the All-Share or FTSE 100 is used as a benchmark. A classic case of home country bias. The FTSE 100 is about 80% of the All-Share. FTSE 250 is a little better but is also mainly UK domestic stocks. The general quality is mixed too. I can give away a secret way to outperform the All-Share index. Don't invest in it. Buy the S&P 500!
A lot of fund managers pat themselves on the back for outperforming the All-Share. But they simply do this by being overweight the FTSE 250.
The S&P 500 as a benchmark is a good one. An accumulation ETF tracking this is up 189% over 7 years or 16.3% a year (0.07% annual fee). This isn't bad although the return is partly due to sterling weakness.
A key risk is that it is easy to outperform in higher risk markets by buying higher risk shares. But then they blow up when markets decline. Purple Bricks, homebuilders etc. In the long-term it is capital preservation that matters most. This is why supposedly dull companies like Unilever outperform the market. If you are in higher risk stuff you have to get in at the bottom and sell before the blow up. But blowups can happen at any time unfortunately.
Personally I think the core and satellite approach has a lot going for it. If you are all in stocks you need at least 20-25 to be diversified... probably 40 or more if you are in small caps. Does anyone have 40 good ideas?
With a core of say 50% in funds the remaining 50% can be in the best 10-15 stock ideas. This will save time, improve performance and reduce risk. The performance boost comes from your first 10 ideas being much better than your next 20 ideas. So you can concentrate more on your top ideas. Warren Buffett highlights this clearly saying that investing is about swinging for the best pitches. Being able to invest in fewer stocks increases the odds for the pitches you do swing for.
Or to put it another way if you have 40 ideas but only invested in the top 15 in say 40% of your portfolio with the rest in funds would that improve your result. The bottom 25 stock ideas may not add value versus a good passive fund.
However, people either seem to be stocks people or funds people. A bit like cats or dogs people! I know this will be sacrilege to some but the logic of it seems sound. Or am I missing something?
@unwise2 - There are no good UK indices for comparison. The only sensible one would be an all-cap equal-weighted index... but we don't have one.
But surely it would not be a massive undertaking to create one?
I had in fact considered making one myself - and possibly of more value - the sector equivalents. The main barrier is that it is hard to create retrospectively given that pretty much all third party data providers delete the history for delisted stocks (I have never understood why this is considered a good idea).
Or to put it another way if you have 40 ideas but only invested in the top 15 in say 40% of your portfolio with the rest in funds would that improve your result. The bottom 25 stock ideas may not add value versus a good passive fund.
True, but how do you know in advance which 15 will be the best performers?
Peter Bernstein did some research a few years ago in which he showed that the 15 stock diversification "rule" is a myth. The problem is that in any index - he used the S&P 500 - there are a few superstocks, and if you miss them then you miss most of the returns.
Obviously the more stocks you hold the less likely you are to miss the best performers, but the more you dilute your performance. Still, no one said that this investing lark was supposed to be easy - if it was, everyone would be doing it.
timarr
I find the first question in this survey problematic, in that it implies a causal link between Stockopedia subscription and performance.
Since subscribing to Stockopedia has your performance outperformed, matched or underperformed the market?
I outperformed the market before subscribing to Stockopedia and I have outperformed it after. I don't ascribe my post-subscription outperformance to the subscription itself. I suspect that many other subscribers are in the same position.
Also, there is undoubtedly a strong element of self-selection bias in a survey of this nature. I am happy to complete it because I have had a less bad (even I couldn't call it good) year than the market. I am absolutely certain that I would have been a lot loss enthusiastic about doing it if the opposite had been true,
Put these two aspects together, and the results could be thought to give a definitely unproven and probably misleading impression that Stockopedia subscription drives outperformance.
Good marketing but poor stats.
I completely agree. This a poorly designed survey that will say very little about the success or otherwise of Stockopedia subscribers. It is highly probable that the the self selection bias helps explain why Stockopedia subscribers are on average, above average (much like the children in Lake Wobegon).
After trying a few approaches to portfolio analysis, unitisation is the only one that doesn't get tied in knots with cashflows. Wish I'd started earlier.
Even then without a hard date for everyone there could be significant variations between performance depending when people value their portfolios, especially in the last couple of months!
You're moving in the right direction, Andrew, but why stop at the SP500? It's some years since I worked in the field, but even then most professionally managed DC pension funds were moving to global equities as the key equity component of any 'growth' default strategy (for which UK weighting will be something north of 10% I expect). Benchmarking would typically be against an appropriate MSCI index, though I'm not clear if they're available to Jo Punter on a daily basis. I think Barclays/ Bloomberg also provide global indices. See https://www.msci.com/acwi If not, you could probably find a corresponding ETF for benchmarking.
Hedging is of course a major issue, particularly recently with the GBP slide. 50/50 unhedged/hedged into GBP might be a compromise/ cop-out.
Obviously SP500 has the advantage of ubiquity/ universal availability. But if you listen to the Meb Faber podcasts, he and his interviewees are often exhorting their US audience to think global and ditch the home country bias. As an aside, he attributes much of the US outperformance in recent years simply to multiple (PE) expansion, rather than genuine growth.
My other beef on these simplistic surveys is there's no consideration of individual investor objectives, risk tolerance etc. Would a 75 year old (not many investing in individual stocks at that age?) be comparable to a 40 year old? Would a 50/50 equity/bond benchmark make more sense, or, more radically, Inflation + 4% pa perhaps?
My final concern is that there seems to me to be quite a bias amongst stocks discussed on Stockopedia to smallish B2C retailers - fashion, food etc. I haven't done any analysis so perhaps I'm guilty of believing my perceptions! If so, it's a small part of the investible universe and the only explanations I can think of is that (A) the business models are simple in concept (though difficult in execution) and (B) people feel they can 'kick the tyres' and gain some greater insight. As another poster said, perhaps the reality is most investors have most of their wealth in collective vehicles and the stocks discussed here tend to be 'icing on the cake'. From my own narrow perspective, I have quoted assets exceeding my LTA but there's no way I would sleep at night if I put the entirety into just 40, say, UK stocks - it would be just too stressful.
It would be nice if there were more discussion of investment strategies on Stockopedia, but I guess it won't happen as Investment Trusts, ETFs are not rated currently.
My final concern is that there seems to me to be quite a bias amongst stocks discussed on Stockopedia to smallish B2C retailers - fashion, food etc. ..........If so, it's a small part of the investible universe and the only explanations I can think of is that (A) the business models are simple in concept (though difficult in execution) and (B) people feel they can 'kick the tyres' and gain some greater insight.
Now this is getting interesting.
About a year ago I broadened my subscription to other markets because the discussion threads were not adding much to my investment success. Other markets have no discussions but you can work with the user friendly Stockopedia tools.
It was a logical migration. Like many subscribers Paul Scott's SCVR caught my interest first. He writes well and knowledgeably. I learned huge amounts about taking accounts to pieces and I roared with laughter at his antics and gift with words. For an accountant it is unusual.
Once a paid subscriber I discovered Roland Head who does excellent work showing us how to use the tools Stockopedia provides.
General discussions, now and again, showed how many brilliant subscribers there were.
However, as you have pointed out, their minds are rarely deployed on specific company analysis.
My conclusion was that the discussion threads were for the part of the day when I needed entertainment.
Lets face it investing is a tedious and solitary pursuit.
Soros even said if you are not bored but having fun you are not making profits.
There is a long list of companies of which BOO (BooHoo) is the best example which have really perked up my results.
However the largest positions in my portfolio have never been mentionned here.
@EffortlessCool - you could interpret the result of the first question in two ways:
- A Stockopedia subscription has aided the average subscriber's performance.
- The typical Stockopedia subscriber is a better than average stock picker (with or without their subscription).
Given the success of the StockRanks over the last 5 years, and the waves of anecdotal evidence from subscriber stories & testimonials, I do believe #1 is true. Frankly, if I even doubted it for a second, I'd hang up my boots and find something else to do.
But if the real reason that the community outperforms is because of #2, well what a great community to be a part of. Who wouldn't want to be surrounded by a superior set of stock pickers on a day to day basis? Osmosis is a powerful force.
Personally I believe it's a combination of both. We're privileged here to host a community of really smart individuals with great experience in the market, but we also provide access to a toolbox that brings rigour and discipline to the typical subscriber's daily habits.
The whole goal of the Stockopedia project is to help counter the poor stock selection & portfolio construction habits that so damage the typical individual investor's performance in the market. There's a lot more work to do on the site, but I do believe that the worst of our behavioural biases can be countered with access to better mentorship, data and tooling. I'd like to see the day come when more than 75%+ of our community are beating the market on a medium term basis. I believe it's inherently attainable as long as we make the relevant investments and the market remains moderately inefficient.
Hi Ed
In response to your opening response to .....
'@EffortlessCool - you could interpret the result of the first question in two ways:
A Stockopedia subscription has aided the average subscriber's performance.
The typical Stockopedia subscriber is a better than average stock picker (with or without their subscription). '
I unquestionably fall into the first camp. I was certainly, sadly, not part of the second camp.
I joined Stockopedia in July 2015. Since then my annualised return (re-based to zero from point of making first Stocko informed trade) has beaten the FTSE 100 on an annualised basis by 7.46%, up to the end of November 2018 (40 months).
This is my total return and thus includes dividends which the FTSE 100 tracking does not, but my tracking shows that my dividends are 2.30% of these annualised returns. Thus on a like for like basis I beat the index annually by 5.16%.
This is not a great performance by any means, but I know for certain I would not have got anything like this encouraging performance over 40 months without Stockopedia in all its quality, sophistication and richness.
Whatismore, I have no doubt I will make improvements to this delta as I tighten up my investing disciplines and increase my use of the rich toolset within Stockopedia. Not to mention the invaluable insights continually proffered by the Stockopedia community.
Yes, I for one categorically endorse your argument that ....
'A Stockopedia subscription has aided the average subscriber's performance.'
I hope you and the team have a great Christmas and I am looking forward to exercising Stockopedia in next year's, possibly bear, market.
Regards
Howard
Nick
Thanks - really interesting as I had thought earlier research has shown that market weighted investments eg trackers meant you ended up investing in shares that became increasingly overvalued which would ultimately leave to underperformance against a equal weighted portfolio in the longer term. Do you get the close correlation shown above over longer periods?
Mathematically, you can prove that if a Market is "diverse" (roughly speaking defined as no stock dominates the market as time goes to infinity) then an equal-weighted portfolio will out-perform a market-weighted portfolio "eventually". This is one the main results from Stochastic Portfolio Theory if that kind of thing interests you.
However in shorter timeframes, equal-weighted portfolios can also out-perform because you have to keep rebalancing them (whereas you do not for market-weighted ones) and you get the benefit of volatility harvesting too.
(NB: very confusingly, "market diversity" is not at all the same thing as "diversification". It is a very obscure property of almost any market which the model in the earlier Modern Portfolio Theory gets wrong.).
Which is why a LCVR report who be worth establishing alongside the SCVR that perhaps utilised the Stockranks system as its basis - if you can find another Paul/Graham !
*Past performance is no indicator of future performance. Performance returns are based on hypothetical scenarios and do not represent an actual investment.
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i am up- but i have included dividends