What Works?

When I looked at the performance of Value at the end of 2022, it was a rather depressing picture:

While it was clear that expensive stocks were not the place to be, the top decile of the Value Rank underperformed the FTSE All Share. Indeed, all of the deciles underperformed. It may seem…

We now come to the last of eight articles in our series on “The Strategy Map”, to explore an approach that sits at the centre of it all. Before I get started, I want to say that I’m in awe of the private investor community. When everyone seems to know more than you about every stock out there, it’s…

This week, Megan has been looking at Adventurous Growth strategies, which are stocks on the Stockopedia Style Map that are high quality and have high momentum:

We know that the Quality and Momentum Rank are positively correlated due to the inclusion of measures of earnings momentum in both measures:

The Adventurous Growth investment style lends itself to high aspirations.

For a start, there are the anecdotes. How many of us have heard tale of the private investor who bought Domino’s Pizza or Bioventix soon after their respective IPOs?

Then there are the stars of the strategy, whose success is something that we would surely…

Who would turn away from the idea of buying bargain stocks right at the moment they have turned the corner? Discovering a hidden gem with a catalyst can lead to transformational stock returns. Many of the biggest stock market winners in any year begin their journey with low valuations, where something changes to trigger a revaluation.

Most investors love the…

In this week's Stockopedia Strategy Map article, Ed introduced the concept of Momentum. Momentum is the tendency for medium-term winners to keep doing well. A typical Momentum strategy looks at the share price performance from 12 months to one month ago. (In the very short term, share prices tend to mean revert rather than trend, so the last month…

In a bull market, when valuations are expanding and the market is pricing in a better future, there’s no faster road to profit than buying momentum stocks. When a stock is on the move, there’s a good chance it will continue in the same direction, especially if the power of institutional buying is behind it.

"An object at rest…

Imagine you're offered $1 for 50¢ - would you take it? Welcome to the world of deep value investing: where you try to buy stocks at a significant discount to their intrinsic value.

It sounds simple, but nothing ever is. The $1 note might be torn, and a bit inky. Your friends may warn you it's not even legal tender.…

The Winners

Stock market investors in developed countries have long been winners. They have enjoyed higher returns in exchange for higher volatility than any other asset class. These excess returns have allowed them to retire earlier, more comfortably and pass greater wealth onto their children. In their long-term study of asset returns, Dimson, Marsh, and  Staunton found that…

The collapse of US tech lender Silicon Valley Bank -- SVB Financial (NSQ:SIVB) -- has triggered a sell-off in banking shares across the market. Despite this unfortunate event, an evenly-weighted basket of FTSE 100 bank shares would still have beaten the index by almost 10% over the last year.

Indeed, until recently, rising interest rates seemed…

In this piece:

• Why recent performance and near-term forecasts aren’t driving share prices higher

• Why the hydrocarbon decline could now be quicker than expected

• Do valuation metrics support a tobacco-style investment in oil and gas producers?

I have to admit that I’ve always had a somewhat guilty fascination with oil and gas stocks.…

Let’s suppose there are two types of economists. The first type thinks stocks behave in a predictable, orderly way. They treat stock selection as a ‘science’, rather than an ‘art’, and try to identify factors that drive stocks up or down according to a clearly defined formula. The second type thinks price trends are chaotic, even random, while stock picking…

Timing market cycles is notoriously difficult for investors. But the potential rewards are significant. Even large, well-established cyclical businesses can see huge share price swings over the course of a cycle – falling by 50% and then doubling (or more) is not unusual.

Right now, I think it’s fair to say that the real-world economy is still in the early…

We have been running the StockRanks since 2013. That is quite a long time, but arguably not long enough to explore how StockRanks perform when the market crashes. Investors have seen difficult times in recent years, but the StockRanks haven’t been through anything comparable to the crash of 2008-09. The market panicked in March 2020. However, the fall was nowhere…

It's been a pretty brutal twelve months for everyone investing in stock markets - not only here, but all around the world. But one area of optimism has been the performance of the UK broader benchmark - the FTSE All Share.

According to my measurement, the FTSE All Share has fallen by 6.2% over the last 12 months since…

I had a fascinating conversation with one of our subscribers back in March 2020. We speculated whether the economic climate of the 2020s would resemble the 1970s. Unfortunately, the comparison has become something of a cliche. Newspapers say the coming months will be like the Winter of Discontent (1978-79), when widespread strikes and industrial action resulted in rubbish piling up…

"I understand that I should buy quality, value, momentum shares and the StockRanks are a good guide to this... but I've still got a major problem when should I sell?"

It's a very good question. It's all very well thinking "90+ StockRank shares tend to beat the market" and buying 90+ ranked shares accordingly - but managing a portfolio of…

Burford is one of the largest (if not the largest) firms in litigation funding - a relatively new multibillion industry whose historically strong returns have begun to attract significant investments from pension funds, endowment trusts and the like. 

The company is popular with investors. Those looking to get a feel for the company as an investment over the…

Back in April 2009 -- a little over 10 years ago -- world stock markets reached an inflection point. No-one knew it at the time (though some later claimed they did) but it was the moment when negative momentum triggered by the financial crisis stopped and equity prices started rising. These were the very early days of a new bull…

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…

In 2013, a year after we launched the subscription service on the Stockopedia website we had an idea. Having read through hundreds of academic papers, quantitative research notes and books on the subject of stock selection we realised there were some common threads. Why not bring those threads together into a simple, intuitive and effective rating system for stocks?

After a couple of minor roles in the City, I wound up at Goldman Sachs in their ultra high net wealth private client division. As is usually the case as a junior you are keen to make a good impression and find promising investments to pitch. The problem was I was rather independent minded and preferred to come up with…

Regardless of what the marketing departments at some major fund management firms might like you to think, the concept of ‘factor’ investing has been around for decades. The characteristics of Quality, Value and Momentum have long been credited as a source of some of the strongest returns in the stock market - it’s an open secret. But despite validatory evidence…

Back in 2012, shares in the media company Trinity Mirror looked surprisingly cheap given the amount of cash the business was throwing off. Despite its outdated business model, the newspaper publisher was still managing to juggle a high level of debt and a troublesome pension deficit. But what was more concerning was its seeming inability to adapt to…

In the aftermath of England’s early exit from this year’s Rugby World Cup came an intriguing but sadly familiar tale of misadventure in the stock market. During the tournament preparations it’s alleged that the team’s kit manager shared a tip about the ‘exciting prospects’ of a micro-cap oil exploration company. This apparently lulled some players into parting with…

In the ten years to 2014, shares in online fashion retailer Asos soared from around 7p to £70 each. The stock became the stuff of folklore among those that had either made a fortune or missed the chance of making millions by selling out too early. Its relentless growth seduced investors and created blistering momentum that pushed it to a…

When market valuations fell sharply this summer, Neil Woodford, the highly respected fund manager, described how sliding share prices can be overwhelming and distort rational perspectives. He said that while it can be difficult to remain focused on fundamentals when markets fall dramatically, it’s a chance to look for opportunities where the falls have been heaviest.

In…

When Warren Buffett raised his stake in Tesco in 2012, little did he know that he was breaking one of his own investment rules. He’d initially taken a position in the UK retail giant some years earlier. After a profit warning and news of increasingly fierce competition, Buffett chose to buy more shares as price started to slide. It was…

Faced with choosing between a $10 bottle of wine and a $90 bottle of wine, which would you go for? In one experiment - with the prices of each wine clearly marked - nearly twice as many people preferred the taste of the most expensive bottle. But unknown to the volunteers, the two wines were exactly the same.

This test was…

One of our subscribers today (dangersimpson ) sent me a marvellous piece of research by Michael Mauboussin entitled “Managing the Man Overboard Moment - making an informed decision after a large price drop".  The insights contained in this piece hold some great lessons for all stock market investors.  He shows how to decide whether to buy,…