2014 Guru Strategy Review: Income and growth strategies lead in challenging year

Thursday, Jan 08 2015 by
7
2014 Guru Strategy Review Income and growth strategies lead in challenging year

Our 2013 review of the 60 GuruModel investing strategies tracked by Stockopedia picked up on some incredibly strong performances. Strategies that focus on small and mid-cap companies soared as investors swept into riskier parts of the market. It was perhaps a tall order to expect that confidence to stay intact. After all, many stocks on stretched valuations were under pressure to hit earnings expectations. With many of them missing those targets, earnings season turned into a bloodbath for some and 2014 proved to be much more challenging for the gurus.

The long-only GuruModels span a range of investment disciplines - from deep value small-cap bargains to high yield blue-chip income. That means benchmarking them against a single index isn't always that useful. Likewise, the demanding criteria of these screens means that some of them don't always offer up adequate numbers of realistically investable stocks.

Index / Strategy Composite1 Year Performance
FTSE 100-2.7%
FTSE 2500.9%
FTSE All Share-2.1%
FTSE SmallCap XIT-4.8%
AIM All Share-17.4%
AIM 100-20.7%
Top 10% StockRank stocks
(> £10m Mkt Cap)
1.2%


Guru Strategy Composite-2.65%
Income Composite1.0%
Growth Composite-0.8%
Value Composite-1.9%
Momentum Composite-3.2%
Quality Composite-3.9%
Bargain Composite-9.8%

Caveats aside, the overall GuruModel Composite just beat the FTSE 100 by 0.05% and the FTSE All Share by 0.55%. But it did better against small cap indices which may be more appropriate - beating the FTSE SmallCap by 2.15% and the AIM 100 by over 18%. The notable poor performance of the AIM 100 last year, down 20.7%, was exacerbated by a handful of single stock wipeouts. Tumbling prices at previously high flying shares like Asos, Quindell and Monitise all dragged on the performance.

Individually, all the strategy composites except the Bargain Composite remain ahead of the FTSE 100 over the past two years. During that time, the best overall performance has come from the Momentum strategies, which have produced a 41% return.

54ae9dcf0e38d2_year_composite.png

Which investing strategies worked in 2014?

Overall, it was the Dividend strategies that managed a whisker of outperformance this year - as we wrote about in detail here. Growth strategies also held up well, with our interpretation of US investor William O'Neill's CAN-SLIM strategy topping the list with a 9.9% return. Among the highlights during the year, the strategy…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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LSE Price
24.5p
Change
 
Mkt Cap (£m)
18.6
P/E (fwd)
9.1
Yield (fwd)
n/a

Solid State PLC is engaged in manufacturing of electronic equipment and distribution of electronic components and materials. The Company is a manufacturer and specialist design-in distributor to the electronics industry. Its segments are Distribution division and Manufacturing division. The distribution division comprises Solid State Supplies Limited and Ginsbury Electronics Limited. The manufacturing division includes Steatite Limited and Q-Par Angus Limited. Its geographical segments include UK and Non UK. The Company is a supplier of computing technologies, electronic components, antennas, microwave systems, secure communications systems and battery power solutions. It markets its products through brands, including ndura RUGGED and RZ Pressure. It acts as both a distributor to original equipment manufacturers (OEMs) and manufacturer of specialist units to clients with complex requirements. It serves aerospace, environmental, government, oil and gas, and transportation markets. more »

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462p
Change
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Mkt Cap (£m)
38.9
P/E (fwd)
10.6
Yield (fwd)
3.1

Plus500 Ltd is an Israel-based company that develops and operates an online trading platform for individual customers to trade contracts for difference (CFDs). Its online trading platform allows its customers to trade CFDs on over more than 2,200 different underlying global financial instruments comprising equities, indices, commodities, options, exchange-traded funds (ETFs), crypto currencies and foreign exchange. The Company enables individual customers to trade CFDs in more than 50 countries. The trading platform is accessible from various operating systems, such as Windows, iOS, Android, and Surface, as well as Web browsers. more »

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766.2p
Change
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Mkt Cap (£m)
819.2
P/E (fwd)
6.0
Yield (fwd)
9.5



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6 Comments on this Article show/hide all

jeavom 8th Jan '15 1 of 6

Hi Ben,

The index numbers you are quoting are based on price indices and therefore ignore the dividends. In fact, index returns are in low positive digits. I suspect this means that you are calculating the strategy perfomance excluding dividends as well, so that they are comparable.

The return calculations should really include the dividends as well as this is the true return. Income strategies tend to have above average yield and will look better than they currenty do. Strategies that tend to have lower income, such as growth strategies, will look comparatively worse.

Best regards,

Mark

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Edward Croft 8th Jan '15 2 of 6

In reply to post #89962

Jeavom, Yes indeed you bring up a good point and it's something we are working on. We recently acquired a global dividend database so that we can calculate Total Returns across all portfolios and strategies. This will be integrated within the application at some point in 2015. It will of course make comparisons across different strategies a lot fairer.

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crazycoops 9th Jan '15 3 of 6

That's great news Ed. Will this be included within the Folio tool as well?

Blog: Share Knowledge
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lightningtiger 9th Jan '15 4 of 6

Interesting to see that the worst 1 year performance from Aim 100 @ -20.7% and Aim All share @ - 17.4% can produce fantastic returns from stock picking with Victoria @ around + 375%, Solid State + 180%,
Sprue Aegis+160% & Plus 500 +100%, not forgetting Fitbug in excess of +1000%, all Picked from Stockopedia Aim market.
The beginning of the year has produced another stock gain of over 125% from the Aim market already from one of these strategies, (that is only day 9 into the new year & I am not revealing which one it is.) These stocks are there for the picking.
At least there are now PLUS 500 T shirts available in Madrid to the football club, which should promote the company further in Europe.

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99figaro 12th Jan '15 5 of 6
3

Very disappointed at this 'fund manager'-esque review of the year which mostly focus's (conveniently) on the performance over 2 years and includes gems such as 'the growth composite held up well" when its massively down over 12 months along with all other composites.

As an independent research facility for investors (as opposed to the fund manager view of selling you more of their funds) I would have thought it more helpful to be pointing out that over the last c.12 months virtually no strategy has worked, presumably because the market is gently rebalancing overall valuations (multiples) down,

This bodes well for the future as it increases the potential for regaining the lost ground and then progressing further if earnings are robust but does mean short term pain (or lethargy) for most investors. The most important message for investors therefore is to stick with it even though it may be challenging to do so.


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roddy10 12th Jan '15 6 of 6

In reply to post #89964

Ed:

May I suggest you offer options to:
(1) switch "on" or "off" the dividend in the total return calculations for strategies and portfolios
(2) put in a tax charge on the dividend (so I can decide that eg my dividends are taxed at 40%, or 20% or 0% or whatever I chose - both currently and historically)
(3) Allow the option to 'reinvest' dividends (post any tax charge) into the strategy or into the same equity. (Important to have both options - as else if one stock in a strategy is a heavy dividend payer it is likely to lead to big skewing in the strategy if the dividend is only reinvested into the same stock).
(4) I realise that for portfolios that cross countries or currencies some of the above is 'interesting' - eg you need to effectively reweigh a portfolio using the relevant exchange rates on the day of a dividend. (Also if I was really being pedantic I would note that tax rates (including withholding taxes) on dividends are not the same globally so investors might want an 'advanced' feature where they can configure dividend taxes on a per country basis).

I am sure both will be a pain to do but add massive value to investors.

Randeep

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