Didn't buy Warpaint? Why clear uptrends are the best uptrends and 20 stocks to consider now

Rusty, that's interesting. Did you select the smoothest charts just from a visual assessment? How many shares in the portfolios?

Well it's now a year since this article was posted so perhaps we will get an update soon.

The portfolio I set up of the shares mentioned is showing a one year gain of about 20% compared to around 5% for the FTSE all-share index and about 10% for the top (90-100) stockranks.

So, an impressive performance, although the portfolio benefited from a strong gold price and a bid for Bakkavor.

The trend/multibagger model portfolio has been running for a year now with only 4 stocks  left, 2 of those being gold, 1 defence (which ties in well with sector trends) and 79% in cash. Ended with a 32% gain with a max of 45% at one point. Worth pursuing imo when markets pick up

Some of the stocks that are or have had recent clear trends. I own six of them.

LON:IAG International Consolidated Airlines SA (LON:IAG)
LON:SNX Synectics (LON:SNX)
LON:SRB Serabi Gold (LON:SRB)
LON:CHRT Cohort (LON:CHRT)
LON:MGNS Morgan Sindall (LON:MGNS)
LON:WISE Wise (LON:WISE)
LON:BPM B.P. Marsh & Partners (LON:BPM)
LON:IHG Intercontinental Hotels (LON:IHG)
LON:OTB On Beach group (LON:OTB)
LON:JUST Just (LON:JUST)
LON:CRN Cairn Homes (LON:CRN)
LON:ELIX Elixirr International (LON:ELIX)
LON:ANP Anpario (LON:ANP)
LON:BKS Beeks Financial Cloud (LON:BKS)
LON:CNC Concurrent Technologies (LON:CNC)
LON:SGE Sage (LON:SGE)
LON:MPAC MPAC (LON:MPAC)

I've been using a mix of multibagger (thanks Ed) and trend clarity features in a model portfolio since April last year with buy and sell rules, re-balancing if required once a week. So far its made 40%. I'm slowly building a portfolio using the lessons i've learned along the way. Some great info coming out of Stocko lately

10.55% after 7 months is pretty good. In practice you'd have some sell rules in there so gains would be more. Biggest winner was Serabi Gold (LON:SRB) which 1 bagged

Removed ERRATA! 

Super

Great article, thanks 

I expect Ed will give us an accurate update on this in due course. For what it's worth I set up a Stockopedia portfolio of the stocks mentioned when Ed posted this. Looking at the charts as far as I can tell since 30th May when the post was made the portfolio is up about 8% compared to a fall of about 1.5% in the All-Share. The 90-100 stockranks seems to be up about 4% over the same period.

Interesting indeed to read your article today as a new joiner to Stockopedia. Previously relied on poorly performing funds to maintain and hopefully increase my investments now I am retired, but with little luck. I have already seen the benefit of the data available to me through your company and purchased shares in Serabi Gold and Mears, mentioned in your Momentum stocks article, but thought I would mention that the only fund I still remain invested in is Artemis UK Select, which I notice has 5% holdings in both Rolls Royce and III-3i, which are also listed in your article for their continued momentum.

I remember tuning into a webinar where this paper and 'stocks on the move' was discussed but I can't for the life of me find it again - in the unlikely event that anybody is still checking this thread and has a link I'd be grateful if you could share it!

Hi Ed - thanks for sharing. 

The authors cite Jegadeesh & Titman's excellent 1993 paper on Buying Winners & Selling Losers - which was the inspiration of my Master's thesis as I looked to take the principle and to find winning unit trusts and holding them over different time frames.

I read "Stocks on the Move" and thought the methodology was interesting but the issue I had with the approach is the availability of stock price history to perform linear regression.  If I wanted to perform linear regression on uptrends, I would first need to eyeball 2000 UK charts for unsuitable candidates and then download price history for each candidate from SharePad or Yahoo and manually regression test in Excel. Is there a way to present R-squared in Stockopedia? Or can you suggest a way (probably how you did it) to perform this analysis.

Thanks

Hi Ed, this is a fascinating study. Is there any chance you could share the Trended Momentum screen that you used so that users can duplicate and have a play around with it?

A comment on the SNAPS article prompted me to review the ongoing momentum in this portfolio.  

It's too short a timeframe to make any serious judgements of course, but there's been a 6.5% return since publishing on 30th May to the 17th July. 

When to sell - 6 Month R2 < 1 year R2

Well-defined rules for why you buy would avoid missing out and momentum alone would make it difficult for me to justify an investment.

Looking back as to why I invested It was all related to value investing and being able to buy it at NAV for an average buy price of 36p.  (see graph below). 

My Valuation from March 2020 data. 

$W7L has become my largest position due to stellar performance over the past 4 years. You have to give credit to management's growing experience and skill for improving business and potential valuations. My rules mean I have been a seller at predetermined prices, as the company keeps exceeding expectations and dominates my portfolio.

Valuation from June 2024. 

Today I can still see the company being able to improve the business and resulting valuation. (see above graph). I wish all current and future holders well.

As always DYOR

BSV

These are the stocks at the moment with the cleanest trends according to Andreas Clenow's method if anyone's interested. The only stipulation ive made is not to include any Sucker stocks

Hi Ed
I'm not sure if this is the place for it, but I'd certainly be interested in seeing research on a Value Strategies over longer time periods, say 2-3 years.

I don't generally follow a Momentum Strategy as I personally try to position my portfolio between:

1. Long Term Compounders, that I never need to think about, and;
2. Deep Value unloved companies, where I expect to make material gains over 1-3 years.

Obviously with the latter I'm very dependent on when that value is realised, hence the longer time frame required.

I have made my largest gains from Value, hence my interest here, and I imagine that if I looked at those holdings on a 6-12 month timeframe they might look like failed investments compared with something like the NAPS Portfolio. 

But would that still be the case over say 2/3/4 years? 

It would certainly be interesting to see some insight behind this.

Thanks

Hmmm what is the causing factor here for these  shares to be moving upwards ???- we say for this specific group they have a higher than average prior history of beating expectations - ok no no shit Sherlock - if we take a group of shares doing better than previously expected - where would we expect the price to trend in the next 12 months up or down?

So what is the cause of these shares doing well ? is it the clear trend or the fact we have picked a sample group that are known to have performed well compared to prior expectations.

By picking a biased sample the results will obviously look good. Compared to the whole where there are more companies that have had poor updates. To get fair comparison here I would like to compare results against sample of stocks that have similarly beaten expectations  but ignoring the trend - and see which ones perform better on future basis.

It is very interesting that these stocks continue to beat expectations into the future - that seems like genuine good news - the reasons though seem common sense related - if stocks have decent short term history of beating expectations it shouldn’t massively be a surprise that this subset of companies hitting a sweet spot should hopefully be expected to perhaps continue that good form. 

In summary are these strong trends not the obvious result of having started with subset of shares that have known to have done better than previously expected. Note by comparing against similar set of beating companies “trend ignored in reference period ” it will be interesting to see if the results for that subset is beaten.

Note I am not doubting that this could be a good screen - there will be many companies that perhaps beat due to random reasons - that don’t really then have great plan going forward - so it could be that the proof of the pudding has been delivered by shares with rise in price in that the test of the market has also been met that they have satisfied the market in respect of past and future.

Could we have a monthly post on a separate thread on stocks meeting the criteria to keep this in focus and current? Ken’s monthly update on investment trusts is always a must read and feel this topic deserves the same. 

Hi Ed

Would appreciate your thoughts on BAKK 

In Jan Paul and Graham gave this co Amber/Red, quite rightly. But now it has a stock rank of 99 and the share price a great momentum! Can you give any explanation 

Ps should I be asking Paul/ Graham

Cheers

Have you considered looking at "downtrend clarity"

I would expect the indicator is symmetrical and would give insights.

One of my consistent bad habits is buying while a stock is still in a downtrend and not selling when a stock enters a downtrend.

Also, stock price movements on a day to day basis are pretty closely correlated to the relevant stock index.  Wouldnt you want to look for a clear trend of  outperformance/ underperformance of the index.

I have improved my process to take account of this idea. I really like it when I can introduce improvements which are based on academic research!

Last June, l picked the top 20 momentum stocks on Stockopedia, the only rule was maximum of only 4 per sector. It started on 13th June, 2023, so just under 1 year, the return is just over 29%. Not  sure if Ed can run a back test to compare the results? 

The top 2 stocks are Rolls-Royce Holdings (LON:RR.) +201% and Yu (LON:YU.) +165%, the worst 2 are Abrdn (LON:ABDN) -28% and Ramsdens Holdings (LON:RFX) -27%.  Warpaint London (LON:W7L) was not selected.

Browsing the Top Stockranks. Top Momentum is up 422% since June 2013.

So does Trended outperform the Top 25 Momentum stocks? 

I think Serabi Gold is worth a close look, albeit I am biased as it is for me a significant holding.

It may on the surface, just look like a beneficiary of the recent gold price rise, but there is more to it than this.

They have credible plans, to double production from what was achieved in 2023, by 2026, which are already bearing fruit, by investing in some additional equipment and a reopened mine.  What is particularly interesting is that the increased utilisation of existing equipment and sharing the fixed costs of the company over greater production should reduce their all-in sustaining costs by approximately $300/oz and thus significantly increasing their margin. 

If the gold price remains at the current level that gives a further margin improvement from 2023, so that we have a multiplier effect of increased production * increase margin, giving much higher profits.  Apparently the increased demand for gold has been caused by China wanting to move their foreign currency reserves from the Dollar to gold, so this is likely to underpin the rise.

There are also grand plans to actually not just double production, but to then triple again, but this is reliant on exploration working out and major investment taking place, so I am not confident about that ever happening.

Obviously, this is a small gold miner, with what is effectively a single site, in a remote location, in Brazil, so has all the expected risks, but I could see the share prices doubling or more in the next year and then continuing to increase.

The news section on the stockopedia entry has good links to presentations, and the all important detail for your own research.

Having been a holder of Warpaint London (LON:W7L) since 2021, I think that there are times when the chart is the last thing you should look at, especially when you get in early, before the big gains. I bought in June 2021, based on the fundamentals. At the time there was almost zero investor interest, low volume and after peaking at around 222p in Sept' the chart kept dipping and looked ugly until Nov' 22. I didn't sell because it kept issuing outstanding interim trading statements and figured investor sentiment would eventually catch up with the fundamentals. In the case of WZL, it was a case of fundamentals first, chart second as Robbie (Naked Trader) says. 

Hi Ed, It is an interesting concept and I had a look at how I would score each of this group based on the first 6 months and how it correlated with the second six months. 

GFM, MPAC,DWHT,SYS1 were clearly level first 6 months, clearly up for 2nd 6 months.

NWG was 1 clearly down then  2 clearly up.

RR.,III,PAF,RTC,W7L were 1 clearly up then 2 clearly up

PLUS,CKN,CRN,RNWH,CMCX,CAKK,TKO,MER,KITW,SRB were 1 unclear, 2 clearly up.

As everything went rocketing up from end of Nov I don't think this year's data is a good example to test on,  only RR. etc support the hypothesis. 

It might be useful to do it on another year's data where the overall trends are not so clear.

Maybe we need a measure of how strong/straight the trend is, which is presumably available from some of the other measures? Alternatively is it about when the key dates are that trigger change in momentum, such as "Sell in May and Go Away"?

caught the uptrend in RTC, bagged and sold in the mid 90's as it felt fully valued, hope it's not one I live to regret selling

So, all the money we pay Stocko for all this detailed info about Balance Sheets, P&L, ROCE etc. is wasted, right? All we need to do is look at the chart. Job done.

Hi Edward, really enjoyed this one, a feeling i often have! cheers

Great work - but the missing component here is when to sell. After six months? When the momentum fades?

You also selected SR > 80 stocks. Did they perform better than lower ranks? I suspect that many high-trend-clarity stocks will have started their trend at a lower stock rank. How much (on average) does the stock rank change as the trend continues?

Gulf Marine Services (LON:GMS) has been on a lovely clear trend for a year or so but has faltered a bit in the last month. So that's the trend clarity lowering. Is that a useful signal?

Sorry for so many questions - but there are many directions in which you could take this analysis further...

I wonder how long it will be before an AI app can provide this date in 25 seconds!

I would also add Galliford Try Holdings (LON:GFRD) to the list of shares in a clear and uninterrupted uptrend, stretching back to last July.  I was lucky enough to add towards the start and have added since, although I admit it is difficult to overcome the mental inhibition to add to a  holding that has risen strongly.

M&C Saatchi (LON:SAA) also displays a strong trend line.  I also hold but regrettably top sliced around 185p.  Tempted to add back but have yet to do so.

Great article! Thanks.
Can this methodology be turned into a successful screen?

In the Stocks on the Move book mentioned below, the author uses a "gap" of 15% to exclude a share from the list.  This is frequently due to takeover activity.  Is there a way in the Stocko screener to flag takeover situations?  You must have the data as a flag appears at the top of the Stockreport but I can't find a way to access it in the screener.

Regrettably, I'm a contrarian. I always make the mistake of trying to outwit the trend :(

Ed thanks again for a great article. May I ask though, when you were selecting the top twenty trending graphs for each year, were you blinded to the names of the stocks? 

I am fortunate to be in seven of these and four of them are core long term holdings for me....Plus500, Renew, Warpaint and RTC Group with the latter being the tiddler in the pack and probably the least known.  I will therefore say a few things about why it has gained momentum in the last nine months or so...

RTC had strong interims last year in late July and all three divisions are firing well so the board reinstated the  dividend at a very significant 7% yield in the final results in March. The share price kicked on but the yield is still nearly 6% and the current p/e only 7.5. The next interims are likely to be ahead of last year when released in July as they have a very large order pipeline and the comments in March suggested all is going well.

The share register is interesting as the second largest shareholder is a competitor to the main part of the group and the largest holder sadly is now a trust set up for the late chairman who died shortly after the interims last year. He has not been replaced and there is an argument that says the board needs additions or a trade bidder may decide it is easier to move in now before any additions or changes take place. The HQ overheads and listing costs equate to saving £1.3m  not least the high executive remuneration which would effectively increase profits by over 50% in one swoop.

The Trust acting for the late chairman's beneficiaries  may be mindful that a significant part of the estate is in one company and so wish to sell part or all of the stake.  It is all an unknown but whilst the company is performing very well the momentum is likely to continue regardless as only two companies on this list are on lower p/e ratings.

The board need to appoint a new chair and non exec or my money is on a third party acting first. 

Ed

In the technical analysis & charts section of Stockopedia there is the draw feature which includes the regression trend line. If  this is based on the Linear Regression. (R2) methodology is there any way the R2 coefficient for a particular regression trend line could be quoted.  If this were possible  then it might be provide additional data support to just eyeballing the share price graph and not be as onerous as  conducting a full blown linear regression analysis on Excel or similar

I think it's important to make the point that in a severe bear market the max draw down could be very high for this type of strategy.  I think in Andrea's book when he back tested draw down was 50% granted it was during dot com and GFC crashes. 

Personally I can not stomach 50% drawdown so following a hybrid strategy that's fits my psyche.

Thanks Ed, thats great. Just a couple of points. Directors have recently taken their gains on high prices and volume has dropped a lot on a number of these. As the results of this approach are naturally looking backwards at a prolonged increase in price, does it beg the question that it’s too late to jump in here across the whole selection?

Logical David, it's a case of 'me too', I have, thanks to Stocko for providing more spare portfolios, just made up one titled Ever-Rising Risers with one k placed in each holding.  This not just optimism and when Ed says "Let’s be clear, if you see a very smoothly rising price trend, like with Warpaint, you are unlikely to be an early buyer as you will wait for a correction. You’ll then end up buying too late. This is a mistake", I have to disagree because it is never too late to get on a true escalator, all it needs is to choose a nice dip to climb on.  I do like, and hold, BAE Systems (LON:BA.) but at a stock rank of only 70 cannot be in Ed's list here.  I also hold 4 shares in that list and unforgivingly sold 4 others a while back.

Wow Ed, 

What impressive returns you get over 12 months.  I've put the 20 stocks into a portfolio called 'Ed's Uptrend Stocks' and it gives a fantastic return of 94% over 12 months.  I own 5 of the shares and it puts my 72% return over 12 months to shame.  I believe it would be a good idea if you revisited this method/system in, say, 6 months time.

David.

It is human nature to want more! 

The results are great but volatile, I can't help thinking that a 20 stock portfolio is too small and stretching to 25 or 30 would be less volatile and with little loss in return. 

Here is the list if you want to put it into a folio: RR., NWG, III, PLUS, CKN, CRN, RNWH, CMCX, BAKK, TKO, PAF, MER, W7L, GFM, KITW, MPAC, DWHT, SYS1, SRB, RTC

Ed,

A interesting interpretation of the Cai paper using  high Stockrank scores to identify likely winners. 

In relation to identifying the likes of Warpaint London (LON:W7L) early on, would company selection based in Absolute Price Strength 3m, rather than Absolute Price Strength 6m be an advantage, or does it need 6m of momentum data  for a reliable R2 score?

I have to agree as it is a conclusion I had already reached and am applying to my purchasing decisions.  Chartists looking back not over 6 or 12 months but over several years are likely well ahead of the game.  Sadly I didn't see the promise in Warpaint London (LON:W7L) , missed out on a few more mostly due to not having cash ready.

Ed, could you add the tickers to the article to make the mentioned shares appear in the sidebar please? It will help searching later, too.

Great stuff Ed. I've created a model portfolio using a blend of your multibagger and Andreas' approach. So far it's standing at 7.5% growth for the whole portfolio since 4th April. Defo the way forward for me

Hi Ed, just looking at my screens and checking which filters I would use. Looking at the 'Taking it further' section, your steps were:

• 80-100 StockRank - easy to do
• 6 month price strength/performance - what are you using here?
• Then eyeball the charts to see which have good trend clarity.

Is that it? You then give a list of top trended momentum stocks - have you added a momentum filter? Or let the price trend do the work?

Ed, great, and consistent with the message Stockopedia has always given - just firmer on how to filter and apply what is already there. I shall be adjusting my screens.

...far above the results of annually rebalanced 90+ StockRank stocks over the same time period

Does this mean you might change the NAPS strategy from the current one to this one? It would be about the same admin time, I would imagine.

On your methodology then are you assuming you sell all the stocks at the end of each year and start afresh each year then? Thanks very interesting 

I've just run this for the US universe (Nasdaq and NYSE) for 90+ ranked stocks with a minimum £50m cap. 

The data starts a little later, in July 2014.  That's about 9.8 years. 

215% cumulative return at a 12.4% annualised rate.  That beats the S&P 500 which has returned 169% in the same timeframe.   

Ed, I think this is terrific!  Do we know what the reason is why small caps are under represented? And is there a way that we might be able to generate the list for generate ourselves in future?

Great article.

"Calculate the trend clarity for each. (Linear regression → R2)"

How do we calculate the trend clarity, or is it available within Stocko data?

I bought Vertiv Holdings Co (NYQ:VRT) on Nasdaq last week. It has quadrupled in the past year, outperforming NVIDIA (NSQ:NVDA) , and I hope that I didn't get in too late. They supply infrastructure and cooling for data centres, so should be able to benefit from both the AI market and the cloud computing market.

Excellent inspiration for further reflection. Thank you, Ed.  And the book you recommend is available  to Kindle Unlimited subscribers,

An underrated  book worth reading - https://www.amazon.co.uk/Stock...

It has a similar strategy (in that it uses R2 to quantify quality of the trend) - it clearly sets out a trading strategy and what is more it's back tested 2000-2010 (US market). Worth checking out.

Interesting. And thanks for the book recommendation Ed, sounds right up my street.