Guru Strategies Review H1 2019: Bargain Strategies Buck The Trend

4th Jul '19 by Jack Brumby

11 comments 7916 reads

I once observed two people facing the wrong way in one of those wave pools - it didn’t end well for them.

What looked like a pleasant chat was interrupted by an artificial tsunami. They resurfaced after a second or two, coughing and spluttering, alive but very wet.

Looking at the year-to-date performance of Stockopedia’s 60 or so Guru Screens, I’m beginning to see how they must have felt - because the screens look as if they have just been dunked as well. Don’t read that wrong, there have been some big winners - but there have been some losers, too, and it is the sheer range of performance that hints at the volatility in the markets over the past year.

To recap briefly on our Guru Screens: we have been running these strategies (inspired by some of the world’s most highly regarded investors) since late 2011. We rebalance the screens quarterly to prevent these portfolios drifting from their stated strategies and we do not include transaction costs or dividend payments. It is important to bear the former in mind when looking at the performance of screens that tend to focus on small and/or micro-cap stocks, where spreads become more of a factor.

The second half of 2018 acted as a sort of equaliser. It interrupted trends and disrupted conversations. It was a bit of a reset.

Most of us have long since dried ourselves off and forgotten about the stock market slide with a sort of defensive amnesia, as is our wont. But halfway through 2019, the influence of H2 2018 can still be felt. The stock market narrative continues to be one of recovery.

A quick look at the FTSE All-Share chart confirms that, yes, we did get drenched a couple of months ago:

Q62bgq_d63TfjUlUeTvdGTAY3RiPRRZVfnhnSAxs

How the guru strategies performed

The rate of recovery has varied across our Guru Screens. Here is how they have performed so far this year. sAonkz_ENi1-_BB-mHx6mHFR4RoSrYEOcXCFi0H5

Index / Strategy Composite	Performance H1 2019
FTSE 100	+13.16%
FTSE 250	+12.69%
AIM 100	+8.21%
FTSE All Share	+12.73%
Bargain Composite	+22.14%
Guru Strategy Composite	+11.84%
Quality Composite	+11.16%
Momentum Composite	+11.01%
Income Composite	+9.84%
Value Composite	+8.96%
Growth Composite	+7.91%

Key observations

The Bargain Composite is a clear outlier in the table above. When we dig into this category of Guru Screens, we can see quite a broad spread across strategies. All of these bargain strategies have generated positive returns so…

Unlock with Email

Unlock with Google

Already have an account?
Login here

dfs12

4th Jul '19

Excellent write up. Thanks.

saurabh2k26_stocko

very nice writeup

Rusty2

I'm confused, Volvere (LON:VLE) was only added to the Negative Ent. screen on 2019-06-14, so why are you including it for the H1? My understanding is the screens are rebalanced quarterly and the shares selected daily don't necessarily form part of the screen, that screen is down 15% in the last week, Volvere (LON:VLE) has a huge spread also.

Jack Brumby

You're right herbie, I read the relative strength as portfolio performance. Negative Ent is definitely not a screen I imagine many investors replicating given the concentration, volatility, and transaction costs. It's not one I'd go for. All three of the top-performing Bargain screens are populated disproportionately with out-of-favour small and micro-caps, so it strikes me as pretty specialist territory.

Klaus Knapp

11th Jul '19

Please show me how the entry and exit dates are being generated and the calculations of how the profits are being made. Can we subscribers achieve the same results?

jmort

You wrote: "note that these screenshots are taken from the new site"

Is there a Stockopedia New Site??

nemo

Have you ever tried using an annual review strategy against your preferred quarterly strategy? I suspect there are a significant number of investors (rather than speculators?) who would find an annual review easier to keep to.

Any comments?

aflash

That deserves a prize as an entertaining piece of journalism plus being an excellent summary.

First comment: a Lot goes on between the quarterly updates of the screens when you can make or lose money.

Second comment: the Print function that gives past valuation of a stock shows the number of screens it qualifies for but only identifies the first and one cannot flip though the others. Vodafone (VOD) as an example presently does not qualify for any screen, last summer was in 3 or 4 but one cannot tell which. As another example (BATS) has moved out of Ben Graham as the price rises.

The Bargain strategies are my hunting ground but I pay close attention to the date they join. The housebuilders have consistently appeared for some time but are misleading because the biggest bargain at the top of the cycle. Other companies, however, rotate in and out with price changes.

Your opening para echoes Yogi Berra's remark which is appropriate here: 'One can observe a lot by watching.'

Mark L.

Typically the guru strategies screens produce a list laden with dual list companies with roots in emerging markets such as Egypt, Kazakhstan and Eastern Europe. Often quoted in a currency other than sterling. For example in the Warren Buffet - Hagstrom screen this evening there are 22 candidates or which 13 are these outside the UK.

So it's no wonder that there's a deviation from the FTSE100, FTSE all share etc. The historic performance is kind of like a play on half an emerging markets screen. I'm therefore not convinced a UK focused investor should conclude much from these screens.

It would be very interesting to see how each screen performs if it could be filtered to only allow shares quoted in sterling, with a main listing in London, and (reasonably) a minimum market cap of say £200m.

HIC

12th Jul '19

Thanks for this - very useful analysis. However I disagree on not including dividends - this would be easy to do and dividends form a critically important part of the return on any holding.

Richard Goodwin

19th Jul '19

They've been testing it for some time on selected users

Guru Strategies Review H1 2019: bargain strategies buck the trend

How the guru strategies performed

Key observations

Unlock the rest of this article with a 14 day trial

About the Author

Jack Brumby

11 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...