The Stockopedia Ranking system has been an incredibly popular addition to the Stock Reports in recent weeks. Ever since we first released the metrics to the screener in April subscribers have been using the system to profit from standout winners like Sprue Aegis - up 42% since highlighted as a top scoring stock at the time. We have continued to improve the system over the course of the year, added them to the Reports last month and today release some exciting new composite ranks we've called the Crossovers. Read on to find out how to use them.
What are the StockRanks?
Academics have long been studying what works in the stock market. Eugene Fama recently won a Nobel Prize for his work into the subject, while others, like Cliff Asness and Josef Lakonishok, have claimed their own prizes by putting their acclaimed academic studies to work as money managers.
In summary this huge weight of literature has shown that stock market share price movements can, in general, be explained by several driving factors - Size (small beats big), Value (cheap beats expensive), Momentum (winners beat losers) and Quality (quality beats junk). It's our mission at Stockopedia to turn cutting edge research findings into easily used metrics and strategies and help our subscribers to greater stock market returns.
What we've done is collate the most predictive ratios and metrics that define these major forces into a set of rankings we call the StockRanks. Three core ranks - the Value Rank, Quality Rank and Momentum Rank - make up the system, ranking every stock from zero (worst) to 100 (best). How we construct the rankings can be learned about further in this explanatory article.
The Power of the Three Crossovers
While the Value, Quality and Momentum ranks are each extremely powerful in their own right, they are best used in tandem with each other. The whole ranking system has been a great labour of love this year for the Stockopedia team but the genius of the system lies in the crossovers which define 3 different types of standout stocks.
For Investors - the QV Rank (Quality + Value)
For Value investors the idea of momentum investing is anathaema. As bargain hunters extraordinaire, they are often turned off by a share price that has already doubled. Luckily, as Warren Buffett has effectively illustrated, you can get by just fine without it. Buffett made his great fortune…
