Is stock rank this screen too simple?

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18th Jan by tvspark

7 comments 619 reads

Hello, I have put together this simple screen based on stock ranks

with a size limit of £100m. The idea being that smaller companies grow faster.

These are the rules:

QV Rank > 80, VM Rank > 80, QM Rank > 80, GM Rank > 80, Mkt Cap GBP < 100m

And they returned these companies:

Ramsdens Holdings
Enwell Energy
Serabi Gold
Altyngold
Water Intelligence
Livermore Investments
Hercules Site Services
NAHL
Journeo
PROCOOK

I doubt that this is good enough and would like to know what errors there may be.

Thanks, Nick.

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About the Author

Tvspark

Premium Member

7 comments

Don`t let the tail wag the dog

19th Jan

Nick, Its very difficult to give an opinion on this without knowing what else you trade in. If you`re saying trade these 10 SmallCaps alone, I`d say this is very risky, especially when the SmallCap/AIM space is not in a bull market. Also I`d avoid companies with a large spread which you can find if you look inside the full quote. I personally wouldnt usually touch something with a spread greater than 5%. Stockopedia in my opinion dont seem to rate the growth ranking as much as the quality, value and momentum so do you need the GM rank. If I wanted small cap I would probably go for min market cap 50m, max market cap 250m, but if you`re only trading this to start with I would include a higher market cap, say 1000m. Also the choices you have are two gold miners and Ramsdens which may have links to gold price- do you want this? Other than this I dont see anything wrong with picking shares with QV, QM and VM>80.

jjis

20th Jan

Hi Nick - you asked if your screen was too simple, I would suggest it might be too complicated by combining so many hurdles as it were. Ed Croft has I believe said on several occasions that you cannot find the perfect stock it does not exist. He suggests and I would tend to agree, that you are better off using the Stock Ranks and picking from the top section of your choice 10%, 20% or 25% perhaps, although making sure you avoid the bottom 40% is equally important if you look at the performance history. The top QVM basket has also done better than most or all of the various combinations you were using. See https://www.stockopedia.com/br...

Then it is usually a good idea to try and build a diversified exposure across size & sectors (see Ed Crofts Naps articles) with different types of exposure (see the point about Gold exposure from the previous reply). Talking of which I'd also agree with the idea of not going below £50m for liquidity reasons unless you really have done your research on the stock concerned. While allowing a larger cap limit or no limit on that would also broaden your choices. But if you wanted to stick to say just £50m to £100m just using the top stock ranks would give you more choice to build a portfolio from - see an example here: https://www.stockopedia.com/sc...

I hope this helps.

Jamie

tvspark

20th Jan

Thanks for the replies.

I do not intend buying this portfolio, but I was going to follow it to see how it did and what errors I may have made.

I did not think about checking for spread and it could be more diversified.

It's an experiment in a "no research" screen.

I did buy a Buffett-esque UK portfolio last year based on some rules I got from one of Megans videos. Without accounting for dividends. it's down about 3% over the year, but I feel it was a rubbish year.

Thanks again for the input.

Rusty2

20th Jan

Last year was not a rubbish year, NAPs was up around 20%. The indexes were up. I would be looking at debt as well as spread. Small caps can go more in bull markets but usually fall more in bear markets. Shares with wide spreads are generally illiquid, so can be difficult to sell, in a downturn or on a profit warning.

The Phoenix

20th Jan

Agree with most of the other comments personally I avoid anything sub 200 mil market cap as even at this level liquidity can dry up, max market cap up to 2 bil , spread no more than 2% max, no loss makers, no aim (IG Design (LON:IGR) ) most recent case in point due to almost non existent regulation, no more than 3x debt to pre tax profit, divi above 1% to prove cash conversion is real, ideally share price at least flat lining or preferably in uptrend, avoid continuing downtrend charts.

djlcollinge

26th Jan

It's basically a screen to identify a superstock. Too much overlap with components. Just use stock rank and compare with Roland heads ' easy rules to locate small caps' screen. I tend to use funds for microcap space to get diversification.

andrewdb

26th Jan

what the phoenix said and

beware of the perils of overfitting
nick ray did some work on this but I cannot find his source post. basically if you plotted the ranks against performance most of the time if you graphed 1y performance against the rank you could expect a wiggly line from bottom left rank 0, low performance to top right rank 100, high performance.

Except for Value rank. back in '17, VR > 92 (from memory) did not outperform VR ~ 90. The other ranks did not seem to have the same issue.

and be aware that no screen works all the time.

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Tvspark

7 comments

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