BEL:NAPS | Naps | Skinner66

2nd Mar '19 by skinner66

4 comments 1008 reads

im surprised some have ago that below performing, remember its 1 year .. ok plus 500 has been beaten, who would predicted that,,like any shares really at the moment,, with new rules maybe hit the low. i dont no,,but give naps the time to recover. maybe a 3 month check on naps is needed and change maybe worth doing as ive seen some put loads into this advice, as follow,just mt point view, things change fast in one year. so maybe 1 year nap. is ok if maybe can hold on longer when market turns bad,,

any thoughts from others id like to here

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Skinner66

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4 comments

Nick Ray

2nd Mar '19

For what it is worth (which may not be very much!) I created^{(see note)} 15 portfolios of 20 stocks which chose high QVM stocks and 15 which chose high QM stocks as they were at 2-January-2019.

The mean performance YTD of the high-QVM portfolios is +2% and the mean performance of the high QM portfolios YTD is +6%.

The inclusion of Plus500 (LON:PLUS) in nearly every high-QVM portfolio has cost them about -2% in performance, but even allowing for that they have taken another 2% hit compared with the high-QM portfolios. Clearly conditions at present are just not very friendly to the high-V component. The performance of NAPS is pretty much exactly where high-QVM portfolios are sitting at present so it is not due to an "unlucky" choice of stocks for the particular set of 20 stocks in NAPS.

[Note: To get a bit of variation, rather than choose the highest Stock Rank stocks, I randomly weighted the fundamental metrics which make up QVM or QM ranks. This is not quite the same as NAPS which also enforces sector and risk diversification.]

underscored

3rd Mar '19

I suspect value is a reasonable proxy for cyclical.

Blissgull

3rd Mar '19

Interesting comments, but when you look at the YTD performance of the stockranks, the top decile QVM stocks have returned 8.67% compared to 7.12% for the top decile QM rank. The top decile QV shares have returned 9.84% and VM 7.9%.

It is interesting that the bottom decile momentum rank stocks have outperformed significantly with a return of 14.87% YTD. Perhaps we are witnessing a minor momentum reversal where shares which fell the furthest in the recent donturn have recovered the most.

Nick Ray

3rd Mar '19

That is very interesting Blissgull. I cannot get anywhere near that performance in my simulated portfolios unless I use the median instead of the mean return. I wonder....

EDIT: I tried a further experiment and I do get similar results with a mean if I include the top decile (top 10%) or vigintile (top 5%). However when you re selecting 20 stocks out of about 1000 that is the top 2% and at these heady heights the mean (at the moment) suffers.

So there are some complicated lessons here about what happens with small sample sizes, but also about not pushing the Stock Rank (or the other ranks) too hard in a pursuit for perfection!

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About the Author

Skinner66

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