I apologise in advance for what is a very long post.

Why change?
A while back I spoke about moving to a more quality momentum strategy. This is on the back of high flyers rank showing the best gains after super stocks. Equally, when looking at my pure stockrank approach, I was holding a lot of stocks because they were great quality or great value, but they weren’t really doing anything, and a big chunk of my gains were from stocks with great momentum. For Ed’s ‘hold for a year’ approach, that leaves plenty of time for these quality value stocks to spring into action. However, I’m looking to cut some of the losers Ed’s approach lets run. I’m also not convinced that there are not more gains to be made by taking a more refined approach to how the QVM that goes into a stockrank is used.

Momentum is clearly good – who doesn’t like price and earnings going up. Equally, I feel there needs to be a reason for the momentum, namely quality. Quality stocks, while not exciting, also tend to be more resilient. Value is just that – how good a price it is. I don’t mind paying a fair price for a stock, as long as there is still some headroom for it to keep growing in value. My aim therefore is to still focus on stockranks, but stockranks in shares which already score highly in momentum, and to a lesser extent, quality. Going back to my old analogy of my grandfathers greenhouse, I’m looking to buy seedlings, or even established plants at a fair to good price, rather than planting seeds and waiting to see which sprout.

Side note: idea for side development
I’d love a way to create your own stockrank. Rather than a default 33/33/33 QVM weighting, it would be great to be able to set your own weightings (35/25/40 QVM is probably what I’m aiming for)


That said, I’m very aware of the risk of big drawdowns in momentum stocks, so diversification is key. For me, I aim to diversify across sectors, risk ratings, and sizes. The issue I have had when I've been playing about with different ways to run this strategy, is the lack of variation in sectors and industries, something I’ve tried to overcome. I’ve also started…

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