NAPS Portfolio Q1 2025 Review - And A New All Time High

23rd Apr by Edward Croft

37 comments 3004 reads

Well the last few weeks have been a bumpy ride to say the least, but oddly enough the The NAPS Portfolio closed yesterday at a new high. This is a portfolio that I’ve been running for ten years on a fully systematic basis, just buying a portfolio of 20 high ranked stocks and rebalancing annually. It’s got a terrific track track record. This year, we thought why not challenge it with a discretionary portfolio, based on similar principles, but incorporating a few more dynamic rules from the research insights we’ve garnered over the years. This portfolio is called the QVM Portfolio and was seeded with the same 20 stocks as the NAPS. After a bid for Alliance Pharma in January, this position was switched into the next highest ranked pharma stock - SDI. So while there is some divergence already, it’s minimal, so we’ll discuss both together.

Q1 Performance

Forgive me for quoting this performance up to the 23rd April rather than the end of quarter, but the numbers are broadly similar. The NAPS are up 7.3% year to date, with the QVM up 6.9%. The switch from Alliance Pharma into SDI has created a small performance drag. Nonetheless, both portfolios are significantly beating the FTSE All Share +0.6%, and at new all time highs. =

This is a good result in what’s been a very turbulent market period. The portfolios fell significantly during the Trump Tarriff Turbulence, but have rebounded quickly. In fact, in spite of all the negativity around markets at the moment, the new all time high makes me optimistic for the coming year.

Winners and Losers - some themes

I can’t stress enough how important diversification across sectors is to the performance of the portfolio. The chart below shows the biggest 7 winners and losers in the 20 stock portfolio. Two key winners themes stick out…

Two junior gold miners have been the strongest winners year to date - Metals Exploration and Serabi Gold (+61% at the time of writing last night - though has tumbled 15% from there on a placing this morning). Gold is a great diversifier, and it’s a hedge in times of market turbulence with the gold price at a new all time high. There’s not too much research on junior gold miners in the UK, but they’ve…

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Barbara

24th Apr

Just trying to understand the range of stocks you evaluate in a given sector Paul. NAPS simply chooses the 2 stocks with highest stock rank in each sector. If you’re using r squared are you evaluating ever stock or choosing the top 10 based on stock rank and then applying r2 ??. One other question if I may…. What period of data are you using for your r2 formula?

Rusty2

This can be done at any time of the year. I would start afresh, ie do a new selection today, not based on a previous selection and equal weight.

doctor dave

Hi Paul can you show us how to do this currently, then we can see how it pans out prospectively. Did you publish it here before? Very interesting! Cheers.

Edward Croft

@raigersfield. Personally, if I was starting a new portfolio now, I'd want to own the stocks that have the ideal characteristics now, rather than those that had the idea characterstics on January 1st. So I'd run the process as of today.

It does raise the question of "what's the best time of year to start a NAPS portfolio" which is a question I don't have an answer for to be completely honest. I have a feeling that early January is quite a good time, as it's before the January trading statement season. But I don't have any hard data on this.

Paul Walton

Apply the NAPS rules (but to get 20 stocks you may have to choose 3 from each sector as some stocks in an individual sector may have no momentum) then select based on highest AS as per Clenow but AS has to be >20 (or higher if you want). It's only an idea tho, I cant back test as I've no access to historical data from Stockos database so cant get what NAPS would be at any point in time

Don`t let the tail wag the dog

I have tracked what I considered the top 20 UK shares by annualised slope on 6th January 2025, and its delivered a return of -7% since that date. I admit I havent picked these based on sectors, but I would be very surprised if this methodology had delivered 25% since the start of the year. As Clenow says in his book, this strategy is only for when the respective index is above the 200 day moving average. Momentum investing does not tend to work in bear markets. This was sorted by 89 days annualised slope, whilst Clenow used 90 days. I used 89 days as David Paul reckons this is a magic fibonacci number.

af20001

Paul kindly shared how to put this together in Google Sheets in a comment on this thread:

https://www.stockopedia.com/co...

What is AN slope and how to you screen for it Dog? Cheers

IronPyrites

I have been running virtual NAPs portfolios since Dec 2024. Choosing the appropriate selection in the first week of each month.

As of today the portfolios are running roughly as follows:

Dec -2%

Jan +6.5%

Feb -2%

March +2.5%

April (so far) +0.4%

January does seem to have been an excellent month to have started a NAPs portfolio this year.

Nonns

I must confess I bought somewhat blindly into the apps when I first joined but found very quickly that timing was everything. Quite often I’ve found that the targeted shares in the official naps have gone up a lot by the time I get to them or don’t look quite as good value as they once did. I’m more picky about my timing now. My naps criteria selection is running at 10.9% right now. That’s after taking the hits with Yu which I got out of. I’ve now supplemented it with some higher dividend stocks as I feel that things are moving sideways for a bit now and having some actual cash coming in which doesn’t force me to sell shares to realise profits for reinvestment is an advantage.

Absolutely. I’m now looking at the naps for nightly to give me ideas on what else to buy into should I sell out of anything.

I thought the sell advice was if the stock rank dropped to was it 72 or 76 (can’t remember which but it’s somewhere on stockopedia consider selling the share).

Apologies I was looking at the wrong screen! I originally put up the correct NAPS from Jan but calculating the AS as of today not from Jan, so it is incorrect. The snapshot I fortunately kept is from Jan 3rd and is just in +ve territory. I've kept in NEXN even those it's moved to a US listing. The idea tho is to swap stocks in and out when they go below the 100MA and replace them with the best stocks from the current NAPS screen. Unfortunately I cant back test this as there is no historical screening on Stocko.

The below is today's NAPS results sorted on best AS from each sector. Can only get 17 results even tho expanding the NAPS criteria for most sectors to 3 stocks each but keeping Utils and Telecoms to 1.AS is > 20. I eliminated at least 3 Reits can you believe as they are takeover candidates but showed high AS (it works!)

Thanks for this. This fits in with what I`ve found. I still think your idea is a great one, just that you need a filter to ensure you trade it in bull markets , not when the market is in a bear market or has a liquidity crunch like a couple of weeks ago and sells everything, even the good stocks on margin calls.

ANN Slope is annualised slope. You can get this figure in Sharescope for any period length under the Technical Analysis criteria in the Trend Line section. You can also get the annualised slope figure for past dates as well (ie the start of the year) However you cant get R-squared figure in Sharescope. However you can get this figure (and annualised slope) by using Trading View graphs, using one of the indicators Paul mentioned. But I havent found r-Squared that useful, I`d rather just look at a graph and see if the price is moving smoothly from bottom left to top right. The highest annualised slope shares tend to be the ones with the highest r-squared figures, and looking at a graph can filter the ones out which have been subject to takeover offers, or just move in a very volatile manner from A to B.

Yes I'd be using a market regime, still doesn't get you out if there's a black Swan event tho

Fri 7:06am

Ok thanks graph bottom left to top right I can recognise!!

How the axes are configured though can make ordinary seem very good and vice versa....

cheers

GloucesterBob

Fri 7:45am

Ed, you stated "Yu (LON:YU.) got rather close to a key stop loss level" what is this level please.

I run a 20% mental stop loss, so am now out of Serabi Gold (LON:SRB) but still made a profit and sleep well.

Fri 8:26am

"Ed, you stated "Yu (LON:YU.) got rather close to a key stop loss level" what is this level please."

I'll be honest, I have yet to commit fully to a stop loss process for the QVM portfolio. Nonetheless, I'm keen to differentiate the QVM portfolio from the NAPS. Stop losses tend to work best when they are coupled to the natural volatility of a share. There's no point running a 10% flat stop loss process for a share that has a 1 year volatility of 60% - you will be stopped out far too often.

This is a rough guide based on the RiskRatings, but can be adjusted using actual 1y vol of each share (which is in the database). These levels are roughly around half the annual volatility. If one is excellent at timing entries they could be kept tighter (e.g. at low risk points, whether at breakout on earnings surprise in a growthy stock, or near a moving average on a natural correction point in a value stock).

In the case of Yu Group - it's a "Speculative" share - and it got to -24% not quite at -25%. There is an argument not to use stops in market crashes - as you can impair your returns on any rebound... but rules are rules.

jonno

Well done Ed, but regarding Journeo (LON:JNEO) I would always defer to Peter Lynch's maxim, know what you own, as opposed to a more mechanical method of stock picking, although pehaps not as succesful in the short term.

Just my view.

NAPS Portfolio Q1 2025 Review - and a new all time high

Q1 Performance

Winners and Losers - some themes

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Edward Croft

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