New Year 'Naps' - Top 10 Stocks for 2015

Tuesday, Jan 06 2015 by
51
New Year Naps  Top 10 Stocks for 2015

When I first started subscribing to stock market tip sheets in the 1990's, the concept of New Year Naps" popped onto my radar. Many tip sheets would choose a handful of favoured stocks (naps) for the year in a special section of their January edition. I thought the phrase and practice was an odd idiosyncrasy until I started to spot racing tipsters and bookies refer to naps when considering racing certainties.

It seems that the origin of the phrase 'a nap hand' comes from the traditional English card game called Napoleon". In the game each player is dealt five cards and declares how many tricks they think they can make. A Nap Hand" is a declaration that you can take all 5 tricks - so it's only ever used when you've got very strong odds. I've never played or heard of the game Napoleon but apparently it used to be quite popular. The phrase 'nap hand' seems to have been adopted first into horse racing and from there eventually into the tip sheet tradition.

But we don't do tips…

Now, before we publish some Naps, we need to make some disclaimers. As most readers will know, the entire philosophy behind Stockopedia.com is not to 'tip' stocks. Why don't we tip? Firstly and most simply - we don't believe we need to. The history of stock market returns shows that simple rule-based stock picking models have been far more consistent and effective than human forecasts.

The history of human forecasting is riddled with failure. Left to our own biases, we tend to project what's just happened, so our forecasts often lag reality rather than predict the future. Those that want to read up on the appalling accuracy of human forecasting should read Sin 1 (the folly of forecasting) in James Montier's excellent Seven Sins of Fund Management.

In contrast, for the last 80 years or so since Ben Graham began his work on classic bargain investing strategies, simple checklist based approaches have been shown to be far more consistent at beating the market. Put simply, statistics trump stories in stock market strategies, and that's where we put our bets at Stockopedia.

More importantly, we believe everyone is capable of making their own investing decisions. Rather than mirroring the 'broadcast' approach that most financial publications take, our philosophy is to put the best possible tools…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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Cranswick plc is a supplier of food products. The Company operates through Foods segment, which is engaged in the manufacture and supply of food products to the United Kingdom grocery retailers, the food service sector and other food producers. The Company provides a range of pork, gourmet sausages, cooked meats, cooked poultry, charcuterie, hand-cured and air-dried bacon, gourmet pastry products and sandwiches through retail, food servicing and manufacturing channels. The Company's brands include Bodega, Woodall's, Simply Sausages and Yorkshire Baker. The Company operates from approximately 10 production facilities in the United Kingdom. The Company also owns its own pig breeding and rearing operations. It produces approximately 800 tons of gourmet sausages per week. From its sites in Manchester, the Company manufactures and distributes foods from Europe, using packaging formats and flavor combinations. more »

LSE Price
3362p
Change
0.7%
Mkt Cap (£m)
1,733
P/E (fwd)
21.7
Yield (fwd)
1.7

The Berkeley Group Holdings plc is a holding company. The Company, along with its subsidiaries, is engaged in residential-led, mixed-use property development. Its segments include Residential-led mixed-use development and Other activities. Its brands include Berkeley, which creates medium to large-scale developments in towns, cities and the countryside, encompassing executive homes, mixed use schemes, riverside apartments, refurbished historic buildings and urban loft spaces; St George, which is involved in mixed use sustainable regeneration in London; St James, which handles projects that embrace private residential development, commercial property, recreational and community facilities; St Edward, which offers residentially led developments, and St William. Berkeley First is a division of the Company specializing in student accommodation and mixed use residential development within London and the South East. Berkeley Commercial is its commercial property developer and investor. more »

LSE Price
3668p
Change
-1.0%
Mkt Cap (£m)
4,800
P/E (fwd)
10.2
Yield (fwd)
5.4

Dart Group PLC is a leisure travel and distribution, and logistics company. The Company is engaged in the provision of air travel organizer licensing (ATOL) licensed package holidays by its tour operator, Jet2holidays Limited, and scheduled leisure flights by its airline, Jet2.com Limited (Jet2.com). It distributes temperature-controlled and ambient products on behalf of retailers, processors, growers and importers in the United Kingdom. It operates through two segments: Leisure Travel, and Distribution & Logistics. The Leisure Travel business focuses on scheduled leisure flights by Jet2.com to holiday destinations in the Mediterranean, the Canary Islands and to European Leisure Cities. The Distribution & Logistics business includes the operations of Fowler Welch-Coolchain Limited, a distribution and logistics services provider. Its temperature-controlled operations are in Spalding in Lincolnshire, Teynham and Paddock Wood in Kent, and Hilsea near Portsmouth. more »

LSE Price
981p
Change
-0.1%
Mkt Cap (£m)
1,459
P/E (fwd)
10.2
Yield (fwd)
1.0



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46 Comments on this Article show/hide all

herbie47 7th Jan '15 27 of 46
1

Yes I saw Boohoo this morning thanks to Paul's review, actually bought some at 22p. I notice IC tipped them as a buy at 48p now a sell at 22p. Really rather disappointed with IC's advise, don't think I will be renewing my subscription.
I agree value stocks are a better investment.

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davidtalbo 8th Jan '15 28 of 46
1

In reply to post #89868

Hi herbie47

Thank you for your comments. With regard to whether Reed Elsevier and Galliford Try are industrials, what I was doing was producing an alternative mechanistic portfolio to Ed's, using Stockopedia metrics and classifications. Since Stockopedia classes both Reed Elsevier and Galliford Try as industrials, then for the purposes of my exercise they were classified as such. The only time I differed from this strategy was when Ed did. Therefore, I classified the Berkeley Group as a consumer cyclical, since Ed did, whilst according the Stockopedia this share falls (surprisingly) in to the financials sector.

Any mechanistic system only produces a shortlist of shares for further consideration. I agree with the concerns about Cenkos Securities, not only with regard to being Quindell's NOMAD but also because of the fall in turnover expected in 2015 (which, incidentally, the Stockopedia Cenkos page clearly shows). Personally, if I had been making a judgement call, I would have replaced Cenkos by Lombard Risk Management, but I wanted to show what my mechanistic system produced, without any amendment.

Best wishes

David Talbot

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herbie47 8th Jan '15 29 of 46

Hi David, I understand about sectors, just find it odd that housebuilders are in different sectors.
Re Catlin this is a bid situation, think its been agreed so you may want to reconsider.

Yes I agree its a good starting point and I think most of them are pretty sound.

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Edward Croft 8th Jan '15 30 of 46

In reply to post #89934

Thomson Reuters are going to be reclassifying some of these housebuilders under cyclicals - notably Berkelely - so I figured I'd pre-empt them in this article. Given the reclassification it wasn't a really discretionary decision, though it was a conscious one.

I actually own Persimmon, Barratt and Telford Homes myself - but Berkeley was ranking higher so I brought it into the article.

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herbie47 8th Jan '15 31 of 46

I see. Yes I own quite a few housebuilders, they have done well this year but Im looking to reduce my holdings soon. Although some (Barratt) maybe worth holding for the dividend. And Inland I think is worth holding.

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herbie47 30th Jan '15 32 of 46

I see Cranswick trading was out yesterday, did not look bad but sp is down, is this to do with supermarket price cutting in the future?

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Edward Croft 21st Apr '15 33 of 46
5

As we're nearly a third of the year through I thought I'd post up some performance figures for the New Year NAPS portfolio to date.

It's too early to draw broad conclusions, but the whole list of 20 stocks is up 13.5% year to date, well ahead of the FTSE All Share's 8.6%. The top 10 stocks are up 11.6%, a tad less than the top 20 - as discussed in the article, the importance of portfolio breadth in harvesting factor based returns can't be stressed enough.

55360382db1aaCursor_and_Banners_and_Aler

Standout performers have been Dart Group, Character Group and International Greetings which are all up between 20 and 40% YTD. The list of shares remains at a 20% P/E discount to the overall market and is benefiting from valuation mean reversion and strong momentum.

I'm hoping to be able to publish the portfolio alongside this piece at some stage in future, but here's some graphics from the portfolio analytics page.  A nice spread across sectors... 

55360223bbf77Cursor_and_NAPS___Portfolio

But personally I don't like the underweighting of the consumer sectors.  Consumer defensive stocks can often generate strong economic moats - so this underweight concerns me.  A more intelligent weighting system than the 1/N sector weighting we applied would be to either match the market, or overweight sectors with a stronger likelihood of outperformance.

553602b86f912Cursor_and_NAPS___Portfolio

Still strongly exposed to good, cheap stocks:

553603bbc4725Cursor_and_NAPS___Portfolio

And still strongly exposed to Value & Momentum:

5536042605292Cursor_and_NAPS___Portfolio

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underscored 21st Apr '15 34 of 46

There does seem to be a low number of high ranked (90+) consumer defensive stocks? Is this because they are the belle de jour?

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Grindertrader 22nd Apr '15 35 of 46

This approach completely fascinates me and it is interesting to see how this develops over the years if you decide to keep this going. Your Rule 2: below is one important rule to which I added into my screeners to further my comfort zone.

I really look forward to further updates on this post.

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Edward Croft 21st May '15 36 of 46
7

The 20 stock NAPS portfolio detailed in this piece is now up 19% year to date which has been a stellar return and well beyond the FTSE Small Cap index which is up 8.6% in the same time frame.

Catlin has been acquired by XL Group for cash and shares - but XL has a StockRank of 47 which isn't a good substitute. Catlin returned an annualised 24% till its delisting, so it wasn't a bad hold for the time period.

Given the UK focus of this portfolio we're rotating the 5% position into the next top ranked UK Financial - which is H & T (LON:HAT).

H&T is certainly one of those stocks that very few investors like the look of right now - it's one of those ugly frogs that's hard to swallow. It's in the gold and lending business and got a double sucker punch a couple of years ago by the payday lending review and the collapse in the gold price.

But it's now cash generative, paying down debt, and in the midst of rejigging its business model. It's cheap and out of favour but sentiment is just starting to improve with brokers upping numbers. There's little technical overhead supply of shares and it could be poised to perform. It's been added to the NAPS folio to make use of the Catlin cash.

I have an idea for a "Semi-Year SNAPs" follow up to this NAPS piece - but not due for at least a month.

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AIM Prospector 21st May '15 37 of 46

It's in the gold and lending business and got a double sucker punch a couple of years ago by the payday lending review and the collapse in the gold price.

Not sure about that, Ed. 2014 Final Results (announced March 5th: http://www.investegate.co.uk/h--38-t-group-plc--ha... )

High cost short term credit interest rate cap

On 11 November 2014 the FCA published its rules relating to a cap on the interest rate and charges that apply to High Cost Short Term Credit ("HCSTC").  The rules took effect from 2 January 2015 and provide for:

·     a maximum charge of 0.8% per day on the amount borrowed

·     a maximum of £15 fees on default

·     a cap on the total costs incurred over the life of the loan of 100% of the amount borrowed

The definition of HCSTC is broad but provides a specific exemption for pawnbroking and certain other credit products at present; we do not expect the cap to apply to pawnbroking in the near term.

The Group's personal loan product must conform to the cap although our relatively low rates of interest compared with the wider alternative credit market mean that the cap has almost no impact on our earnings.

David O'Hara

Editor, AIM Prospector

E-Magazine: AIM Prospector
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herbie47 26th May '15 38 of 46

In reply to post #99172

Thats sounds like a good idea, must admit I'm gutted having missed out on most of the naps in January. Not keen on H&T myself. I would consider Novae, which is similar company to Catlin, SR 96.

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Immanuelwoo 27th Dec '15 39 of 46

New joiner but hope Ed or the rest of the good folks can share your rebalancing experience with NAPS portfolio.
I was thinking of rebalancing quarterly the bottom quartile of stocks with the best equilvalent stock in the same sectors. If any stock in the bottom quartile is still >80 in the overall stock rank, keep it and let it run for a quarter longer.

Anyone tried that before. It makes perfect sense to me on paper.

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herbie47 27th Dec '15 40 of 46

In reply to post #115944

If you have not seen it you should read this: http://www.stockopedia.com/content/semi-year-snaps-more-top-stocks-for-2015-103099/

This was after 6 months. Your theory seems to make sense but a lot will depend on timing. 3 months maybe to often? Some sectors its difficult to find 2 stocks with high enough ranking, such as Ultilities, Telecoms, Health.

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Immanuelwoo 28th Dec '15 41 of 46

In reply to post #115947

Thanks Herbie. Will give it more thought before I push the button for naps 2016.

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vik2001 29th Dec '15 42 of 46

thanks for this ed. I have set up a virtual nap and its already up by £900 in the last 7 weeks following your rules. im going to setup a real life portfolio using real cash soon. what I wanted to know is there a better time to devise the Stock Ranks naps? ie waiting till after xmas/new years - perhaps even in February once the stocks have settled down. So my question is can the timing of the NAPs selection affection the performance of ones portfolio?

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gus 1065 29th Dec '15 43 of 46
1

In reply to post #116007

Morning Vik - sounds like a good start for your Nap portfolio.

Is your question about the best time to pick the naps or when is the best time to buy into the market generally? If the former, Ed may have some data on whether there is some kind of seasonal pattern to Stock Rankings/share price performance patterns. His strategy of buying last January seems to have been very successful compared to some of the other portfolios devised later in the year. If the latter, my experience is that although the market in general shows some seasonality, buying (or selling) based on a previous year's pattern is tricky. As soon as a trend is identified it repetition seems to break down.

There are a few general adages that may be broadly helpful but are by no means infallible. There has been a bit of a year end Santa rally so far (fund managers acquiescing to higher prices on thin/nil volumes to window dress year end fund performance). We often see a further rise in the first quarter peaking late March as retail investors fill up their ISA allowances and II's place their capital allocations for the new year. There is then a bit of a sell off as activity tails off - leading to another established saw of "sell in May, come back on St Ledger day" (early September as I recall).

Of course, laid over all this are event driven market moves that can break up these patterns. Last year we had marked sell offs due to concerns over Greece, China, oil price etc.. Many of these factors are still latent going into 2016. Short answer is that calling market timing correctly is difficult - probably even harder than for a specific stock since there are so many more variables for the market as a whole.

My personal approach is to phase my investment over time - hopefully missing the peaks albeit at the risk of missing the troughs - and once invested staying in the market rather than trying to trade in and out due to the expenses involved and the view that time (ie compounding) is more important than timing.

Good luck with your investing.

All the best,

Gus.

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vik2001 29th Dec '15 44 of 46

thanks for the reply gus. yes my question was when is the best time to pick the Naps. So January would be a good time?
be interesting to see some data if selecting stocks at certains times of the year will affect the Naps portfolio.

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tournesol 29th Dec '15 45 of 46
2

vik

David Schwartz was a stock market historian whose work was focussed on questions such as the one you ask and who write books about the subject. He used to write a column for the FT. He died in 2013 but you can still find his books second hand. See www.amazon.co.uk/Schwartz-Stock-Market-Handbook-Shares/dp/0952396122

He would ask/answer questions such as "is January a good time to buy stocks?" - "after a year which ends down is January a good time to buy stocks" - "when interest rates have risen is it a good time to buy stocks?" etc etc etc.

I recommend his books.

Won't make you rich but will scratch your itch.

T

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PhilH 30th Dec '15 46 of 46
4

A quick update on the Euro NAPS selections I outlined in this post last January ... http://www.stockopedia.com/content/new-year-naps-t...

Change
Salmar ASA (OSL:SALM)
+20%
Hornbach Baumarkt Ag (ETR:HBM)
-6.7%
Sprue Aegis (LON:SPRP)
 +3.8%
Southwest Airlines (NYQ@LUV) 
+3.89%
Barrat Developments (LON:BDEV)
+39.25%
Corticeira Amorim SGPS SA (ELI:COR)
+95.33%
GFT Technologies (ETR:GFT)
+135.67%
Data Modul AG Produktion und Vertrieb von Elektronischen Systemen (ETR:DAM)+80%
CellaVision AB (STO:CEVI)+74.68%
Health Net Inc (NYQ:HNT) (LON:HNT)30.17%


Average return: 47.61%


Best of luck
Phil

P.S. Edited to correct links to stocks

Professional Services: Sunflower Counselling
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