New Year NAPS - Top Stocks for 2018 and the Benefits of Ignorance

Tuesday, Jan 02 2018 by

2017 has been a good year for stock market investors, but it’s been a great one for NAPS investors. Over the course of 2017 this remarkably effortless stock selection system (that I’m now calling the “no-admin-portfolio-system”) returned over 45% after dividends, beating the performance of 99.8% of 3295 professionally managed funds in the UK.

What’s more this was achieved in less than an hour’s work at the beginning of the year, with absolutely no research into any of the individual stocks in question.

So, I’m going to start the year with a review of the NAPS performance over the last 12 months before considering the difference between ignorance and stupidity.

Once I’ve convinced myself (again) that it’s absolutely fine to know almost nothing about the individual stocks I’m selecting, I’ll then publish the 20 stocks that have made it into the 2018 NAPS Portfolio.

And then I’ll sleep on it for another year.

2017 Performance in Context

I’ve been running the NAPS portfolio since the end of 2014, and the performance has been, you might say, more than satisfactory. The portfolio has more than doubled (+115% before dividends) in these three years, with an average 29% annualised return.

Over this time period, the FTSE All Share has returned about 18.8% before dividends - at an average annualised return of 5.9%. So the NAPS has devoured the performance of FTSE index tracker funds by more than 20% per year since inception, and it’s done this at considerably lower volatility.


2017 has been the best year of the three years so far with 42.5% growth before dividends. The chart above contains three lines which are clearly labelled:

  • The dark green line is the 20 stock NAPS Portfolio (top two stocks by StockRank from each sector rebalanced annually).
  • The light green line is the performance of the top 20 stocks by StockRank (no diversification, rebalanced annually).
  • The orange line is the FTSE All Share.

Although it’s a small sample, I do believe the above charts provide validation of the core ideas behind the NAPS - namely:

  1. Factor investing can beat the market. (The green lines, based upon the StockRanks, dominate the market index).
  2. Diversification across sectors can further improve returns, and reduce risk. (The dark green line beats the light green line).


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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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172 Comments on this Article show/hide all

Nick Ray 30th Jan 153 of 172

"Hostage to fortune" time, but here goes...

I tend to believe that a Value Rank above 75 hints at underlying problems for the stock in question, and a Value Rank in the range 25-75 is preferable.

So before too much more of the 2018 year goes by, here is a table of NAPS 2018 stocks sorted by Value Rank. My hypothesis is that the first eleven stocks (with Value Rank <= 75) will outperform the 20-stock portfolio.


The metrics above are based on the earliest date in 2018 that the stock report has a print page for. Usually this is 6-Jan but occasionally it is later.

Something I had not realised before is that although the Quality Rank is fairly stable, the Value Rank jumps about quite a lot as the price moves. So it is possible that the exact set with Value Rank <= 75 might change depending on the exact date used, because there are quite a lot of stocks hovering around the 75 mark.

As an aside I would probably tend to choose stocks with Q>50 too, but in this case the only stock with Q<50 is also eliminated by V>75.

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Gromley 30th Jan 154 of 172

In reply to gormanpd, post #152

pd - there is a saying something along the lines of  "don't let the tax tail wag the investment dog" (I'm sure when someone fired it at me some years ago it was worded more elegantly than that).

It's never, imho, 100% true as some consideration does need to be given to tax efficiency, but I do think it is worth bearing in mind.

Just thinking about the situation I think you are describing, I think the issue is : that an unrealised CGT liability (because you haven't yet sold) does not deplete the capital invested, a realised liability does deplete your capital as you need to pay the tax / have the capital on hand to pay the tax by the due date.

I can see that , but I think it is quite marginal.

To run some numbers (for the purposes of these examples I'm going to assume CGT of 50%, because the higher the number the more extreme the difference should be - I'm guessing though your CGT rate is 33%)

Scenario 1 :

By your rebalancing point Stock A has achieve a 30% gain.

You now have to chose whether to :

a.   stick with A which (with the benefit of Tardis) will return another 30% gain. Or

 b.   sell and buy stock B which will return 30% (plus the transaction costs).

Case a. will give a net gain of 34.5% and case b 32.225% (because of the lower capital reinvested)

or conversely if we know that Stock B will return 30% (plus frictional costs) the stock A would only have to return 26.5% to match the net result. (You'd be a genius if you could differentiate the likely returns so accurately)

Scenario 2 (more extreme) :

Stock A has returned a gain of 100% and both stocks will return another 100% over the next "cycle"

Net gains are : stick with A 150% , trade into B 125% - that looks more material!

However, turn it on it's head and if stock B will definitely return 100%, stock A would still need to generate 75% to match it (and again that is a genius differentiation of prospects.)

In scenario 1, I would say that frictional costs (trading costs & spread on each of the buy and sell) are probably more significant than CGT, the balance switches in scenario 2 but even so frictional costs are not insignificant.

Overall though this reinforces the message that it you are to sell stock A to buy Stock B (whether for 'rebalancing' or other reasons) you need to be satisfied that the prospects of B are materially (can't define that) better than those for stock A.

In the context of NAPS & SNAPS - some stocks re-qualify anyway - perhaps one could set a rule that stocks already held have their SR upgraded by 'X' points before selecting the portfolio. I think this would be trial and error, but possibly interesting anyway as the 12 month holding period is entirely arbitrary.

I can certainly see a clear case for x= 0.5 (in the case of a tie, hold the existing stock), beyond that  I suspect  that in any case x would have to be pretty small.

To be honest though If I could guarantee a 30% pa return (with some of it tax shielded) I wouldn't be too fussed about marginal benefits.

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gormanpd 2nd Feb 155 of 172

In reply to Gromley, post #154


You make some interesting points. To address this I modelled an investment of 100 which gives a r% return every year for say 10 years.
Scenario A: You invest 100 for 10 years at r = 15% pa (Stockopedia client!), sell at the end and pay your (suggested) 50% CGT on the gain. Your net after tax capital is 252.

Scenario B: You invest 100 for year 1 for a gain of 15%. At the end of year 1 you realise, pay CGT at the same rate and reinvest for year 2 at 15% and so on similarly until the end of year 10 when your net after tax capital is 206.

That is an overall after-tax cash difference of 18% of the ending capital, equal to 46% of the starting capital, this is not an immaterial difference between Scenarios A and B. It represents a 2.2% compound after-tax return difference every year for 10 years (9.7% pa versus 7.5% pa after tax).
As you correctly surmise my CGT rate is 33% and at that rate the foregoing exercise gives a 14% better result in Scenario A, or 43% of the starting capital, and equivalent to a 1.7% pa compound after tax return differential.

For lower rates of return the differentials are reduced, of course.

I don't think the metaphor of the dog's tail adds to one's understanding of the CGT effects, or contains any wisdom at all. Capital gains tax management is an important feature of managing one's overall portfolio over time, tax cash flow is just one factor in the buy/sell decision making processes. The tax authorities are sharing approx 1/3rd of the investment risks I take, it's like having an investment partner, but I've had to provide his share of our capital ......

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pka 2nd Feb 156 of 172

In reply to gormanpd, post #155

"The tax authorities are sharing approx 1/3rd of the investment risks I take, it's like having an investment partner, but I've had to provide his share of our capital ......"

That's heads the tax authorities win and tails they don't lose!

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Velo 4th Feb 157 of 172

In reply to Velo, post #132

First complete month is in for NAPS 2018, and from just a gentle meandering since commencing on Jan 2nd - until that is one day, last Friday February 2nd, had quite a dramatic effect, pushing the NAPS folio markedly into loss at over 2% down with over half that loss occuring on Friday itself.

During January, several stocks increased their rankings, and several slipped down in the rankings. Friday changed all that and not one stock reamains up on the Jan 2nd rankings. With just 4 remaining the same as was on 2nd Jan.

5 stocks showed a capital gain, one was 0% nuetral - all the others were down. Approx £2k down in total on a £100k folio.

But more interested in the progress of the rankings. Here they are:

Name      S/Rank              S/Rank
               2/Jan/18          2/Feb/18

SCS             100                    99
TW.               99                    98
BMY              99                    98
GFM             99                     99
RPC              93                     88
FORT           94                     94
MGNS         99                     91
OCN            98                     97
STHRE         99                     96
LSL              99                     98
PLUS           98                     96
VLE              83                     77
SND            98                     98
VTC             95                     94
TATE           98                     96
STCK          97                      95
BP.             95                      94
INDV          95                      88
VOD           90                      92
JEL             85                       85

And the % capital gains/losses -

               % down      % gain
PLUS                              26%
VLE                                10%
STCK                                7%
JEL                                    6%
GFM                                 3%
LSL                                   0%
SCS             -1%
INDV          -2%
RPC            -3%
STHRE       -3%
SND           -4%
VTC            -5%
FORT         -6%
BP.            -6%
VOD          -7%
TATE         -7%
BMY          -7%
OCN         -9%
TW.          -10%
MGNS     -19%

Surprisingly of the 5 stocks showing a gain, two of them are ranked below the S/R 90's. Second highest is Volvere @ S/R 77 and fourth highest is Jersey Electricity @ S/R 85
- In pole position is star performer Plus 500 which went into the lead from the off and has maintained that position throughout January, currently showing an impressive 26% gain!

Slightly surprisingly (for me) all the big losers at the bottom are all above the S/R 90's+

In fact of all those stocks down, two stocks in 2nd and 3rd position of least down are both rated at S/R 88 (INDV & RPC)

Only one month in;  but intersting so far.

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tiswas 6th Feb 158 of 172

In reply to Velo, post #157

Interesting Velo

Is it possible to show how the portfolio has handled the sell off, as at today for example?


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Edward Croft 6th Feb 159 of 172

I am hoping to update more fully if I get time... but the 2018 NAPS is down 5.2% since the start of the year - less than the indices at the moment. Last year's NAPS (if not rebalanced on Jan 1st) are down around 12% since the start of the year. This kind of stresses the point of rebalancing - it helps manage risk & lowers volatility.

More speculative stocks like IQE which had grown to such a big portion of the portfolio in 2017 are now rebalanced out, and the weightings realigned - so big reversals in positions such as this have a much lower impact. Some call this 'volatility pumping'.

It's the speculative and highly speculative stocks that are taking the biggest beatings in the market at the moment. They all got over-extended last year. The greater weighting to lower volatility Conservative & Balanced Risk Ratings in the 2018 NAPS should offer a little more downside protection.

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Dean Tonna 6th Feb 160 of 172

In reply to Edward Croft, post #159

I’ve been running a (demo) NAPS portfolio chosen as a snap shot this weekend and it’s down 2.9% in 2 days—I guess this proves the point that jumping on a sinking ship is never usually the correct play.

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Velo 6th Feb 161 of 172

In reply to tiswas, post #158

Tiswas - saw your request earlier but busy then and at the mo'.

As Ed says, today's retrace has had a further dramatic impact on the 2018 NAPS. Currently I'm seeing worse at virtually 7% down (3% down occuring today! [intraday] ) with the £100k folio now approx averaging just over £93k in total.

Will post a full day's impact effect after close tonight.
Noticed when Ed said 5% down I had near 7% down at approx the same time. Wonder if Ed was forced to use mid prices when setting up the NAPS folio? I took the End of Day prices on Jan 2nd as the starting point and added all broker's fees, but beforehand also made an allowance for the ask/bid spread (set the prices up later in January, and could only find historic high's, low's open/close etc., so took the day I complied the starting point as indicative of spreads and apllied those spreads to each end of day price) which of course is higher than historic mid prices plus added full boker's fees, in this case HL's £11.95 per transaction fee and the stamp duty. That's why I have no decimal fractions in the percentages; only round figures, to ameliorate any differences (one share I posted as 1% down when in fact I had it showing as 1.8% down in the folio).

Not expecting Ed to have the time for detailed updates other than the quarterly or half yearly significant rebalance updates.

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Nick Ray 6th Feb 162 of 172

I'm sure many of us are tracking the NAPS in a folio. It might be a good idea for Stocko to create a Fantasy Fund to track the NAPS as it does for the Guru screens.

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Velo 7th Feb 163 of 172

In reply to tiswas, post #158

tiswas - apologies, I said I would return with an update but got tied up elsewhere. Can post a mini, quick-summary though, right now of the 2018 NAPS as it stands tonight on a £100K starting investment from Jan 2nd to tonight Wed 7th Feb.

The NAPS has closed at x3.3% down @ £96.7k - So it too has benefitted somewhat today.
However, only 4 stocks in profit now - all the rest in red.   Not too bad considering world market events over past few days, I suppose. Those 4 stocks are:

          PLUS 500   25.0% gain   (S/R96)
          VOLVERE      6.8% gain   (S/R77)
STOCK SPIRITS      5.8% gain   (S/R96)
  JERESEY ELEC      2.8% gain   (S/R85)

Holding the wooden spoon at the very bottom of the folio is tail-end Charlie,   MORGAN SINDALL (S/R93)  showing  x17.4% down.

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tiswas 8th Feb 164 of 172

Thanks Velo. I am sure that you or Ed will update us at the end of what is bound to be a rocky month.

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dfs12 9th Feb 165 of 172

In reply to Nick Ray, post #162

Totally agree. I'm amazed that they haven't done so.

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dfs12 1st Mar 166 of 172

In reply to Velo, post #157

Dunno if your still tracking this years NAPS - but another month has passed us by... just wondering if you could give us an update?
Many thanks!

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Velo 1st Mar 167 of 172

In reply to dfs12, post #166

Yes I am dfs, should be able to post an update over this weekend as the 2nd of each month is the data point - so tonight's close is the same as the 2nd.

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Velo 4th Mar 168 of 172

In reply to Velo, post #157

Racing to get just the barest details down before the weekend closes. The overall portfolio of the NAPS as at Friday, 2nd March 2018 close, stands at x5.2% down (ie., down x £5.2k) based on a £100k starting point.

(Can't get formatting to work)

Stock Rankings are:

Name  S/Rank         S/Rank         S/Rank
            2/Jan/18     2/Feb/18     2/Mar/18

SCS         100                  99                  100
TW.          99                     98                  97
BMY         99                   98                   98
GFM         99                   99                   98
RPC          93                   88                    88
FORT        94                   94                   93
MGNS      99                   91                   93
OCN         98                    97                  95
STHR        99                    96                  96
LSL            99                    98                  98
PLUS         98                    96                  99
VLE            83                     77                 78
SND           98                     98                 96
VTC            95                     94                 91
TATE          98                     96                 91
STCK          97                     95                 95
BP.              95                    94                  77
INDV           95                   88                  93
VOD            90                   92                  86
JEL              85                    85                   84

And the % capital gains/losses -

                   % down         % gain
PLUS                                         20
GFM                                           13
VLE                                               1
STCK                                            1
SCS                                              0.4
JEL                                                0.2
VTC                  -0.7
FORT               -5
INDV               -5
SND                 -5
STHR               -5
LSL                  -6
RPC               -10
BP.                 -11
TW.                -11
BMY              -11
OCN             -15
VOD             -15
MGNS         -17
TATE            -20

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Mark Charles 4th Mar 169 of 172

Great work to all that have contributed here, It’s jest a thought that really this should be viewed against an overall market comparison if the market was up 10% over the same time frame that’s not a great start to the year , if however the market has fallen by 10% it’s not as bad as first it would seem.
Maybe a comparison could be added to provide perspective.
Thanks for this thread iv found it most useful.

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Howard Adams 5th Mar 170 of 172

In reply to Velo, post #168

HI velo

Great data many thanks for taking the time to do this.

By way of contrast FTSE All share 02/01/18 4202.53, now 3899,70 down -7.21%. Thus SNAPS 2% better than an index.

For those experimenting with international portfolios.

S&P 500 2695.81 (02/01), now 2691.25, -0.17% S&P 500 beats SNAPS by 2.3%.
NASDAQ 7006.90 (02/01), now 7257.87, +3.58. Beats SNAPS by 6.08%.

Suggests it is useful to look towards a mixed US/UK portfolio for a while if you are so inclined. Which luckily I began to do Q4 last year, but I have found I needed to adjust my investing style for that market.


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dfs12 5th Mar 171 of 172

In reply to Velo, post #168

Great stuff. Thanks. Interesting to see both the ranks and the price changes. My portfolio is factor driven but I reserve judgement on the final decision on whether a stock is selected. Hence I avoid stocks that I don't like. The net result of my added judgement? I have managed to exclude several in the top half of the table and include several of the losers. For example happily ploughed into Tate & Lyle (LON:TATE) where results and dividends look good and sustainable but excluded SCS (LON:SCS) where I am nervous of the impact of a slowing property and retail market. Demonstrates how we tend to overrate our own ability to add value.

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tong 8th Mar 172 of 172

In reply to Nick Ray, post #162

It is a good idea

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About Edward Croft

Edward Croft

CEO at Stockopedia where I weave code, prose and investing strategies to help investors beat the stock markets. I've a background in the City and asset management but now am more interested in building great stock selection tools for the use of investors online.   Traditionally investors online have had very poor access to the best statistics, analytics and strategies for the stock market and our aim is to set that straight.  High Quality fundamental information has been prohibitively expensive in the past and often annoyingly dull. People these days don't just want to know the PE Ratio and look at a balance sheet. They expect a layer of interpretation over data, signal from noise and the ability to know at a glance whether a stock is worth investigating or not. All this is possible using great design and the insights gleaned from quantitative research.  Stockopedia is where we try to make it happen ! more »


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