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

Tuesday, Jan 02 2018 by
240

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.

NAPS_-_Performance_Charts_MASTER_-_All_Y

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).

The NAPS…

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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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277 Comments on this Article show/hide all

Velo 4th Oct 258 of 277
6

5bb671aad2ecdOct_2nd_-_SRanks.jpg

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dfs12 4th Oct 259 of 277

In reply to post #404724

Many thanks Velo. Drop not as bad as I had expected.

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Nick Ray 4th Oct 260 of 277
1

NAPS got a big kick upwards from Volvere (LON:VLE) (and SCS (LON:SCS) to a lesser extent) today which is quite amusing as it was quite a strong down day for most of us.

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Edward John Canham 5th Oct 261 of 277
2

Strange that Indivior (LON:INDV) has recouped its stockrank.

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Velo 5th Oct 262 of 277
1

Erratum:

"September has run on with its decrease, now increasing to lie at x 5.5% down since Jan 2nd 2018 representing a £5.5K capital loss on the initial investment."

Should have read x 4.5% down (£4.5k capital loss not £5.5k as reported).

The result with dividends included, remains the same at just 1.5% down.

Apologies to all.

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Nick Ray 5th Oct 263 of 277
5

In reply to post #404774

Strange that Indivior (LON:INDV) has recouped its stockrank.

How Indivior (LON:INDV) 's Stock ranks have evolved this year:

5bb7478c36d5bqvms-indv.png

Colour code: Quality - red   Value - green  Momentum - Blue  Stock Rank - dotted Magenta

For Indivior (LON:INDV) this year Value and Momentum seem to cancel each other out. When one is high the other is low and they cross over at about the 60 mark.

The Stock Rank dropped a little when the Momentum fell more quickly than the Value rose but now it is being held high by the increased Value (also  known as a "huge drop in stock price.")

With Indivior (LON:INDV) there is a judgement call to be made about whether they can replace their cash cow drug with something similar going forwards. V > 80 means that the market isn't entirely convinced yet. But the Stocko ranking system likes cheap stocks and of course it is working probabilistically. It doesn't need every cheap stock to work out.

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Velo 7th Nov 264 of 277
9

Once again, apologies for the late posting of Nov 2nd results. Thought, there's only 3 more updates to go, I can manage that, but I'm pulled in all directions near month ends now, and travelling 150 miles away from home for a full week. Took print-off's of Friday's close, but only had time to finish it this past day. Don't think I'll be able to do this all next year - but only 2 more months to go - I can see it through to the full 12 months end.

Thought - great no one's posted a query, I can relax and post it by Wed evening - but got nailed by a private message, just as well, as I was already half way to letting it slide to Thursday.

 Right. Onwards:

 Results for NAPS 2018 up to Tuesday 2nd November -

October got caught in the worldwide correction (signs it's now abating) my own portfolios are improving no end. How have yours fared? All is mostly woe from most investors the past couple of weeks and the NAPS 2018 is no exception. On Friday it increased a full 1.1% up by close that day - but that is still an overall x8.3% fall, year to date.

 

Dividends:

October has proved to be another weak month for divi income but look at the total - it's now a running total of just over £3k in divi income in real world terms

- so instead of the NAPS 2018 being down x8.3% you could say, it is now just x5.2% down year to date.

 So, taking account of an horrendous late October that doesn't sound 'too' bad when including divi income also.

  

------------------------------

First table shows increases/decreases:

 Only 5 shares showing a gain now (one down on last month).

thus leaving 1 at 0.0% and like last month 14 of them, showing a red decrease since Jan 2nd start, this year.

 PLUS is now a 'normal' expected top placing remaining in top place with a 49% gain.

whilst INDV just like last month remains at the bottom with a x 50% decrease.

  

------------------------------

Second table shows the Stock Ranks in comparison to starting out on Jan 2nd this year -

 

STOCK RANKS:

Overall, 12 shares show a Stock Rank above SR90 compared to the year start

* Just 3 shares have increased their rating compared to the start of the year

* 2 retain the same S/R as they started out with,

* Which means 15 have reduced Stock Rank ratings since the year start.

 Highest S/R is 99 (3 of them)

Lowest SR is 54  (FORT)

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Velo 7th Nov 265 of 277
5

5be350abc77bbNAPS_Increase_Decrease.jpg

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Velo 7th Nov 266 of 277
3

TYPO!   AS AT NOV 2nd - NOT AS SHOWN AT OCT 2nd

5be3528d8a034Nov_2nd_-_SRanks.jpg

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dfs12 8th Nov 267 of 277
4

In reply to post #416824

Many thanks Velo. 5.5% drop is a good result I think. Thank you very much for all your time in posting these updates. Seeing the track of ranks and prices during the year is really useful. And adding the effect of the dividends gives that missing dimension. So many thanks. And glad your portfolio is recovering nicely. Hopefully we'll all have a better position to cheer by the time Christmas comes.

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emilstyle 8th Nov 268 of 277

Anybody has a backtest not using just UK market but all the shares of this world following the NAPS system? I'm subscribed to all the world markets and would like to know if this can work also with shares all around the world and not just UK's one.
Thank you :)

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Nick Ray 9th Nov 269 of 277
1

It's a fascinating result. Starting with the highest Stockrank stocks in each sector, after ten months so far the performance seen has a huge range from -50% to +50%. And the stock with the lowest original SR (VLE 83) has the second highest gain (actually I think it is 47% not the 27% as shown in Velo's table.)

But the really interesting thing is that this a fairly good result. Every metric I have looked at performs similarly. Even when you choose from the top decile, you still only get about a 60:40 success rate (at best) in terms of beating the market, and the market is currently at about -8% or so.

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Velo 10th Nov 270 of 277
1

Hi Nick,

"...And the stock with the lowest original SR (VLE 83) has the second highest gain (actually I think it is 47% not the 27% as shown in Velo's table.).... "

No, it's as shown Nick ( 27% )
Think you might have inadvertently strayed on to the incorrect line when calculating.

For your purposes, if you take the mid price close as shown yesterday when you posted Friday 9th Nov of 1100p and use Yahoo Finance historical prices or any other plaform you prefer and bring up Jan2 2018 - the closing price on that day was 857.50p

So on end of day mid prices that's 28% not 47%.

For the NAPS I added broker's fees, stamp duty where appropriate, and the margin for the buy price and not the mid price, Additionally I also attempted to stagger/ guesstimate the buys throughout the day as end of day prices in real life would be impossible due to the market being closed, hence above it shows 27% real-life increase which was correct on 2nd November, but now a week later at close on Friday 9th, it's moved on and is now in fact down to 21.5%

Hope that explanation helps.

Regards.

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Velo 10th Nov 271 of 277
1

In reply to post #416884

Hi dfs12,

I'm pleased you've found it useful as we draw into the final run to the year end, thanks.


RE: "And glad your portfolio is recovering nicely."
- Think I might have over-egged that bit about my portfolios. They''re still down on Oct 2nd but are improving, but it appears in fits and starts. So, yes, improving but they're still damaged from the recent worldwide correction.

Until next month.......

Regards.

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Nick Ray 10th Nov 272 of 277
1

In reply to post #417794

Thanks Velo. For some reason my historical price data for Volvere (LON:VLE) was 740 for about a month around 1/Jan/2018. I've just reloaded it from Yahoo and now I have the correct data. (I don't usually look at stocks below £90M so it's a stock I only track for the sake of the NAPS portfolio.)

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Velo 10th Nov 273 of 277
1

In reply to post #417809

Ahh sorted, Nick - thanks for advising.

You know if perchance you were right - it would have rendered the folio results for all this year completely innacurate - as the folio is balanced - it couldn't have been that far out without serious consequences to the whole accuracy of the folio. So I'm relieved :)

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Taff6 13th Nov 274 of 277

In reply to post #403219

Key day reversal @resistance for Griffin Mining (LON:GFM) today?

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lightningtiger Wed 4:23pm 275 of 277

Another chunky dividend to come from Plus 500 this month which should be about 100p or so depending on the exchange rate at the time
.November will be my best month for dividends this year and estimated end of year should be about 70% up on last year.
I am questioning the figure of Plus 500 being 49% up to 2nd November since 2nd Jan the price was 881.5p and they have paid out one dividend this year already.which is extra money to the total return.

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Velo Thu 7:16pm 276 of 277
2

In reply to post #418994

Hi L/Tiger,
You ask:
"I am questioning the figure of Plus 500 being 49% up to 2nd November since 2nd Jan the price was 881.5p and they have paid out one dividend this year already.which is extra money to the total return."
--------------------------------

49% gain up to Nov 2nd is correct.

I'll re-post the final para of my post (No:270) about 4 posts or so above here, as it explains why end of day prices were NOT used as it wasn't 'real world' buying as the market would be closed -

"..For the NAPS I added broker's fees, stamp duty where appropriate, and the margin for the buy price and not the mid price, Additionally I also attempted to stagger/ guesstimate the buys throughout the day as end of day prices in real life would be impossible due to the market being closed, hence above it shows .... the real-life increase which was correct on 2nd November 2018...."

Jan 2nd opened @ 899p it closed lower @ 881.50p
Intraday it travelled as far up as 903.50
- and as far down as 869.5p

Take out the close as unobtainable in a real life situation, and which would you choose for the day? (See that para above)
In actual fact, It looks like I chose from quite early in the day, and including all costs as mentioned in the above para I entered Plus as being bought all-in, all costs inc, for 889p ( That's 563 shares equiv. to £5,005.07 and therefore 889p per share).

I do not calculate the percentages per share but copy the percentage gain/decrease directly as shown in the folio here on Stocko. The SP showing for PLUS on this site on Nov 2nd was 1326p - so a quick actual calc and re-check (as I never check Stocko I merely copy over) and yes it's the same as I posted - 49% (49.1%). So the % gain shown is correct.

- Even so, using your closing price as the start point, the percentage comes out pretty similar at 50% gain (50.4%).

The dividends are pooled together as in real life (unless you've instructed your broker to reinvest immediately back into purchasing more stock). The (real life calcs) dividends for the folio as reported above is now a running total of £3.0k+ (£3022.65)
- So "your" PLUS divis are in the divi-pot, so sorry that's where your PLUS divis will remain :)

PS. If you like, It would be quite easy for me to post the individual total divis obtained for each share at the year end, if it helps.

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lightningtiger Fri 1:18am 277 of 277

Hi Velo,
Thanks for explaining the dividends are pooled together. That is why I was questioning the return.
There is also a 25% tax reclaim on the dividends that comes into the picture as well. The first part where 75% of the dividend is paid & then a bit of a waiting game and the exchange rate comes into play as does their bank charges too! So in fact you do not get the full 25% back.in refund..
If it is easy for you to show each share dividend separately, that would be good.

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