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

Tuesday, Jan 02 2018 by
239

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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199 Comments on this Article show/hide all

Velo 1st May 180 of 199
2

Just in case there's the odd soul out there tonight wondering how the 2018 NAPS is progressing now the calendar has clicked over into May - I'm letting it run to May 2nd as all the reporting dates in previous posts have all fallen on the 2nd of each month - and I hope to post the update tomorrow evening (Wed) or during the day on Thursday; whatever if busy, I'll screen shot everything at close of May 2nd and post when free.

GOOD NEWS is that the NAPS actually hits pay dirt this month - it's best perfomance all year

- for the first time it's now clearly in profit. (Previously a loss every single month until right now in the past seven days). It's "getting there" The NAPS theory for that rocky start to 2018 is starting to sprout wings :)


PS. Haven't given a thought to add dividends to the results                                                                                 - will work on that as a sepertate add-on to the figures I post.

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covkid 1st May 181 of 199

I for one am very interested in how it’s doing & i’m sure i’m not the only one...........

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Edward Croft 1st May 182 of 199
4

I have the NAPS up 4.4% year to date. Plus500 is up 64% and Griffin Mining up 36% as top performers. 12 winners, 8 losers. Worst performer being Tate & Lyle - down 17%. I'll update fully at the end of June.

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Velo 3rd May 183 of 199
4

Bit late (formattring taking for ever. Excel won't format on here, nor Word tables, nore JPegs ....grrrr, but here is the NAPS 2018 by Stock Rank as at May 2nd.
.

NAME       Stock Rank    Stock Rank     Stock Rank      Stock Rank      Stock Rank
                     2/1/18           2/2/18                2/3/18              2/4/18              2/5/18

SCS                 100                  99                       100                   99                     99
TW.                   99                  98                         97                    95                     96
BMY                 99                   98                         98                  100                     99
GFM                 99                   99                         98                    99                   100
MGNS              99                   91                         93                    91                      94
STHR                99                   96                         96                    91                      90
LSL                   99                   98                         98                    86                       92
OCN                98                    97                         95                    99                       98
PLUS               98                    96                         99                    99                       98
SND                 98                   98                         96                    97                       96
TATE                98                   96                         91                    85                       84
STCK               97                    95                         95                    80                       76
VTC                 95                    94                         91                     91                       91
BP.                  95                    94                         77                     92                       96
INDV               95                    88                        93                     93                        96
FORT              94                    94                         93                    95                         95
RPC                93                    88                         88                    77                         78
VOD               90                    92                         86                    83                          80
JEL                  85                    85                        84                    80                           82
VLE                83                    77                         78                    77                          75

-------------------------------
Now gains and decreases:

The 2018 NAPS finally moves into positive territory this month with a 2% gain overall. Apart from the stockranks above I'm a bit concerned that I have only 8 stocks showing as a gain, whilst Ed has 12 and the overall gain difference. Might recalculate the starting prices on Jan 2nd.


NAME     % Increase      % Decrease

PLUS          70%
GFM           30%
INDV          12%
SND           10%
VLE            10%
BP.               5%
FORT           5%
VTC              3%
STCK                                     -3%
JEL                                         -3%
SCS                                        -5%
RPC                                       -8%
BMY                                      -9%
TW.                                       -9%
MGNS                                -10%
VOD                                   -10%
OCN                                   -10%
LSL                                     -11%
TATE                                   -14%
STHR                                   -15%

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Nick Ray 3rd May 184 of 199

One trick you can use if all else fails is to save your EXCEL table as an HTML file. Then open it with Notepad (or similar simple editor) and grab just the table itself (between <table> and </table>).

Then in Stocko, put the comment into the "text editor" mode (options at top right)  and click on the "<>" button which puts the text box into HTML mode. Drop the table in from the simple editor and click on "<>" again to get back into the normal text editor.

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dfs12 3rd May 185 of 199
1

In reply to post #360713

Many thanks for the work to publish this info.

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Peteraj100 26th May 186 of 199

Fascinated and appreciative of the method and the commentary. As a new subscriber, and a bit of a math and stat player, I am about to start tracking NAPS and adding two mods: 1. Adding 10% stop loss, and 2. Ploughing stop loss cash back into the remaining 2018 NAPS top performers. We’ll see!

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Velo 2nd Jun 187 of 199

The 2nd of the month - so monthly update due :)

If I don't manage to get the June 2nd results up by tonight sometime, I should be free to manage so by Sunday evening.

After a miserable first quarter, it kicked off last month and it's continued motoring along nicely now.
Up 5.5% overall by Friday close - after being over 6%+ up earlier in the week.

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Velo 2nd Jun 188 of 199
8

NAPS 2018 by Stock Rank as at JUNE 2nd.

[Blue (in bold) = up on Jan 2nd.     Red = down.     Black = no change]

NAMES/RankS/RankS/RankS/RankS/RankS/Rank
 2/1/182/2/182/3/182/4/182/5/182/6/18
       
SCS10099100999999
TW.999897959698
BMY9998981009999
GFM99999899100100
MGNS999193919497
STHR999696919089
LSL999898869279
OCN989795999898
PLUS989699999898
SND989896979690
TATE989691858487
STCK979595807669
VTC959491919189
BP.959477929696
INDV958893939692
FORT949493959594
RPC938888777869
VOD909286838077
JEL858584808283
VLE837778777593
 

 

      Post that follows after this is for %gains and decreases.


 

NAME% Increase % Decrease
   
   
PLUS78% 
GFM29% 
SND19% 
INDV18% 
VTC12% 
BMY10% 
BP.10% 
RPC9% 
VLE7% 
FORT3% 
MGNS      -0.2%
JEL -2%
TATE -3%
OCN -4%
SCS -5%
TW. -10%
STCK -11%
STHR -14%
LSL -17%
VOD -17%

 

After 5 months the NAPS 2018 folio is now well and truly out of the gate and showing a 5.5% gain overall. (I expect next month Ed may do a half year review?)

 Caveat: As per usual, Ed's results will differ (for the better) from mine as Ed's are from the year end (mid price I think) where as mine are culled from the first day available to purchase on Jan 2nd , using that day's end closing price inclusive of the buying spread premium, plus stamp duty, plus broker's fee. (P.S. Quite a variance on a few odd shares, between the 29th December close and the 2nd Jan close).

 First thing to notice is that 10 shares are now showing gains this month, so 50/50 for the portfolio as regards workers v laggards.  And that's been steadily increasing for the better all year to date.

  

STOCK RANKS:

* Only 3 shares currently sport an increased rating compared to Jan 2nd start,

* 3 remain unchanged

* Which means the rest (all 14 of them; have reduced Stock Rank ratings).

% INCREASES/DECREASES:

* Of the top five  % increase positions, 3 are in the 90's Stock Rankings

* with one at 100

* and the other at 89.

Top performer to date is yet again, as it has been all year (Newton's law of What's in motion, stays in motion?) - Plus500 showing a 78% gain.

All Bottom five  %-decrease positions for poorest performance are as follows:

* One is at 69 Stock ranking

* two in the 70's

* one in the 80's

* and the other is in the 90's.

- Holding the wooden spoon in bottom position, is not one, but two shares sharing the spot at -17% decrease with Vodafone fractionally, shading the worst performer from LSL by the merest of a whisker.

Top performing % increase share =   S/Rank is in at 98 ( Plus 500 )

Worst performing decreasing share = S/Rank is in at 77 ( Vodafone )

At the half year period next month it might be beneficial to add a pro-rata dividend amount to the folio total clearly showing it as an additional extra (Hope I remember to do so :)

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Velo 2nd Jun 189 of 199

In reply to post #360718

Thanks Nick Ray for the guidance and the support dfs12, but this site defeats me every time. Simple BB code I can do - but formatting on this site kills me! It's still all over the place!

(Going to try JPEG it next time).

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Nick Ray 2nd Jun 190 of 199

In reply to post #369264

It's basically fine. The reason that everything is so spaced out is that it has wrapped <p> </p>
around all the entries in the tables for some reason.

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Edward Croft 2nd Jun 191 of 199
1

In reply to post #369264

Velo - I presume you are pasting in these tables from another application. I've cleaned up the markup so there aren't

tags everywhere.

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dfs12 2nd Jun 192 of 199

In reply to post #369264

Brilliant info again - thanks Velo. And you're doing well if you ask me. A few months back I published a short article about 4 different companies. Nothing clever. No graphics or tables or anything else. For some bizarre reason the 4th company didn't show up. So I edited it. Showed in the editor. Didn't show on the page. Re-edited looked fine - didn't show. Finally on the nth try it showed up. Then a couple of days later looked back at the article and the 4th company had disappeared. I look at the other articles on the site and wonder how they manage to do it. Presumably there are a few tricks to learn. Sadly I don't have the spare time to learn them. Not sure I've got much of value to say though to be honest - so maybe a good thing for all!

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gus 1065 2nd Jun 193 of 199
2

In reply to post #369264

Hi Velo.

Thanks for the regular updates. If you’re looking to insert formatted tables/text, the attached link suggest a reasonably painless solution using the Windows Snip tool. With a bit of practice you can incorporate pretty much anything into a thread.

https://www.stockopedia.com/content/small-cap-value-report-6-jun-2016-som-srt-amo-134306/?comment=10#10

Gus.

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dfs12 3rd Jun 194 of 199

In reply to post #369259

I'll be very interested to see the effect of dividends. Also great that your analysis is based on purchases with all the associated costs. Maybe next year someone should actually buy a nominal amount of each share (say a couple of hundred quid), then track that. Then we'd get an even closer reflection of real performance. In particular it would show the cost of the bid offer spreads.

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lightningtiger 7th Jun 195 of 199

With just £200 your costs would be extremely high.Just to deal at say £12 and then the spread, say 1%, that is another £2, totaling £14 ( 7%).
The average UK dividend is about 3%.
With £2,000 costs are much smaller as a %age.£12 dealing and spread £20 totaling £32 on £2,000 = 1.6%.
Both the dealing cost and the spread can be improved upon reducing costs still further. So if this can average out at 1% say then your total portfolio will be about 2% better off with the dividends paid.
That gives a total return on your portfolio which includes the dividends which can be re invested.,clears your costs and begins the magic of compound interest.
Nearly all these Naps pay a dividend, but there is no guarantee they will continue to do so.

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Nick Ray 11th Jun 196 of 199
8

Here is a plot NAPS2018 compared against the whole UK market. The median for the market is in yellow, and the mean (equivalent to an equal weighted index) is in magenta. The performance of NAPS2018 is shown in blue. The plot uses a log scale, so constant growth looks like a straight line. The deviation of the median line from a straight line is the undiversifiable "market risk".

5b1e789fcf20cnaps2018median.png

It is interesting that the NAPS never (rarely) falls below the magenta line. So even worst case it is matching the market. (By the way, the gap between the mean and median performance is an emergent property caused by taking an arithmetic mean of a distribution which is approximately log-normal (or any distribution which is symmetric but geometric). The way that you "capture" this bonus is to regularly rebalance the portfolio.)

Just to get a feel for how much better NAPS is performing, here is the same plot but with the deciles (10% to 90% percentiles) added in red.

5b1e79566d71anaps2018deciles.png

At present the performance matches the 70% percentile which is pretty good. (Connoisseurs of statistics will note that the decile envelopes have the characteristic "sqrt" look predicted by theory.)

Just for completeness here is the NAPS2017 performance compared against deciles using the same scale.

5b1e7a231be33naps2017deciles.png

Last year the NAPS ended the year roughly comparable with the 80% percentile. Something that really surprises me is how much the NAPS portfolio moves between the percentiles. I expected it to settle somewhere maybe between 60-70 and coast along but that clearly does not happen. Even more interesting is that it seems to break for the upside when it moves!

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cidunn 11th Jun 197 of 199

In reply to post #372369

That's great analysis Nick, always love your posts although I cannot profess to fully understand them. I working on that....
All the best, CID

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dfhscgfsd 11th Jun 198 of 199

Hi Ed, I set up an automatic Naps picker based on your rules outlined above, could you tell me if it is the same as your screen for today please.

Ticker Stock Rank™ Risk Rating Industry Grp Size Group Spread (bps) Flag
Griffin Mining (LON:GFM) 100 Speculative Metals & Mining Small Cap 190 Basic Materials
Bloomsbury Publishing (LON:BMY) 99 Balanced Media & Publishing Small Cap 165 Consumer Cyclicals
Communisis (LON:CMS) 99 Adventurous Professional & Commercial Services Small Cap 160 Industrials
Keller (LON:KLR) 99 Adventurous Construction & Engineering Mid Cap 56 Industrials
Persimmon (LON:PSN) 99 Adventurous Homebuilding & Construction Supplies Large Cap 7 Consumer Cyclicals
Ramsdens Holdings (LON:RFX) 99 Speculative Investment Banking & Investment Services Small Cap 356 Financials
SCS (LON:SCS) 99 Adventurous Specialty Retailers Small Cap 235 Consumer Cyclicals
easyJet (LON:EZJ) 97 Adventurous Passenger Transportation Services Large Cap 6 Industrials
Hansteen Holdings (LON:HSTN) 97 Conservative Residential & Commercial REITs Mid Cap 36 Financials
JPEL Private Equity (LON:JPEL) 97 Conservative Collective Investments Small Cap 140 Financials
BP (LON:BP.) 96 Balanced Oil & Gas Large Cap 2 Energy
Computacenter (LON:CCC) 96 Balanced Software & IT Services Mid Cap 29 Technology
Camellia (LON:CAM) 95 Conservative Food & Tobacco Small Cap 292 Consumer Defensives
GlaxoSmithKline (LON:GSK) 95 Conservative Pharmaceuticals Large Cap 1 Healthcare
Spirent Communications (LON:SPT) 94 Adventurous Communications & Networking Mid Cap 34 Technology
Forterra (LON:FORT) 93 Adventurous Construction Materials Mid Cap 16 Basic Materials
Mondi (LON:MNDI) 93 Balanced Containers & Packaging Large Cap 10 Basic Materials
Coca Cola HBC AG (LON:CCH) 92 Balanced Beverages Large Cap 4 Consumer Defensives
Drax (LON:DRX) 89 Speculative Electric Utilities & IPPs Mid Cap 6 Utilities
Gamma Communications (LON:GAMA) 82 Balanced Telecommunications Services Mid Cap 105 Telecoms


I actually come up with a few different versions, today the highest have a 95.5 avg stockrating

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gfkw47 5:17pm 199 of 199

Hi,
The NAPS method of stock picking is the most interesting process I have yet found - and so far the most successful - although this year so far has been a little disappointing.tho still beating the FTSE,
Foes Ed have any thoughts about an interim half year selection - i have had to cash in some of my portfolio so it is a bit out of balance anyway - so I think I will do a complete re-balance.

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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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