New Year NAPS - Top Stocks For 2021 And Some Bold Bets On 'big Mo'

3rd Jan '21 by Edward Croft

146 comments 41875 reads

This is the seventh year that I've published my New Year NAPS Portfolio - seven is supposed to be a lucky number. I am though starting the year with some trepidation about the state of the markets. On the one hand, there's a wall of stimulus continuing to come through, both fiscal and monetary, which should continue to support equity momentum; but on the other hand, this liquidity is papering over the reality that much of the western world is deeply insolvent. I certainly don't have a macro crystal ball, but I'm aware enough to understand that there will be a reckoning at some point. But not... quite... yet. In the meantime, while the music plays, we dance.

If you are new to the Stockopedia service, the NAPS is my "no-admin-portfolio-system" - an illustration of how to use the StockRanks to construct a well diversified portfolio with a good probability of success. It's a process that can be run in less than an hour per year and has a strong track record of market beating returns - in fact it's returned 17% annualised over the last 6 years as you'll see below. That's not too shabby. If you are a discretionary stock picker the NAPS is a good benchmark to try to beat each year to see if your selections and trading add additional value.

The NAPS archives go into lots of detail about the annual portfolio selection process and the theory behind it and there are a few older videos on our Youtube channel which I really must update. For the first few years I kept a very simple selection process and the performance was fantastic. I should have realised "if it ain't broke don't fix it" but I started fiddling with the diversification rules and made the portfolio more and more constrained. Rather than just diversifying across sectors, I introduced diversification across size groups and risk ratings. This had the negative impact of driving down the average ranking of the shares held, and thus the performance suffered for a couple of years.

Nonetheless the 5 year performance was a 100% return. Not too shabby. At the start of 2020 I realised I needed to unshackle the portfolio and set it free. So that's what I did. I removed all the extra diversification rules and baked in more focus on momentum... it was…

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HileyW

8th Apr '21

For those interested in UK vs. EU vs. US NAPS YTD. Having invested in 20 stocks in each of the 3 markets using Ed's NAPS criteria, 3 month performance (including bid-offer but excluding broker fees/tax) is as follows: UK 12% vs. FTSE all share 3%. EU 5% vs. Eurostoxx 600 7%. US 9% vs. S&P 500 7%. Plan to rotate the bottom 10% in terms of live QM/VM scores.

Silver Moon

25th Apr '21

I'd like to apply a Holdings Performance bar chart to a personal folder but don't know how, can someone help please.

piotrmanczak

15th May '21

Good results overall, well done!

Resh E

18th May '21

Been running this for real, but stocks picked April 22, benchmarked against FTSEAS. I am up 10% on the month, compared to the All Share at breakeven.

I have to say that I have folded and put some stop loss orders on some of the better wins to take some profit on some of those holdings rather than run them for a year. But that's a real money thing - I have kept the original picks in a folio to see how they do.

Any profits taken by stop losses will be reinvested - perhaps even in the same equities if those companies still make the grade and fall lower. If not, some new additions will replace those sold out.

Let's see how this goes! Also, I am now trading all of this within a fixed fee ISA platform after I realised how much of my money my former providers were taking in platform fees...

GrahamScott

18th Jun '21

Are we going to see the 6 monthly review and new picks soon?

Rusty2

Can’t do the new picks until 30th June.

Edward Croft

19th Jun '21

Will be early July.

Currently up 28% year to date.

AlexB1966

12th Nov '21

In January and February, my son and I implemented 3 slightly different portfolios based on NAPS-style VM and QM filters, but with some added features. We have now closed out all those portfolios (though we have kept some of the shares just because we like them!). I thought I would share some thoughts on the three portfolios and some lessons we have learnt, to implement again in January 2022 (depending on the macro-environment – we are worried about a big drop in the near future).

For this post I will just be reviewing the first portfolio – which was closest to the NAPS portfolio implemented by Edward and contained 8 of the same stocks.

Portfolio 1. Implemented 5/1/2021 – performance YTD

NAPS-style high QM and VM, UK, France and Germany (France and Germany because we actually can easily and cheaply access those two markets). Equally weighted across 10 sectors with 1-3 shares in each sector (UK unless stated)

Basic Materials SLP +16% plus 8% dividends

Healthcare SDI +60%

Energy WG -33%

VBK (Dax) +100%

Telecoms VOD -17% plus 3% dividends

Financials CMCX -38% plus 5% dividends

Technology WAVE (Paris) +60% plus 0.5% dividends

CCC +9% plus 2% dividends

Industrial SOM +60% plus 8% dividends

Consumer Cyc. STO3 (Dax) +48% plus 3% dividends

Consumer Def. LNTA -15%

MCB -22%

WYN +50% plus 4% dividends

Utilities DRX +33% plus 4% dividends

Stars included WYN, SDI and SOM, which are well known from the NAPS portfolio. But less well-known are probably the Europeans WAVE, STO3 and VBK. STO3 and VBK remain in our holdings even after closing the portfolio. STO3 supplies building fittings and remains at 75 value rank despite the 50% increase. VBK is a leader in bio-fuels, and whilst it is no longer cheap it has a high ROC and is operating in a market that is expected to grow by 4000% by 2030! WAVE is a French IT Consultancy which has done well but is no longer as compelling from a value POV.

Lessons. Our actual return as per close out was over 30%. We sold out of some too early, some too late. We could have just sat on our hands, we would have done just as well! We probably bit off more than we could chew running three portfolios, 40-odd stocks and significant risk. However, we could have improved significantly if we had taken account of the macro-environment from late April onwards – as the reflation trade faded, our returns dried up and then reinvested – hindsight is 20:20.

The most important lesson we probably learnt is that there are really great stocks in Germany and France that are probably just not getting the scrutiny that UK stocks get. All 3 of our European stocks appeared in our top 6.

Finally, Edward, this exercise really taught us a lot about the power of Stockopedia.

I agree about European stocks, I do hold a few that have done very well this year, MIPS and EUZ are both up around 3x. I don't have the European section anymore, so I don't know how those 2 were ranked, I bought them some years ago.

However, if you are UK based it is always easy trading them and is usually more expensive. Information is scarce as well, I found on Stockopedia even some of the results were missing.

There used to be some coverage of European stocks a few years ago, but not seen anything recently.

Congratulations Alex - that's a terrific result! I'm on 23% but I've broken too many of my own rules through discretionary fiddling.

Nicholas Franklin

26th Nov '21

I wonder why you don´t include Real Estate amongst the sectors?

You do realise this is a UK site?

No separate sector for Real Estate, here are the sectors: https://www.stockopedia.com/se...

27th Nov '21

Depends what you mean by Real Estate. If it’s house builders they are under consumer cyclicals in a sub category called house builders and construction supplies.

I think they are more spread about than just under CC, some are under Financials subsector: Real Estate Operations such as Inland Homes (LON:INL), and some even in Industrials subsector: Construction and Engineering such as £GFRD.

Belvoir (LON:BLV) and Property Franchise (LON:TPFG) are under Financials but are probably what Americans would call Real Estate agents.

I often change the sector, to what I think is most appropriate, when doing NAPS.

28th Nov '21

ok, I operate in the US market and wanted to replicate the NAPS there. I didn´t know UK didn´t consider Real Estate a sector. thanks!

Not sure about US as I don’t have that region on Stockopedia. Theres nothing to stop you doing a real estate sector there. There are some sub-sectors set up but they may not find everything you want. I consider some stocks to be in the wrong sectors anyway.

13th Dec '21

Do you rebalance the NAPS portfolio throughout the year? if so, at what frequency and based on what parameters?

cheers

There is SNAPs, which is done after 6 months. But no it runs for 12 months, then is redone again for the next year. This is the latest SNAPs: https://www.stockopedia.com/co...

14th Dec '21

Thank you for your answer...
I´m wondering though... if we create the portfolio based on QM/VM, that means we place a higher importance on momentum... in times like we are in now, the volatility makes the momentum score vary quite a lot, and wonder if we wouldn´t be better off with a more frequent rebalancing.

It is a fair point. I have set NAPS every month this since April. I don’t think rebalancing more frequently would have gained anything until September. Since then the NAPS have not fallen back as much as the original NAPS but then you will have the costs of selling and re buying. Since 1st September NAPS is down around 15%. But that is doing it with hindsight. NAPS is still up around 22%, April NAPS is down over 3%. June NAPs is down nearly 7%, October is breakeven. I don’t have September NAPS figures to hand, I would have calculate them.

New Year NAPS - Top Stocks for 2021 and some bold bets on 'big mo'

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Edward Croft

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