New Year NAPS - Top Stocks For 2022 With Lessons From The Tao

1st Jan '22 by Edward Croft

151 comments 30948 reads

One of the joys between Christmas and New Year is the time it brings us all. After all the mess of gift giving and receiving is over and relatives have left… there’s a moment where you realise you’ve finally some time for yourself. It’s in these gaps that we have moments for reflection, to make new resolutions, to read, to ponder… or just lie around and eat a pot of honey. I found myself nostalgically reading “The Tao of Pooh” and reflecting on some of the things I’ve got wrong in 2021 - namely trying to do when not doing would have done just fine. On reflection, the NAPS embodies a number of taoist principles, and it’s in this vein that I’ll review what’s been another good year.

NAPS Portfolio Performance 2021

The NAPS Portfolio appreciated by 28.3% through 2021 (excluding dividends & transaction costs) versus the FTSE All Share at 14.5% (18.6% including dividends). In spite of a reversal from the 39% high on September 1st, it has been a remarkably strong showing in a year when so many portfolios have suffered.

The Long Run Performance

For those that need reminded, the NAPS is my “no-admin-portfolio-system”. A 20 stock portfolio from the highest StockRank stocks, diversified fairly equally across all 10 sectors, rebalanced annually. It’s a “select once, leave for a year portfolio” that requires no more than an hour to put together, but has performed remarkably well over the last 7 years. With more than an 18% annualised return over this period, £1 would have grown into ~£3.23 following this process in a tax efficient wrapper.

Please note that the above performance excludes dividends for both NAPS and FTSE All Share. The FTAS has a 49% total return (including dividends) over the same timeframe. I prefer to exclude the impact of dividends from NAPS performance tracking as it is a conservative way of factoring in transaction costs.

If you’d like to learn more about the NAPS - you can catch up on all the articles in the blog archive here. There are also some videos on Youtube which I keep promising to update and will do soon.

Winners and Losers 2021

While Reach (LON:RCH) couldn’t hang onto all of its gains this year, it still…

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ACounsell

22nd Feb '22

Another 2022 NAPs selection bites the dust. We can add System1 (LON:SYS1) to the list of heavily underwater stocks. Fortunately I don’t hold but the current return on the portfolio is heading south in a hurry. Though including Bp (LON:BP.) will have helped returns but the small cap plays are being hit badly.

Edward Croft

ACounsell - NAPS will correct harder than the FTSE All Share, but probably not as hard as the AIM All Share. That's by design. It's a higher beta than the safer indices, but not as high beta as others.

FTSE All Share -0.5%
NAPS -7.6% YTD
S&P 500 -8.7%
AIM All Share -14.6%
AIM 100 -17.2%

TBH - judging performance over weeks is not the point of the NAPS. It's just a long-only equity portfolio after all... not an absolute return long/short portfolio. Therefore it corrects and is volatile just like normal long only equity portfolios.

Leebod

You mean March!?!

Rusty2

Actually my February NAPS is showing a small profit.

Hi Ed,

Understand and accept your comments about relative risk and judging performance over a longer time period. My comment was not intended as a criticism - more an observation that the NAPs had got off to a difficult start with 7 of the selected holdings falling by more than 15% and a number of others in negative territory. Overall as you highlight the NAPs portfolio is doing less badly than a lot of other ‘benchmark’ indices in what is beginning to look like a difficult year for markets in general.

Jleavett

1st Mar '22

It's certainly going to be interesting seeing what happens this year. If it recovers and ends up making a decent return for 2022 I will never doubt again.

ricardomontalban

5th Mar '22

Having a real dilemma about NAPS 2022 - I have been very disciplined so far and done no tinkering whatsoever. However I'm wondering if 2022 is "Black Swan" enough to bail out into miners and commodities? Vertu Motors (LON:VTU) Robert Walters (LON:RWA) Hill & Smith Holdings (LON:HILS) Focusrite (LON:TUNE) and Liontrust Asset Management (LON:LIO) all down well over 20% - portfolio down 11% ytd (maybe this isn't too bad relatively - but it feels bad).

I want to keep the faith - but it is hard!

doctor dave

People have generally got the wrong idea about NAPS. This is a “no-administration” portfolio for people who have some money but do not want to manage a share portfolio actively. It has done better than most active portfolios over the last few years. But it is still a passive portfolio. So it can only be assessed as a basket of shares over twelve months. If it is rubbish this year then we can all feel better about ourselves (unless we have done worse). You are either “all-in” or you are not.

1668james

10th Mar '22

People need to keep the faith! No strategy is immune from the overall market conditions. As Ed points out the NAPS is down less than the S&P 500 so far which pretty good.

If as investors we run at the first sign of a setback (which many do) then we only end up missing out on the rebound and the transaction costs will also eat into your portfolio.

Investing in stocks is a long game and as Warren Buffet said the market is there serve you and not to instruct you.

Steel Monkey

6th May '22

NAPS is nearly tracking the S&P500. As of yesterday 05/05 the index was down 13.5% compared to 04/01/22. An equally weighted £20k NAPS portfolio (i.e., £1k in each of the 20 stocks) invested on 04/01/22 is down 13.8%. ROIs range from -47% (Lions Trust) to 25% (R E A Holdings). +ve ROIs - 8 stocks, -ve ROIs - 12 stocks. The businesses are all sound and I guess if this was a rising market, it may have outperformed the S&P. Given the current situation, it may be prudent to use trailing stops. @Ed Croft - you might have to then rename it to MAPS - Minor Administration Portfolio Service

I've always said the NAPS approach is a jazz sheet to riff on, not a fixed musical score. Some people create more active rules, others stay more passive. It's really up to the user depending on personal preference, time horizon, risk tolerance and more. If someone has a 10 year horizon and the capital is not required in the interim - market volatility shouldn't matter - it should be embraced humorously. If someone has a shorter time horizon - then having more active risk management may be beneficial - both in terms of capital protection but also for mental health.

eParo

18th May '22

Liontrust Asset Management (LON:LIO) has fallen off the cliff in the last 6 months. Time to buy?

InvestTrader

I had thought of doing this. Great idea. Hope you report back after a year to see the results.

19th May '22

How do you link an Excel cell to a live share price please? Cheers

erkithe

18th Dec '22

Well, who could have predicted that year and its effect on NAPS. -17.42% down (-15.57 with dividend and stock splits) overall across the list of stocks. Some highlights (LON:INDV, LON:IMP, LON:CNA, LON:BP,), lowlights pretty much everything else.

Roll on next year and hopefully back to profit with a strategy that has been rather successful since I joined in 2015

19th Dec '22

I do a NAPs folio every month. Since July things have improved. October is up over 11% already, mainly due to Yu (LON:YU.), up 97%. November is up 6.5%.

Ultilities have done well this year, Centrica (LON:CNA), Yu (LON:YU.) and Telecom Plus (LON:TEP)

20th Dec '22

Very true, if I break it down and look at it from a monthly point of view compared to the full year, then I get a more positive result. Everyone to there own.

You may have misunderstood me, I meant I do a new NAPs selection every month. The original NAPs done in January, had a low point around end of September and has recovered somewhat, my NAPs is different from Ed one, though.
My recent ones picked Yu (LON:YU.) which has done exceptionally well. Even taking YU out of October's, it still has done well. Really not sure what next year will bring.

What I'm also seeing is the top QM are outperforming the top VM stocks in the last 3 months.

1st Jan '23

which I guess makes it SAPS - Significant Admin Portfolio System.

New Year NAPS - Top Stocks for 2022 with lessons from the Tao

NAPS Portfolio Performance 2021

The Long Run Performance

Winners and Losers 2021

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Edward Croft

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