Semi Year SNAPS 2021 - As Long As The Music Plays, We Dance

1st Jul '21 by Edward Croft

90 comments 18418 reads

What a six months it's been for the NAPS Portfolio - the "bold bets on Big Mo" that I described at the start of the year have paid off. I'll go into the performance in detail shortly, but the portfolio has rocketed by 160% since the Covid crisis lows and has managed a 68% return in the last 12 months alone.

A NAPS recap...

For new readers - the "no admin portfolio system" has been running since the beginning of 2015. It's a very simple, systematic process that selects the top ranked shares in each sector into a 20-stock portfolio. I run the process once per year at the start of the year, and then rebalance a year later. The "SNAPS" are the same process but run at the half-year mark.

For the first five years I used our marquee StockRank as the core ranking at the heart of the portfolio and selected 2 stocks from each of our 10 sectors. Eventually I reduced the shares held in the Utilities and Telecoms sector to one each - as frankly they tend to be small sectors with large, defensive, regulated stocks that don't hold out much hope of strong capital returns.

After five years I switched to using a "half and half" portfolio that more aligned with my market interest areas. Half the portfolio now uses the "VM Rank" (value and momentum) while the other half uses the "QM Rank" (quality and momentum). I explained the current process in depth at the start of this year - but in essence it still allocates fairly equally across the 10 sectors. I believe this change in process has added considerably to the 75% investment return the portfolio has generated in the last 18 months.

If you want to read the full history of the NAPS you can find the archive of blog posts here and some webinars about the process on our Youtube Channel.

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31% performance year to date, which compares favourably against the FTSE All Share which is up only 7.8%,…

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Bronstein

21st Aug '21

Sadly only reading this for the first time today as a relatively new joiner. Really enjoyed the analysis here and I see lots of food for thought in the SNAPS. I do also have one suggestion: given many invest via their ISA, it would be interesting to see a portfolio constructed around these same criteria with an annual cadence set around April 4th rather than Jan 1st.

Rusty2

22nd Aug '21

Good point about ISAs but it is easy to do your own version. I have done one NAPs folio for each month since April, in the last few months NAPS are struggling to make gains. April NAPs is up 9%.

jamespstephenm

25th Aug '21

I would offer a word of caution with US stocks for use in the NAPS. If you look at the browse screens, while QM ranks have fared 'ok' top stock ranks and VM ranks have massively under performed. The US seems to be the only market where this is the case. I believe Ed did mention this during one of the NAPS videos a while back.

Whole heartedly approve of the NAPS/SNAPS approach though! Good luck.

James

Also large companies perform much better in the US markets than in the UK. Stockopedia performance for the top ranked stocks in the US has not performed well, the S&P500 has outperformed it. In fact at the moment the 90-100 ranked stocks in the US are the worst performing of all the ranks: https://www.stockopedia.com/st...

troytea

all listed in the uk. It keeps costs down and more importantly it is easier for me to keep a handle on domestic stocks

dubo2021

27th Sep '21

Why? Use the same methodology outlined to make your own list of names. I am in Australia too, seems simple enough.

Velo

October this Friday, so thinking on starting my NAPS from approx the third week of October/Nov 1st to start the "Sell in May" version of NAPS.

In my previous posts I indicated I'd done a dummy run on the QM/VM combo, and since then, practising again as think I might be busy in late October so don't want to be fumbling about at the last minute on the new site.

However, I still had the initial test run data to hand from July 8th I mentioned above - in a folder, so decided to set them up in a watching portfolio today, to see how it had/ would have progressed (July/Aug/Sept so just over 3 months) if I had chosen to invest back then, on that day (July 8th) with my first run choices.

- Thought it might be of interest

Well, was taken aback at the poor results in the QM half and equally surprised at the decent results in the VM half. Was sure it would be VM that would be the poorer performer.

So, surprise No:1 was a 5% downside performance to the 10 QM choices with barely 3 making a gain (2 really as the third was just for a £1 gain (based on £2k per stock)

2nd surprise was almost a complete sweep of gains in the VM half of the portfolio with a 6.5% gain.

However one of the selections was an energy company and there's no price today for it, so assuming it was one of those energy companies that have just collapsed. So the VM half of the portfolio contained only 9 stocks.

Overall there was still a relatively even-stevens close to the full portfolio showing a slight overall gain of 0.6% gain.

(Felt sure as I was entering the prices tonight, that it would be a significant loss. Pleasant outcome after the poor performing QM half of things).

If results were really good, I was going to commence now, but some of the down trending stocks I can see were trending bearishly at the time of July 8th. Some only fell earlier this month in September, so couldn't have been foreseen at the time with trend following strategy entries.

Need to decide if rebalancing quarterly, etc., as I've been reading some data from a 2008 book (US) that reads as if it was meant for Stockopedia, where they had the best results by rebalancing monthly! (What about costs?)

Next best was quarterly rebalancing and bringing up the rear was annual rebalancing. All showed reasonable gains and not huge divergences in % amongst the better performances anyway. (They used the same Gurus as Stocko).

- The selling rule is to only rebalance should any stock no longer display the metrics it was first chosen for, not to ignore it. And not rebalancing because it fits with the timeframe - only if the metrics had dissipated away.

Also I like how it said, long term investing includes rebalancing on a regular basis as long as you don't deviate from your chosen strategy, therefore that is still classed as long term investing. You can add to strategies but you can't cherry pick sectors - all must be used for diversification. Long term holding excludes just mindless buy and hold forever. Buy and hold only if the stocks still qualify with the strategy.

Otherwise, if still qualifying then a rebalancing period could involve no changes; so you could buy and hold forever that way :)

PS. Curiously all their 10 stock portfolios outperformed their 20 stock portfolios, no matter the value guru chosen, or the back testing year coverage. (But minor % differences only).

Hi Velo, I have set up a NAPs on the first of the month in June, July, August and September, all of these are making a loss, around 2.5-3%. September has been a bad month, the original NAPs set up in January is down around 7%. I don’t have a split between VM and QM stocks.

Hmm . . . Interesting. Thanks for the helpful info Ray.

I'd like to think the Sell-in-May refrain has some validity, as your experience appears to add weight to it, but 2020 absolutely destroyed that perception by doing the opposite!

Was vacillating over £2.5k per stock to £3k per stock, for test starting, but will stick with the initial £2k each per 20 stocks. Others seem to have done well with this strategy, but the fact remains there are no guarantees. There have to be dud years - that's a given. Impossible not to have them.

I'd like a longer-term portfolio (mine are itty-bitty mixes) simmering away in the background under uber control conditions., whilst I also engage in continuing with my other methodologies - ie., trend following.

PS. Was going to post tables and lists of the individual stock % gains etc., but it's a dead test, and was busy too.

Will post details of my own live buy NAPS as others may be interested in the progress. I'd really like this to work, so £2k per stock gives me recovery remission to start over if all doesn't pan out well. Quietly confident it will though.

28th Sep '21

I not convinced that sell in May is something I would do. Yes has worked this year although sell in August probably would have worked even better, timing the market is difficult. On UK small caps it's probably not worth doing either.

One thing I forgot to ask is how do you separate QM and VM, as I found several were selected on both lists? VM may do better when the markets are flat or falling? Some of the VM stocks have performed badly, one of the worst was Opg Power Ventures (LON:OPG), down over 40%.

" One thing I forgot to ask is how do you separate QM and VM, as I found several were selected on both lists? "

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

Yes, same here. Good stocks tend to be commandeered by all processes/ Guru strategies :)

As the process is to initially choose the 2 highest rated stocks per sector, for each strategy (so a total of 40 selections to whittle down to just 20 overall). So in that scenario just move on to the 2nd choice. I had a hankering after Gamma, so when it came up on both lists and even though it was only the July 8th practice run, I thought:

- See? After all these years it's still calling me. It's got my name on it!

So deleted it from one list that had a nice 2nd choice and all was well. Gamma's long, long, long term SP history is to die for. Bottom left to top right corner of the screen.

Years went by and I did nothing, so this exercise broke the inaction. I was already liking the process :)

When I opened that portfolio and blew oxygen into its lungs with live prices yesterday, Gamma was one of those with a very small decrease against the July 8th buying-in price (used EOD prices) LOL! :) :)

Incidentally, I've kept the 2018 NAPS folio (Ed's selections) - that year was one of the worst, if not the worst performing years for NAPS (based solely on Stocko's ultimate overall Stock ranks selections only).

However, had a look-see yesterday at how it was doing after leaving it to its own devices for nigh on 4 years now

- and first amazing thing is, that the larger majority of the 20 stocked portfolio are still all well up in 90's deciles.

The second thing I noticed (well it was actually the first thing) was from that year of a poor performance, the portfolio is nowadays showing a decent gain - and gone was the double-digit % loss for 2018.

Furthermore, back then, I was including all the dividends which because of Plus500 were exceptional. So adding just that year that I kept records, moved the gain up higher, quite noticeably.

If I made estimates for the following years and nil for the recent years it would still move the portfolio up into a v smiley arena!

Well that's not a bad performance at all - not breaking any record performances but a decent enough performance.

So without any rebalancing whatsoever, one of the worst NAPS years (2018) on record, left to run unmolested is doing quite well nowadays, years later.

Reminds me of that account from Fidelity of Canada as related in Daniel Kahneman's, investor psychology books.

(Apologies if you've already heard this one).

In it, he tells of Fidelity carrying out a review of all their clients accounts to see if there was a recurring theme amongst their best performing clients - there was!

The very few top performers all had one thing in common - they were all deceased! And had been deceased for many a year.

Pretty much like leaving that 2018 NAPS to run as is. Turned out the 2018 NAPS WAS a success after all - in the long run :)

(Ed has kept records of how each year performed - but I wonder if he's let each of them run-on un-rebalanced, just to see?)

That's interesting about 2018 year. I don't leave them running as only 10 folios available on here. I did think that they ran out of steam after a year but I did look at the 2020 NAPs and it's up around 28Y YTD which is about the same as 2021 NAPs. The big winners from last year have hardly gained this year but the mid performers have done well, such as Galliford Try Holdings (LON:GFRD), Solid State (LON:SOLI), Judges Scientific (LON:JDG), Reach (LON:RCH) are up well, Reach (LON:RCH) is up about 155%. Big loser Enquest (LON:ENQ) is up 106%. Apart from Associated British Foods (LON:ABF) all the losers are up. From that it looks like sell the big winners (Ergomed (LON:ERGO), £Premier Foods (LON:PFD), Petropavlovsk (LON:POG), Frontier Developments (LON:FDEV), Shanta Gold (LON:SHG)) but keep hold of the others? Taking out the top 5 from 2020 will improve the performance from 28.5% to 36.7%.

This is contrary to running your winners and cutting your losers though.

gus 1065

1st Nov '21

Just set up a NAPs portfolio using the themes outlined above to test a view that there is an often observed seasonal Santa Rally in the run up to calendar year end that may compound the benefit of a QM/VM portfolio approach. Snapshot of positions entered into today, £2.5k in 20 stocks. Not a perfect sector 2x2 selection as Consumer Defensives and Basic Materials under represented but still pretty well spread across market caps/risk profiles etc.. Several stocks in the list I wouldn’t normally consider (as much for reputation as hard numbers such as Gulf Keystone Petroleum (LON:GKP) Firstgroup (LON:FGP) and Indivior (LON:INDV) ) but stock agnosticism is one characteristic of the NAPs approach. Will report back on outcome at the end of the year and Q1 2022.

Gus.

Hi Gus, Interesting I set one up yesterday but got quite a few different selections, I'm curious how Ninety One (LON:N91) creep in, I have many higher ranked ones in the QM and VMs, such as Legal & General (LON:LGEN), Property Franchise (LON:TPFG) and Alfa Financial Software Holdings (LON:ALFA)

Hi Rustbucket.

I built a long list of the top 30 QM and 30 VM names as a raw data set then picked from this to get a diverse set of sectors. One additional criteria I applied was to exclude stocks with a market spread over 1% (some of the names in the long list had spreads of 3% or wider) which may have knocked a few names out. I also took out a few stocks that I know are very hard to buy online such as Md Medical Investments (LON:MDMG) . Tullow Oil (LON:TLW) was on the long list but Gulf Keystone Petroleum (LON:GKP) was already ahead of it on the list in the O&G sector (although for personal preference I would have taken Tullow Oil (LON:TLW) ). Not sure anything singled Ninety One (LON:N91) for inclusion so may have been (my) Monkey Brain error in the selection process missing out financial sector names higher up the list. Suggest we compare notes in maybe 6 months time.

I see, yes less than 1% spread would take out many stocks, such as System1 (LON:SYS1) but Legal & General (LON:LGEN) I would have thought would qualify?

I did have trouble deciding between several stocks such as Renold (LON:RNO), Quarto Inc (LON:QRT) and Property Franchise (LON:TPFG)

I don't think some of the info. is correct on spreads, looking at Renold (LON:RNO) the spread is around 2.5% yet on Stockopedia it says 35bps. Tekcapital (LON:TEK) spread is around about 3% as well.

I also exclude stocks like Md Medical Investments (LON:MDMG) and also foreign ones like Vietnam Holding (LON:VNH)

Surprised you don't have any recruiters, I was fighting them off, Pagegroup (LON:PAGE) has a 100 QM score.

This was much easier exercise to do on the old site.

9th Nov '21

I know the NAPS to date has returned circa 18% annualised, but can anyone confirm the performance of the SNAPS since inception?

Regards

I make NAPS up 28% YTD. I don’t have SNAPS set up unfortunately. Other NAPS I set up in June and August have not gone up, in fact both are down.

I suspect SNAPs is struggling as well, some big fallers such as Ferrexpo (LON:FXPO) and Royal Mail (LON:RMG)

CharlesHenryHer

29th Dec '21

Do people suffer from liquidity issues from owning AIM shares when exiting/entering positions and has it impacted performance?

Hugely dependent on your broker, and the size of the order. It was the primary reason I moved from trading 212 to HL, their order execution was significantly better. Sorry if that doesn't really answer CharlerHenryHer.

Semi Year SNAPS 2021 - as long as the music plays, we dance

A NAPS recap...

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Edward Croft

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