SNAPS 2020 - The Benefits Of A Good, Long Sleep

27th Jul '20 by Edward Croft

35 comments 10689 reads

As of July 25th, this year's NAPS portfolio has done rather well. The NAPS are currently up 8.5% year to date, versus a FTSE All Share benchmark that is down 19.1%. That's a 28% outperformance in the first six months. While the portfolio is still below its high watermark from June 2018, it's actually broken out to new highs relative to the benchmark. I'd love to say it's been a smooth ride, but as we all know there's been a nasty virus knocking about and the markets stumbled badly in March.

One of the great benefits of the NAPS process is that embedded within it is this idea of only checking once (or twice) per year. If we'd just gone to sleep for 6 months and woken up to check the NAPS valuation, we'd have had the pleasant surprise of seeing it grow. In this article I'll explore the fact that it's been to hell and back in the interim and whether that matters.

If you are a new reader, you may have missed the journey I've had with the NAPS strategy over the last five and a half years. In essence it's a systematic, diversified, 20 stock portfolio based upon the StockRanks that only takes an hour per year to put together - accordingly, I've titled it the "No Admin Portfolio System" or NAPS for short. You can learn much by going through the NAPS Archives or watching one of the old Youtube Webinars. I do hope to create a course about the methodology in due course.

[This is a long piece, if you want a PDF version you can download it by clicking here]

Recent Performance

After a useful early run, a fairly brutal viral attack knocked 40% from the portfolio in February and March. Serendipity then provided a 70% rally over the last 4 months. The line in grey is the FTSE All Share which I always use as a benchmark. There is fairly strong and enduring momentum recently, which has been driven by a 10% allocation to gold stocks.

Here's the five and a half year performance history of the portfolio, a 118.5% performance excluding dividends. This chart illustrates the extent of the whipsaw we've seen of late.

I couldn't help but subtract the FTSE All Share's…

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Edward Croft

28th Jul '20

This comment is under review

Greig

Many thanks for doing this detailed write up Ed, and congratulations on achieving spectacular results having successfully weathered recent events. You mention that you hope to discuss your disciplined methodology in more detail in the future; I for one, would find this most helpful.

Notwithstanding the need to digest news with a grain of salt, I think that it is widely regarded that 2 of the most reliable market bellwethers are the yield curve and the VIX. Have you considered using these measures to help adjust exposure to markets, and perhaps boost the portfolio's long-term performance yet further?

troytea

Thanks for this Ed, I’ve now bought into factor investing as it was outperforming my own picks. I have split my own portfolio into 3 sub portfolios based on stockrank, qm and vm with some other rules for diversification, balance sheet, stop losses, etc. Qm is outperforming the others at the moment.

Metatron

Does anybody know a UK stockbroker who trades Ros Agro?
Keller goes xd tomorrow

QM has been doing best of all the ranks this year - our tracking of the QM Screen just tracks the top 25 candidates quarterly (rather than the entire top decile that the ranking charts do). It's about breakeven for the year.

https://www.stockopedia.com/screens/top-qm-rank-481634?view=5b616fcf6bc24

QARPY

29th Jul '20

Wow! That’s what I call a V-shaped recovery!
I am jealous of that!
Thanks for sharing this, Ed, very informative.
Btw, what happened to Reach (LON:RCH) which you had selected for 2020? Did you swap it with Vistry (LON:VTY)?

30th Jul '20

Reach is in the portfolio & performance calculations. Vistry appeared when Galliford Try divested its housebuilding to Bovis in January... so there are 21 shares in the current NAPS set.

I'm not sure why it's not in the bar chart above - I delegated that task and it appears to have slipped off the diagram. I'll have it amended.

andrea34

3rd Aug '20

Thanks for the update. The results would seem to prove that one cannot cherry-pick stocks from the NAPS system as, to do so, could severely dent a person's performance as in H1/2020 more than half of the stocks are down over the period (not withstanding the Covid effect).

Just in relation to the write-up on Serica Energy (LON:SQZ) although its price tends to be affected by changes in the oil price the majority of the company's production is actually gas and not oil.

ACounsell

Hi Ed,

I appreciate you don't include transaction costs and dividends but I think your % gain numbers are on the high side. This maybe because there may have been a bit of a mix up with regard to cut off dates. For example the 200%+ gain in Petropavlovsk (LON:POG) is up to 25th July (as it says in your text) whereas the performance to 30th June was good but not that good (about 104%)! From the end of June to 25th July was a pretty good period for markets (especially gold) as concerns re Covid-19 were, albeit temporarily, ebbing so if the other gains and losses are to July 25th then the graphic is not measuring the performance over the normal 6 month period you use for the NAPS

I model NAPS portfolio on a six month cycle consistent with your selections. This process creates a virtual portfolio valued at approximately £50,000 with c.£2,500 in each holding. Commission (at AJ Bell's rate of £9.95) and Stamp Duty where appropriate are included in the overall cost of the portfolio. This is then compared with the valuation at June 30th including any dividends received in the holding period. The share prices are taken from the closing prices on 2 January and 30 June as indicated on Stockopedia Charts (I accept there is a small element of approximation here and also you start your calculation from close of business 31 December). On this basis overall performance including costs and dividends was a negative 1% - pretty good vs. the market but not the 8% gain which I assume is to July 25th if the Petropavlovsk (LON:POG) comments reflect the other holdings too. Unfortunately I am not great with Excel graphics so have had to resort to a tabulation of my results as shown in the table below. Given that you are refreshing the portfolio as at July 2nd shouldn't this performance (or something close allowing for my inclusion of costs and dividends) be the appropriate one for the NAPS process or have I misunderstood your analysis? (Note: I haven't included Vistry in my analysis)

	Holding Value (£)	Price 30/06/2020	Cumulative % Chg +/(-)
Petropavlovsk	5108.26	25.95	104.3%
Premier Foods	4651.56	70.80	86.1%
Frontier Developments	3761.24	1862.00	51.1%
Shanta Gold	3587.98	13.85	43.5%
Galliford Try	3141.73	117.36	25.7%
Ergomed	3014.64	474.00	20.6%
Gamma Communications	2355.20	1280.00	-5.5%
Good Energy	2328.29	191.00	-6.8%
Judges Scientific	2252.80	5120.00	-8.9%
Aveva	2175.65	4105.00	-12.9%
Rightmove	2133.30	547.00	-14.6%
Solid State	2029.12	544.00	-18.8%
Medica	2008.46	123.75	-19.6%
Associated British Foods	1885.92	1964.50	-23.9%
Legal & General	1752.15	218.20	-29.8%
EnQuest	1583.48	13.96	-36.7%
Rockrose Energy	1536.48	1164.00	-38.1%
Barclays	1531.65	113.54	-38.7%
Reach	1393.97	77.10	-44.2%
Rank	1318.38	147.80	-47.2%

Totals	49550.26		-1.4%
Estimated Dividend	200.15
Total Shareholder Return	49750.41		-1.0%

Yes - I had the performance at about -1% at the half year mark at 30th June. This is non controversial and is as illustrated by the date/performance crossover in the chart on that date.

There was no mix up on dates... I just didn’t manage to write the article till the 24th - so performance was reported as of that date.

dfs12

4th Aug '20

Fantastic to see a real portfolio built on the back of NAPS and SNAPS. The suggestion that bid/offer spreads, transaction costs and dividends are all excluded from performance and therefore roughly balance out is a pretty fair one - in a normal year! But this year dividends are extremely hard to come by. So it is superb to see the real picture. Thanks for your time to post.

Yes I can see that the date/performance crossover that chart implies something close to break-even - no controvesy intended! I missed that by focusing on the individual share price bar chart and misinterpreted the text heading as meaning that it was the gains to June 30th when you explain in the text that it was performance to the date of you writing the article (24th July). Fully clarified now - Thanks.

I should have added another interesting point. I adopted the same approach for your previous NAPS methodology (you identified these stocks in your January write up) and the top 20 most popular stocks from the Stockopedia stock picking competition. The 'old' NAPs methodology produced a return of -17.4% so it was a very good move to switch to the new system! The Stocko Top Picks was more successful returning a small loss of -1.5%.

Bluesky Ventura

Roodini

11th Aug '20

Hi Ed and the team,

Fasinating article.

The chart here is an amazing illustration.

Have you ever thought about adding in a couple other fields to the chart ( see screen shot)

Right now, this chart while an amazing chart, is hampered by the fact that buying all the +90 SR shares is tough. So that introduces the risk of picking the 30% of those that fall.

Obviously I know you can do this in the screens, but the screens dont show the overall "performace" of the screen. Adding in a couple of the other numbers in the data base into this chart would be very powerful.

V4Value

13th Aug '20

I have a basic question based on the revised method of splitting the portfolio equally across QM & VM and the sectors. Am I correct in assuming that you could have two stocks from one sector in either the QM or VM 'bucket'? Or do you select the highest QM rated financial and then the highest rated VM financial, for example. The latter method would mean lower rated stocks if you have to look way down the ranking list to find a technology company in the value category, say. I guess the first method is slightly more complicated but would offer higher rated stocks. Put simply, do either the QM/VM categories have to have 10 sectors in each, i.e. 10 different sectors in QM and 10 different sectors in VM?

contiuk

28th Nov '20

Hi. I am new to the Naps portfolio, considering all my options.
I can see you mentioned that the performance between the old Naps and the new one is pretty bight.
What is the main difference between both?

Only the review at 6 months and rebalancing?

Thanks for your help?

MiserableJacktPotato

He explains this in the article.

Old NAPS used all three of Quality, Value and Momentum stockranks and all picks were a strong blend of all three.

The new way creates two group, one with high QM and the other high VM. Hope this helps explain it.

Gromley

Hi contiuk,

IGPJ described the difference between the developing approach to NAPS, but in your question I think you may have conflated the difference between NAPS (annually rebalanced) and SNAPS (half yearly rebalanced).

As you say you are new, if you are interested in how the approach has developed, it is probably worth reading through the whole history from the start; which you can find HERE

It will take you a while (!) but if the concept is of interest I would definitely recommend it as worthwhile.

29th Nov '20

Hi Guys,

Thank you both for the reply, I appreciate it.
I watched a webinar on the initial NAPS and then read the posts for the SNaPs but yes, I believe I got a bit confused.
There is so much information available on long term investing, it’s overwhelming.
I’m currently reading three books at the same time lol.
At this very moment I am half way through the Stockpedia book “How to make money in value stocks”, which I find a great summary and mix of several books together.

Anyway, I find Stockopedia a great platform to save me tonnes of time, but still not sure how to use to my favour all those screens.

I’ve been checking performance (UK only stocks); Piotrosky, the Zulu principle and Growth and a reasonable price seem the ones with higher return over 5 years and more consistently.
But then found the NAPS portfolio! Which it makes sense in terms of less hassle on choosing stocks and balancing a portfolio.

Sorry for the long text

Thanks again for the help. See you around here : )

SNAPS 2020 - the benefits of a good, long sleep

Recent Performance

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Edward Croft

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