Stock Picking Challenge 2021: Crypto fever propels the Q1 winner

This time last year, the entrants to Stockopedia’s first ever Stock Picking Challenge were assessing the damage from one of the sharpest stock market plunges in living memory. This year, much of the uncertainty has gone and equity markets have been kinder.

In fact, despite the terrible problems that Covid is still causing, many international markets are back to their bullish best. This time last year, growth and momentum strategies had capitulated in the face of so many unknowns. Today, they’re in recovery mode.

Back then, a handful of smaller, more speculative stocks (particularly in pharma, mining and cleantech) were some of the few bright spots at a very dark time. We’ve since seen momentum build across markets, earnings forecasts beaten and a growing sense of optimism. But how are the funds in this year’s Stock Picking Challenge doing?

A new challenge for 2021

The Stock Picking Challenge is our annual invitation to investors everywhere to come up with their five Top Stock Picks for the year ahead. At stake is the prestige of outperforming thousands of the smartest stock-pickers around, and the chance to win some impressive prizes too.

Last year, we had over 2,100 entries and the overall winning fund managed a gain of 632.7%. In 2021 the competition grew by more than 1,000 entries, with 3,285 five-stock selections submitted to us before the turn of the year

With the first three months behind us, the Q1 winner this year was jamesy227 with a gain of 265% - and here’s the five-stock fund that delivered it:

There’s no hiding the fact that jamesy227’s picks have been propelled by the surging interest in cryptocurrencies. With Bitcoin, Doge and other crypto coins soaring in value, some of the related stocks in this area have done extremely well. UK based crypto miner Argo Blockchain is one that has seen its shares soar since late last year.

At the other end of the spectrum, the fund in last place in Q1 was from Parin Chudasama, with a -39.6% return. What’s interesting about this fund, though, is that these kinds of small-cap pharma and tech shares (the likes of 4D Pharma, Novacyt and Verditek) had a habit of performing well last year. So things have changed here - the frenzy in these sectors may have subsided.

Selections, trends and performance

Unsurprisingly - given the nature of the competition - success in the Stock Picking Challenge has so far relied on the very strong performances of a small number of stocks and sectors. But how about the average performance?

Well, this chart (taken from Ed’s recent Mello presentation) shows how the median return is currently around 12% - approximately 650 of the five-stock funds have achieved that. You then get a very long tail of positive performance, all the way up towards the 300% range. It’s still very early days in the challenge, but you can see how a few spectacular performances can put a rocket under a portfolio.

That said, a 12% median return is good going, with these selections outperforming the average returns seen from the FTSE All Share and AIM All Share this year.

The Stock Picking Challenge is open to both Stockopedia subscribers and non-subscribers and it’s interesting to see how the most popular top picks on each side have performed. As this chart shows, the performance of the top five most picked shares between subscribers and non-subscribers was wildly different. The subscriber top five delivered a solid return of around 17%, while the non-subscriber top five was down by about -17%.

Interestingly, when it comes to the top 5, 10, 20, 50 and 100 most picked stocks, subscriber selections delivered remarkably consistent average returns in the mid-teens. But the top 20 and top 50 non-subscriber popular picks outperformed the subscriber ones - and the top 100 most picked on each side were close to being tied.

In all, the top five most picked shares in the challenge this year were Boohoo (309 picks), Sylvania Platinum (281), 4D Pharma (207), Saga (190) and Supply@Me Capital (166).

In terms of performance, the top performing shares in the challenge (with at least 10 pickers) have been Argo Blockchain (+427%), Kr1 (+384%), Premier African Minerals (+275%), Ferro-Alloy Resources (+249%) and Zephyr Energy (+220%).

For more detailed top lists from the challenge, you can explore the slide deck here.

What’s next in 2021?

In last year’s challenge, the overall winning stock selection only emerged towards the end of the year, so it’s very much all to play for in 2021. The surging popularity of cryptocurrencies have put an interesting influence on the Q1 results - and well done to jamesy227 for taking the Q1 win. It will be interesting to see if that cryptocurrency trend continues.

More generally, it is very promising to see that there is market-beating ‘social alpha’ in the stock picking ideas of private investors (both subscribers and non-subscribers) in the Stock Picking Challenge. Hopefully we’ll see more of that as the year progresses.

You can keep track of progress in the Stock Picking Challenge 2021 here: https://www.stockopedia.com/challenge/2021/