LON:WPP | Stockopedia – First Impressions

8th Jan '18 by Colin Eastaugh

21 comments 4444 reads

I am a newbie to Stockopedia. For a long time I resisted the charms of Ed and his team but having over the Christmas period watched a few of his videos on YouTube, I thought I would take the plunge. The reasons – Ed’s honesty. He mentioned that there could be a problem if most Stockopedia followers ‘chased’ the same shares. Ed also mentioned that comparatively speaking performance wise (as in companies highlighted by Stockopedia’s ranking systems) Stockopedia has done well of late, but this is partly because commodities have taken a back seat in recent years. Again an honest viewpoint.

As mentioned in another post, all credit to the IT team at Stockopedia, it is very easy to navigate between the screens and the website seems intuitive.

As for my experience of all of a week, it has been positive, I have bought a few shares in WPP, highlighted on one of the screens, and it has bounced nicely, the subscription has been paid for in the first week. Stockopedia has also thrown up lots of other investment possibilities. And finally, and possibly most importantly, Stockopedia has allowed me to look at my existing portfolio with fresh eyes.

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flashing blade

4th Apr '18

I am also a newbie to Stockopedia and impressed by the wealth of available material on this platform.

Previously I have relied upon individual stock picking but after reading the NAPS article can certainly see the merits in a strategy of selecting high ranking stocks from each sector. I have tried to create my own filter/screen to set up a dummy portfolio but so far making a complete hash of this.

Prior to joining I held held Communisis (CMS) and whilst I am in very modest profit very surprised that in Stockopedia it was ranked at 100. This was the last thing I expected ! The learning point here for myself as a Stockopedia beginner, is that you simply do not buy a portfolio of high ranked shares in each sector without further consideration of other factors without taking into account other factors.

On the flip side, and using WPP as an example, Stockopedia assesses the company as a value trap and is considered to be a 'losing style'.

However some Stockopedia investors will still consider this investment despite a current rank of 46. In order to develop my understanding I would be interested to understand what additional considerations experienced Stockopedia investors would take.

Andrew L

Personally I take the Stockrank and constituent parts - quality, value, momentum - with a pinch of salt. They probably add value but I want to think for myself too. I just try to use common sense. Is this a good sector, are the company dynamics good. I think thinks like the Z score are helpful.

The trouble with screens - and any screens - is that they will tend to highlight stocks that are cheap for a reason. The very good quality companies may always be too expensive to qualify. Also I think quality is largely subjective and driven by the future. Screens imply moving in and out of stocks as they qualify or move out of the screen.

This approach can work and I know lots of investors like algorithms as they don't like subjective thinking. However, I prefer to think about whether the company is any good as a starting point. An example might be Dignity. It looked like a quality company but competition has led to its share price collapsing. I personally prefer to find companies that can potentially compound value in the long-term.

The nature of a business franchise is always somewhat subjective. So I like to assess qualitative factors but I know some stockopedia users don't. But I think having stockopedia as a starting point is good. If the system rates a stock you are looking at as a "sucker stock" it at least gives pause for thought.

Hope that helps.

PhilH

However, I prefer to think about whether the company is any good as a starting point.

And how does one assess that?
From experience, I know that I have zero ability in that respect, plus the time taken to kid oneself that one can make an assessment takes hours, weeks, months even

When all of the 'experts' have stopped giving their opinion on stocks all that will be left is their track record ... if they have the courage to publish it.

Stocko has provided data (albeit only 5 years) on guru strategies based upon academic research which require minimal knowledge of the companies the screens select yet individuals still think that 'knowing' the company/business/key personnel can make a difference.

My advice is to sidestep the part of the investor psyche that wants to take credit for picking a good un and just follow a strategy.

PhilH - yes I understand that point of view. However, in my experience filters can throw up odd results. You can use a screen if you want to buy all of them, rebalance all the time etc. Screens with momentum inevitably involve buying and selling a fair bit which can create tax/trading issues.

How do you assess whether a company is any good? It isn't rocket science. Does it have a good franchise in an attractive sector? Personally I wouldn't own banks, insurance, most real estate and some other low quality sectors but stocks in these sectors will occasionally pop up on the screens.

Your challenge is not really accurate with regard to fund managers. The best have bought great companies in good sectors i.e. Terry Smith, Nick Train etc.

You just have to ask would I want to own the whole of this company. Take Crawshaw for example. I would never want to own that as the whole concept of a butcher's chain is likely to be a disaster.

The screens also don't necessarily factor in cyclicality. So homebuilders might qualify because they are doing well now.

I am just saying what works for me. I also try to ask whether the company itself is any good. I don't think it is rocket science to assess. Things like return on capital employed, competitive position, demand for the product and exposure to risk. I understand that some people find looking at fundamentals a waste of time but personally I think it is important.

The key driver of whether a company does well over 10, 20 or 30 years is the quality of the business. This is the quality on a forward looking basis. Past statistics can be a guide but do not necessarily indicate the quality going forward (i.e. Dignity).

I am not having a go at Stockopedia which I think is a great system. I have recommended it to my Uncle who uses it. I just think we have to use common sense as well. But that is my perspective. I think Ed and a lot of other Stockopedia users would disagree. Fair enough, everyone should do what works best for them.

If fundamentals are so unimportant, though, then why do people the Small Cap Value report that comes out every day. Or why do people look at RNS updates for the qualitative factors. For me I couldn't buy a stock blind just knowing the Stockrank. I like to see if things add up.

I would personally say if you can't have a stab at assessing the business then don't invest in stocks. Go for funds instead. Nothing wrong with that. There are some great Investment Trusts out there.

The ROCE for a company only remains high due to the competitive position which is driven by qualitative factors. Secondly, the growth prospects for a company require judgement and won't be contained in any past statistics. So I think we should make a qualitative assessment of the future but fair enough if you disagree.

5th Apr '18

From late 2013 Crawshaw (LON:CRAW) went from ~8p to a peak of 92p two years later. Not too shabby for a butchers. Who'd have thought it eh? In Nov 13 it had a Stockrank of 99. In July 2014 it had just come off a high of ~60p and had a StockRank of 85. That would have been a good return. By Nov 2015 it was hitting 93p with a StockRank of 76.

Personally I think it was the size of Crawshaw (LON:CRAW) that stopped me investing in it as it was too small at the start and then as it grew it didnt meet my criteria.

Personally I stopped reading SCVR for company specific insights. What I do take away is things like strategies to spot bankruptcy risk or overly indebted companies.

If the author of SCVR highlights a firm one month and then the stock plummets, what do you do?
Desperately wait for an update from the author as to the best guidance?
Or do you follow your instinct to sell/top-up only to feel like a mug later when the author finally suggests the opposite?

Using a company knowledge based approach means you are forever tied to the companies/sectors which you think you understand and this can limit your investment universe.

Does the UK GARP Guru Screen 'know' anything about the companies it selects? It has an annualised performance of 25%. Why not run two portfolios in parallel or run a 'fantasy fund' here. You might be surprised at the the results if you can stick to a strategy.

With respect to growth forecasts ... you don't have to worry about the accuracy of the growth forecasts (as analysts are notoriously poor at making them) ... instead you might become interested in the direction of the consensus, e.g. analysts are more bullish or bearish.

Can I ask what your performance has been over say the last 5 or 10 years?

With respect to buying funds ... don't make me laugh. A total rip off!
I know very little about the stocks I buy from many different Western markets.

Take a look at the performance of my fantasy fund which mirrors my personal investments (except I didn't start with £1m)

By the way, I'm not saying fundamentals aren't important. They inform StockRanks and can/do drive screening strategies. I just don't get hung up on the detail. I pick a strategy that has demonstrated that it works well with limited drawdown and crack on. If the screen selects a duffer, so be it. Loss of price momentum will take me out without too much damage. I probably wouldn't have been able to spot it in the first place anyway.

In fact I was invested in a Spanish firm Let's Gowex that was a complete work of fiction that fooled many 'wiser' than me. I sold out before the scandal broke and more than tripled my original investment.

PhilH - very good points and congratulations on your impressive results. I think people can do well buying low quality stocks and exiting before they blow up. Paul Scott bought into PurpleBricks and made a few times his money I think. The issue with this approach is you have to sell before the blow up. Maybe stockopedia ranks/screens can help you do that.

Crawshaw - This to me was a grand old duke of York stock. Taking investors to the top of the hill and down again.

I am not questioning that a screen approach can do well. I prefer to have another checklist to make sure the business is good. I agree, though, that this means I miss out on momentum stocks that triple before blowing up.

UK GARP screen. I have no doubt that this can do well. However, it will tend to invest in lower quality stocks as these are the ones that will be cheaper. It can't make an assessment of whether something offers secular growth.

My argument for a knowledge based approach or qualitative assessment is given that the most important thing is capital preservation.

Performance - I would prefer not to get into a kind of my performance versus your performance debate. I don't run a proper portfolio. However, stock picks I selected in 2015 are up 51% on average. The picks from 2016 are up 46% on average and the 2017 picks are up 17% on average. I need to run a proper portfolio like you do as this is really the only way to prove a system and generate credibility.

Funds - I think you are painting a broad brush. 90% may be bad but about 5% or less are ok. Also I think we need a passive benchmark if we can't find good stocks. I think probably the FTSE 250 or the S&P 500 are best.

SCVR - I largely ignore it as it is generally making "face value" type assessments. It isn't possible for them to know lots of companies in depth. However, it isn't bad as a starting point and to learn things. Paul's call on BooHoo was very good. I think SCVR covers too many low quality stocks but I understand why they do this - to highlight things that can go wrong.

Filters to catch a broad range of stocks - I agree with you here and I would use filters. I agree with your point that having the widest net possible is good. Looking at the GARP screen here, though, and most of the stocks are cyclical and low quality so I try to use common sense too. I will also select stocks that the screens think are dogs. The screens are only going off historic data.

This is quite a bit debate topic and happy to do it over e-mail as doing it here we may create a few essays. I agree your performance and track record is very good. I just wouldn't feel comfortable momentum type companies knowing they could be a Gowex. I prefer to miss out on opportunities in order to have a portfolio of higher quality stocks.

People generally turn to screens after their performance using fundamental analysis turns out to be bad. In my view, you can have a better model of fundamental analysis rather than exclusively relying on screens. But we can agree to disagree!! No harm in that.

Fantasyfund - good portfolio by the way. Some good names in there like Adobe. Your previous point is fairly good. Adobe might have come up on a screen and you would of bought it. I would of needed to spend a long time researching it so may have missed out. So your approach does have advantages. I also agree that restricting yourself to areas that you know can reduce your pool of potential investments.

Without fail, all of the stock I have invested in have had a Quality Score over 80, most of them over 90 at the time of purchase.

Yes but I am not sure on the quality metric. I have seen Stockopedia stocks with a high quality score have issues. I would argue that adding sense to a screen helps. I.e. homebuilders look great but they are cyclical so you have to be cautious. However, I think Ed and others would disagree.

I recall Stockopedia has Asian Citrus in the screen of screens a while back. So it was top ranked in most areas. This didn't stop the company going down the tubes.

Well there are no doubt plenty of other companies that go down the tubes too taking the investment of many apparently knowledgeable fund managers with 'em.

The ranks are not there to guarantee that you wont pick up a duffer, but the research says that holding a basket of these stocks increases returns overall. When we (as a community) have dug into stockranks it seems that a high stock rank doesnt increase the returns of the selections overall, but it seems to have a defensive quality that reduces the number of large losses in the selections.

I've been very pleased with the drawdowns in my fund, the only reason several stocks are down too much at the moment is that my real life has prevented me from ringing my broker to sell.

tomg23

Hi Phil

Always impressed with your input on here. I invest in a similar way to you but have not ventured into overseas stocks, so agree with all of your points. I also understand the way rationalinvestor likes to invest and think its what makes a market. What is your usual stop loss rule out of interest? I thought it was about 10 percent? Per your above post I see you have not had time, but whats stoping you closing out now ? Do you think these will bounce back in time?

Keep up the good work

Tom

Howard Adams

Hi Phil

Thanks for the link to your Fantasy Fund and the links from that to your value screen, growth screen and Ichimoki charts.

I always read your posts with great interest and have recently been experimenting with my own screening and rules-based processes.

Of interest to me, I tested my current holdings (37) with the Ichimoki charts. 48% responded as bulls, 3% a mix and 49% bears (ho dear!, but we have had the down turn recently & some are US Nasdaq).

A little more encouragingly though, 32% were heavy bulls, 16% light bulls.

3% mix.

14% light bears, 5% medium bears and 30% heavy bears.

(light equates to lighter colour on the chart, heavy the heaviest colouring).

These are very interesting responses and offer me useful guidance to look at risks and possible mitigation actions.

Now I have had some experiential learning to draw upon from trialing my own screening & rule-based process.

I am going to look at your screens and Ichimoki charting tools in detail to see what I can learn, to evolve my own practices, as you are clearly a few years ahead of me as I see from your fantasy fund.

Many thanks for being so generous with your knowledge and experiences.

Regards
Howard

Hi Tom,

I'll change the order of your questions if that's ok ...

What is your usual stop loss rule out of interest? I thought it was about 10 percent?

My notional stops held in spreadsheets are calculated from Ichimoku Charts. Generally I place my stop just below the cloud, but if a stock is soaring way above the cloud I might move it to 10% off the price to alert me to a drop off.

Do you think these will bounce back in time?

I have no idea and once I've sold I don't look back unless they reenter my screen.

Per your above post I see you have not had time, but whats stoping you closing out now ?

I just haven't made the time to ring my broker. Stupid really, but there you go, life is very busy atm

Hi Howard,

I really want a good excuse to be holding onto a stock that is Strong Bearish. So for example Trigano (TRI on French exchange), which has been one of my best performers, is currently Strong Bearish.

Positives ... the price is consolidating rather than collapsing. Still got a strong StockRank. Excellent history of revenue and earnings growth.

Negatives ... the Chikou (lagging line) has closed below the cloud for the first time since Mar 2016

Looking left on the chart I think a close below 140 is game over.

Bobst & Evolution Gaming are Strong Bearish and I have *no* business still holding them (regardless of what I think the business/sector prospects are)

Not sure if that helps!

Just to clarify Howard ...

Weak Bearish is not a problem for me, it's just the price consolidating after a price appreciation.
Strong Bearish is a big problem, the price had broken out of a consolidation period and has turned bearish

Weak Bullish isn't great, it's a price rallying after a fall.

I tend to buy stocks that are Strong Bullish and hopefully they stay like that for a long time. At some stage the become Weak Bearish as the price eventually consolidates. They then either take off again Neutral Bullish -> Strong Bullish or they turn StrongBearish (the party is over - at least for me it is)

Hi Phil

That is useful thank you.

With regard to TRI on French exchange), if I had held that as you have, based on my own view of the Stock Report, my 19 Minervini-based tests (it only fails 50MA by very small margin) and the Ichimoki screen I would remain a holder, as you imply until it hits your 140.

For the other two, £BOBNN (BOBST Switzland). Looking at the Ichimoki chart. Then, looking at Stocko report and my 19 tests, if I had held I would definitely be out.

Same goes for £EVO on Stockholm, but I would have been a holder for a long time (in fact I tracked this on an early European screening I did, but failed to go in).

Looking at your examples has been useful, thanks for providing them. I am already employing the Ichimoki charts from this morning. A very useful addition to my tool kit. Thank you.

I'll dig into your two screens next. I have already noted some overlaps with my style, but also some interesting differences which I'm keen to comprehend.

Regards
Howard

Hi Phil

Thanks for the clarification (you posted this as I was responding to your first response).

I will definitely bear your suggestions/experiences in mind.

Regards
Howard

iwright7

For newbie investors its worth watching this PI video with WheelieDealer to work out the type of investor-trader that you want to be.: .

http://www.piworld.co.uk/2018/04/05/coping-with-the-ups-downs-with-wheeliedealer-interviewed-by-tamzin-freeman/?ct=t(RSS_EMAIL_CAMPAIGN)

A great take home message for stock pickers is not to buy speculative resource stocks unless you are prepared to spend a huge amount of time researching/monitoring them. Also cut out the market news noise and don't buy tips. ....Buying quality orientated stocks make more consistent returns.

WheelieDealer is a great fan of Robbie Burns: The Naked Trader, (as am I). This target return graph should be printed out and stuck to a new investors wall.....

https://www.stockopedia.com/sc...

Munday

30th Sep '19

With the,new setup I foundthe scrolling was hesitant and at one stage I thought that I had lost an isa until finding it again by a roundabout route. Teething problems I suspect.

Stockopedia – first impressions

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Colin Eastaugh

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