The Screen of Screens shows one way to navigate European uncertainty

The Greek debt crisis has sucked the wind from the sails of European indices in recent months. Yet among the EU investment strategies tracked by Stockopedia there have still be some strong performances. One of the highlights has been a surge in returns from Quality focused models, including a great run by the Screen of Screens. For investors in European opportunities, the SOS has proven a source of strong ideas.

While the relentless negotiations over Greece have unsettled European markets, they have clung on to much of their early gains in 2015. The FTSEuroFirst 300 index of the largest European companies by market cap got off to a cracking start in 2015, and remains up by around 15%. The FTSE Euromid, a benchmark of mid-cap pan-European companies, has done even better, rising by 20%.

Meanwhile, the composite of all of Stockopedia’s Quality-oriented screens has risen by 18.9%. We’ve seen some particularly strong gains in the Warren Buffett inspired strategies and a 24.3% return from the Screen of Screens this year.

What makes the Screen of Screens tick?

To qualify for the Screen of Screens, a share must pass the rules of at least four other long-only, guru-inspired strategies. Across our European edition (which includes the UK) there are only 114 companies that do that. While the SOS could be seen as a rather blunt proxy for quality, the strategy has performed well since inception.

Like all the other models, it’s rebalanced quarterly and the performance returns don’t account for costs. But even so, the UK screen has returned 103.6% since December 2011, and European version is up 73.1% since May 2013. In both regions the strategy saw declines through 2014.

Perhaps unsurprisingly, when sorting the SOS list for those companies that appear most on other screens, patterns do emerge. Predominantly they have high StockRanks. That reflects a higher likelihood that stocks on multiple strategies often tick the boxes across the Quality, Value and Momentum factors that make-up the StockRanks. In addition, and with a few exceptions, they also come with high dividend yields. But there appears to be very little pattern in the sector exposures - these companies operate in a variety of industries.

Name	Market Cap £m	Stock Rank™	# Screens (Long)	Yield %	Sector	Flag
Berkeley	4,466	99	12	5.51	Financials
BB Biotech AG	2,262	100	10	3.91	Healthcare
Per Aarsleff A/S	451.4	97	10	0.64	Industrials
Eolus Vind publ AB	53.5	98	9	5.26	Utilities
Societatea Nationala de (Tranzgaz)	510.3	96	9	8.04	Energy
Abbey	218.6	98	9	0.84	Consumer Cyclicals
Bellway	2,824	82	8	2.65	Consumer Cyclicals
Karelia Tobacco SA	443.1	87	8	4.08	Consumer Defensives

This snapshot of European companies is sorted according to the number of guru strategies they qualify for. UK-quoted housebuilder Berkeley currently appears on 12 other screens, and has a StockRank of 99 (out of 100). Among the strategies it passes, five are Value-focused, four are Growth screens, two are Momentum and one is Quality. Other housebuilders on the list include Mark Slater’s favourite Bellway, and dual-listed Irish construction group Abbey.

But Swiss biotech investor BB Biotech is much more concentrated, with nine of the 10 strategies it qualifies for being either Bargain or Value screens. It momentarily dropped out of the SOS earlier in 2015 (see below), but the company’s price has risen by over 96% over the past year.

An even stronger price performer has been Danish infrastructure contractor Per Aarsleff, which is up 130% over 12 months. It too has a strong StockRank of 97 and appears on 10 guru strategies.

The smallest company - with a market cap of £54 million - is Swedish wind farm developer Eolus Vind. It saw earnings dive in 2014 but the latest quarterly updates suggest it will rebound in 2015. Part of the problem seems to be that Eolus Vind is a small company operating in a new and developing sector, resulting in lumpy contract flow.

Finally, and with no sense of irony, investors with a penchant for sin stocks in uncertain markets, might look no further than Greece’s oldest tobacco company, Karelia Tobacco. Shares in Karelia have actually risen by around 57% over the past two years. It has been upfront about the risks pertaining to possible tax hikes and economic uncertainty that could impact its home market. But it does have interests internationally and has been growing profits. That gives it a profile that fits with guru strategies that focus on value, growth and quality.

Venturing into Europe

It goes without saying that detailed research, particularly in unfamiliar European shares and markets is essential. But it is promising that the European Screen of Screens has performed so well in 2015, at a time when the region’s indices have been shaken by economic and political uncertainty. Diversifying into Europe can mean venturing into uncharted territory. However, SOS shares that appear on multiple strategies and have high StockRanks have in the past offered an interesting starting point for further investigation.

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