What do you do when a StockRank significantly drops?

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17th Mar '16 by Paul Flanagan

21 comments 10284 reads

One of my stocks in my portfolio Castle Street Investments (CSI) had a stock rank of 90+ yesterday and today it drop down to 51.

I decided to sell it straight away as I would still break even on the trade.

Do you have a strategy if the StockRank falls below a certain level?

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About the Author

Paul Flanagan

Premium Member

21 comments

Rusty2

17th Mar '16

Is this a delayed reaction to the results which were announced on 10th March, not sure how long Stockopedia take to update those figures.

Gus is right also there are glitches in the system, I spoke to Ed about certain companies and he could not explain why there was a sudden fall in the SR only to return a day or so later. In this case I would suspect its a delay in updating the rankings after the results. You may want to print off 7th March screen and compare with todays.

Daniel Rudd

17th Mar '16

Castle Street Investments (LON:CSI) showing as 97 stock rank on the US & EU version, looks like a glitch in the system to me. I usually check the stock ranks on a Sunday to allow for the trading reports from the previous week to be factored in. You can also check on the bottom right of any page to see when the fundamentals were last updated.

John

17th Mar '16

Daniel
Where exactly are you finding the last date fundamentals were updated?

Paul Flanagan

17th Mar '16

Thanks for the replies.

Out of interest do you ever sell if a StockRank drops below a certain number?

Daniel Rudd

17th Mar '16

http://s11.postimg.org/mraya222b/image.jpg

Rusty2

17th Mar '16

But thats the same on every page? I don't think that refers to the Stockopedia rankings and figures apart from the share price?

gus 1065

17th Mar '16

Personally, I don't use SR as a mandatory sell signal on any of my shares. I do monitor all of SR, Q, M, G and V for all of my shares - I've set up an excel spreadsheet and download the rankings from Stockopedia every week or so - but these are only part of my analysis.

I tend to look more closely at a share if there is a jump in any of the metrics; it's quite a useful ready reckoner to prompt more work. Several of my shares have poor SR's but I am happy to run along with these where I am comfortable with the risk/return trade off.

I am running a NAPS portfolio and have set a "sell" condition of a SR of 80. One of my stocks, Norcros (LON:NXR) , has triggered this and I will replace it when I do my QA review, although I may well keep the stock in my wider portfolio.

Gus.

Daniel Rudd

17th Mar '16

My understanding is that they're updated daily and prices are on a 15 minute delay. Quality & growth ranks tend to change after trading updates usually 1 to 3 days after the announcement. I click the print button to compare. Value & momentum changes based on the previous days closing price. Maybe one of the stocko guys can jump in to clarify.

Nick Ray

18th Mar '16

It can be quite tricky to work out why the Stockopedia ranks move but in this case I suspect it might be to do with the recent RNS giving the audited final results on 10-March.

If you look at the Castle Street Investments (LON:CSI) stocko page and use the 'print' feature to compare the values now with 7-March you can quickly see that the ranks on 7-March were Q:83 V:95 M:87 and they are now Q:52 V:19 M:89. So it is Q and especially V which have taken a hammering. Just below the ranks there are boxes for the key V and Q metrics.

We see that in "growth and value" P/B has gone from 3.24 (green) to 1.27 (orange) and P/S has gone from -3.92 (green) to n/a (neutral). Arguably -3.92 should not have been treated as a good thing. A low P/S is good but a negative P/S is not so good.

In "Quality" ROC has gone from 26% (green) to -6% (orange) and ROCE from 15% (green) to -4.7% (orange). In truth it looks as if the previous ROC/ROCE figures were better than they should be due to missing data in 2013 and 2014.

So it looks to me that the previous stock rank of 99 was skewed high by missing or dubiously treated data and the new value of 51 is probably a more accurate reflection of the company's true state. To be perfectly honest the revenue and net profit data really did not inspire a lot of confidence even with a stockrank of 99.

Looking back through its recent RNS statements I see that it is an investing company which has recently completed a placing and a RTO. So it will be a very different company going forwards and its current rankings probably give little insight into how it performs in the future.

So perhaps this is a useful illustration that it is worth looking carefully at any company's data in detail, even after a screening pulls it up.

pka

18th Mar '16

Nick Ray wrote: "So it looks to me that the previous stock rank of 99 was skewed high by missing or dubiously treated data and the new value of 51 is probably a more accurate reflection of the company's true state."

I suspect that this is more likely to occur with small companies than larger ones. This is one reason why I restrict my mechanical Stockranks investment strategy to companies in the FTSE 250 and FTSE 100 indices.

Rusty2

18th Mar '16

I don't know much about Castle Street Investments (LON:CSI) but its seems to be a cash shell, no revenue, so its difficult to rank, no wonder the SR changed so much on new data. I tend to avoid these sorts of companies until more is established about the business. I'm also not convinced by buying the top Stockopedia ranked companies, I think you should do more research, I prefer companies > 20m and making a profit with low or no debt and reasonable value. I use SR mainly for selecting shares to research or to compare with peers.

Paul Flanagan

18th Mar '16

Thanks herbie47. I'm not sure what I should be looking for when researching companies so I decided to just pick the from the SR. I guess ignorance is bliss

My portfolio is solely based on picking the top SR companies across the 9 sectors. I selected 4 stocks per sector to give maximum diversification. To my surprise it's up 2.9% since I started it on the 3rd March. My biggest increase is Lighthouse which is up 30% : )

Rusty2

18th Mar '16

Well for a start I see if Paul Scott has done a review on it, some of the high ranked shares may have poor balance sheets like Wincanton (LON:WIN) or there maybe pension deficit as with Alumasc (LON:ALU). I don't like too much debt either. I would read the companies trading statements and half/full year figures, its no good buying into a company if profits are going to fall next year unless its already factored into the share price , see Renishaw (LON:RSW) or St. Modwen Properties (LON:SMP) both share prices have fallen and so have the SR rankings. Also I look at the value, I probably would not buy Character (LON:CCT) now, one because it not such good value now and the outlook seems a bit uncertain. Yes I saw Lighthouse has gone up, March has been a good month so far.

4 shares in each sector? When I did my dummy NAPS last year I struggled to find 2 in some sectors such as Telecoms, Health and Utilities. Although it has been easier this year.

Do you use stop losses?

gus 1065

18th Mar '16

Hi Herbie.

Agree with your general comment - I always check the discussion thread before buying, especially if there is a recent SCVR report as this often brings out a lot of useful background if I am not familiar with a share.

Not sure why you are singling out Renishaw (LON:RSW) as a "fallen angel" though. Shares have had quite a strong run over the past month (up another 6% today) and are back above levels of six months ago. This has been a profitable long term hold for me and is a favourite with Richard Beddard over on ii. I see its SR is down from high 80's in Jan to 67 now, (oddly enough both V and M are down quite a bit - intuitively you'd expect these to move in opposite directions) but Q remains very high at 98.

Gus.

Rusty2

18th Mar '16

Re: Renishaw (LON:RSW) yes its recovered somewhat lately, but last year the share was above 2600p the SR was in 90s, the results were excellent but since then the shareprice fell under 1600 and the SR went down, why because the outlook is not so good, latest figures revenues are down because of slowdown in China. Yes its a good company I just sold my last holding today. But £26 to £16 is a big fall. They are very exposed to China, they supply Apple whose sales in China are down about 20%. No idea why the share price has shot up this week, can't find any news. So just saying consider the forecasts.

gus 1065

19th Mar '16

I guess perspective is everything. I bought in at about £3.50 a share in 2009 so even with retrenchment from £24 to £16 I still perceive it to be a big success. Now back above £20, I see the sell off being the anomaly rather than the recent recovery! In terms for the reasons behind the rise, there seem to be quite a few articles in the specialist trade press about several product innovations that they are leading the way with. This company tends to be a feast or famine stock with quite a lumpy order book; hopefully on the cusp of another good run

Paul Flanagan

19th Mar '16

Herbie, I told a white lie when I said 4 in each sector. Some sectors I couldn't find many stock above 80 SR so I ended up purchasing more in other sectors. So my portfolio is slightly over weight in Industrials (24%), financials (19%) and consumer cyclicals (15%). I wish to address this when I rebalance in June.

I have never used stop losses. If you use them what % do set it at? Again I think I need to do some more research regarding them. Currently my worst performing stock is NWF Group (LON:NWF) which I am down 8% on.

Rusty2

19th Mar '16

I set up various dummy NAPS, I find there are usually a few fallers over 20%, the odd one is around 40%, I just feel a stop loss would cut out some of those, most recent has been Alternative Networks (LON:AN.) which was down over 40% but has since recovered somewhat, still down about 28%. I would suggest a stoploss of around 15% would cut out the big losers, like Lamprell (LON:LAM), Indivior (LON:INDV). The main problem with stop losses is they are not guaranteed, so with Alternative Networks (LON:AN.) as it was a profit warning I'm not sure your broker would have been able to sell at the stoploss price but Lamprell (LON:LAM) and Indivior (LON:INDV) has been a more slow decline. Or maybe you should set alerts on here when a share falls say more than 10% you can then re-evaluate it.

Rusty2

19th Mar '16

Yes I quite agree about perspective was thinking about this the other day. I only bought in just before the full year results, so I bought around about £20, I'm out now happy to have got my money back, the Chinese exposure does concern me and I feel that has not gone away yet, the latest import/export figures were not good. I do know Richard Beddard and do have quite a few of his shares, I like his cautious approach but like all of us his makes mistakes, see Solid State (LON:SOLI), Ashtead (LON:AHT) and Victoria (LON:VCP).

Investor & Trader

19th Mar '16

My concern with a stop los is that an overall drop in the market in general may take out these stops, however fundamentally the individual stock still may have the exact same merit as to why they were initially invested in, and as such should recover well when the overall market regains its ground.

A stop loss may make you close all of your positions not just singular...

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About the Author

Paul Flanagan

21 comments

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