When is a Super Stock not a Super Stock?

14th Feb by Demet

4 comments 328 reads

I first bought shares in ITV in 2017 at £2.00 as part of having a balanced and diversified portfolio (gaining coverage in the Media sector), with a good dividend yield, and good growth in producing content and selling it around the world. I topped up my holding in 2020 at £1.40

Unfortunately ITV has been a big disappointment and I have lost half my capital invested, despite the saving grace of some dividend income. The problem has been the continuing decline in TV advertising revenue which has not been sufficiently compensated by content production (ITV Studios) and a growing online presence (ITVx).

Throughout most of this period the stock has been listed as a Super Stock, but with the benefit of hindsight I would describe this company as a ‘Falling Star’. So why is ITV still a Super Stock? What is it that I do not understand about the Stock Rankings?

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WarrantStar

14th Feb

Stockranks are not a quick, easy and guaranteed route to investment success. If you want to rely on them then you should have a very well diversified portfolio

Rusty2

SuperStocks will pick some lemons, look at IG Design (LON:IGR) share price 225p, last July, now 58p.

lf you buy a basket of SuperStocks, you should do well, the top ones are up, over 380% since inception. lt has out performed all the other styles.

You could introduce some rules, say sell when Momentum falls below 70.

ITV (LON:ITV) has not been a SuperStock, all the time, if you had sold when it changed, what would your performance be?

rhomboid1

Stock ranks aren’t definitive…they’re a combination of fundamentals & mood music…& rely on forecasts being meaningful…at this point Games Workshop was about to ~double in the next 3 years…I held it before…& held it thereafter…the important bit was holding it

Edward Croft

15th Feb

ITV has certainly been a frustrating share in recent years.

There's a chapter that explains the Style Classifications and how to use the StockRanks effectively in the StockRanks ebook, and also some more extensive write ups about each Style in the academy.

The 3 QVM Ranks can be thought of as plotted on the axes of a cube - with the 8 corners of the cube mapping to a "Style". So "super stocks" are at the corner where Q, V and M are all high. "sucker stocks" are those nearest all three zeros. And so on for the others.

They are really a shorthand for understanding how the rankings interplay. I think of "high flyers" as premium growth stocks (high QM, low V), and "contrarians" as good value stocks currently suffering a price setback. "Super stocks" are often cheap, but profitable shares that are starting to recover.

"Falling Stars" tend to be very high quality, but expensive shares currently going through a correction (High Q, Low V, Low M) . As Rhomboid points out - that was Games Workshop in correction phase in between High Flyer modes (High QM, Low V).

ITV has never been a falling star - as that classification relies on a higher P/E ratio. ITV has consistently been at the cheaper end of the value spectrum since 2017. The history of the Styles for ITV is plotted below. Mostly "Style Neutral" through 2017, and then moving towards contrarian then super stock. It's been a Super Stock since the big drop in price in early 2022 - which made it even more statistically cheap.

I hope that helps. NB - the styles aren't a recommendation. The performance of the ranks and styles work across diversified portfolios. In the ebook I explain how many can be disappointed when buying only 1 high ranked share. The benefits come from diversification across a basket. 10-20 stocks is a good range.

When is a Super Stock not a Super Stock?

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Demet

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