Why? Share price is virtually the same as start of YTD, heavily dependent on a dying carbon intensive industry and Director dealings show bigger sells than buys over the last few years. Dividend yield looks good because the share price keeps falling.
Surely it's time to rebrand BP as a Falling Star?
We don't put any discretionary rating on these classifications. "Super" stocks are just those that have high Q, high V and high M - i.e. good, cheap & strong. It would only be a Falling Star if it only had a high Q - i.e. an overpriced Quality play that had weak momentum. i.e. a classic "Falling Star" is Fevertree Drinks (LON:FEVR)
By the way - if you are in any doubt about the Classifications - check out the launch webinar - it was very good - I remember being pretty excited about the release and all the work we'd done on them - https://www.youtube.com/watch?v=gw0E9Y42sEI
It's overdue to guide subscribers through the ratings a bit more - we're going to put a learning track in place.
Hi Derrick357, I thought this was a great question and it certainly made me think.
As Ed says, the simple answer is that the classifications are the result of an algorithm, so they are generated automatically according to the underlying data. There's no human judgement involved after the initial criteria have been set. This does lead to another question - now that we are all getting more familiar with StockRanks and classifications, are there any overall conclusions that we can reach? I can think of three - others may want to add more.
1. The classifications give a high weighting to consistency across the three elements of the Stock Rank. Consider BP (LON:BP.) as compared to Creightons (LON:CRL) which I chose because I have some and it has the same Stock Rank as BP - a score of 89.
BP. Q 62 V 78 M 77 Total 217 Profit growth (CAGR) -16.7% Classification: Super Stock
CRL Q 95 V 70 M 53 Total 218 Profit growth (CAGR) +43.7% Classification: Style Neutral
The difference between the QVM scores is that BP's are evenly spread whereas Creightons has higher V and lower M. This is quite counter-intuitive. If you were shown the two company profiles and share price graphs and asked which company was the High Flyer and which was Style Neutral, I bet most people would put them the other way around.
2. The Stock Ranks value past performance and do not (cannot) take account of big, macro trends unless these also show up in analyst forecasts. I agree with you, the big oil companies are on the wrong side of history. They know this and are working out how to survive. I don't see this being a happy period for shareholders, since even if they do make it there are bound to be substantial stranded assets that cannot simply be abandoned, they will cost money to decommission.
3. Similarly, the StockRanks tend to understate the potential of businesses that have been loss-making, because the reasons why this is about to change often do not show up in the factors that have been selected for the algorithm. Statistically, some of these businesses will not succeed. Again though, if you gave investors the profiles of two companies BP (Super Stock with SR of 89) and Paul Scott favourite Sosandar (LON:SOS) (Sucker Stock with SR of 9) and asked which of these two was likely to offer a greater return over 2-3 years, I think most people would choose Sosandar. By the way, BP might still be the right choice for a risk-averse investor. I'm just asking the question: which one is likely to return more?
My conclusion: StockRanks and Classifications are really useful when researching companies. For maximum benefit, they should be taken seriously but not literally. They are sophisticated indicators that can help us to understand company characteristics and make us question our assumptions. As investors we need to apply our judgement to what they are telling us and bring in as much other knowledge as we can to guide our decisions - including our personal values.
The best way to think about the Styles is this - imagine a cube with Q, V and M - as the axes. Each share is a small QVM dot triangulated within the space. Each Style is a corner of the cube. Nearest corner = Style. Any share not near a specific corner is Style Neutral.
Many of the best stocks in the market are Style Neutral, and there are some woolly ones at the margin of each classification just because they are near a corner.
I’d never use the styles in isolation - always with the absolute rank measures to help validate.
Thanks Ed - that's a useful visualisation.
Many of the best stocks in the market are Style Neutral
Important point!
Looks a bit like this. It is a tricky to see three dimensions in two so I've shown two separate rotations to clarify where BP (red) and GAW (green) are in space.
They are a squiggle rather than a point to show how the ratings have changed over the last six months.
BP is clinging to its super-stock status by the skin of its teeth at the moment.
That's a v useful visualisation, Nick, especially given the time vectors. Is this somewhere I don't know about in Stockopedia, or did you do it?
No - I did it using WebGL. (So if Stocko wanted to do it they could, and it would be possible to explore 3D depictions of stocks in the browser!)
Handy cube above from Nick Ray.
Really BP should be a value trap.
The issue with the Stocko scores is the highish 61 quality score preventing a value trap rating, as BP is a positive earnings machine, for now.
I think owning BP is a bit like watching a movie in a crowded cinema with a small exit.
