Winning/Losing Styles

4th Oct '21 by Rusty2

17 comments 669 reads

Just been looking at different styles on Stockopedia. The four winning styles are Super Stocks, High Fliers, Contrarian and Turnaround. The four losing styles are Sucker Stocks, Momentum Traps, Value Traps and Falling Stars.

OK fair enough but when I look at the performance since inception I read:

Super Stocks: +279.57%

Style Neutral: +231.32%

High Fliers: +184.45%

Momentum Traps: +164.52%

Turnarounds: 99.84%

Value Traps: 93.79%

Contrarian: +34.46%

Falling Stars: +0.53%

Sucker Stocks: -16.62%

So is the guidance correct? The surprise for me is Style Neutral, I knew Momentum Traps have performed quite well.

I'm confused how Style Neutral has performed so well.

I believe the results are from the top 25 stocks in each style, I don't know how often these are adjusted, is it quarterly?

Maybe Stockopedia has some more data to substantiate this guidance? But as it stands it looks like Super Stocks, Style Neutral, High Fliers and Momentum Traps are winning styles and Contrarian, Falling Stars and Sucker Stocks are losing styles with Turnarounds and Value Traps in between.

Another thing I noticed is under say High Fliers it says the style is Neutral, which I don't understand, surely they should be High Fliers.

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gus 1065

4th Oct '21

One possible consideration (from my portfolio at least) is that the number of Style Neutral shares is a larger proportion of the total share universe than the other categories. If, as you say, the analysis picks out the top 25 in each category (rather than say a mean or median average) this would tend to favour the categories with a larger number of entries. (Think about the shape of a normal distribution bell curve. The larger the number of data points the closer the top 25 will be to the higher side of the distribution).

Gus.

Rusty2

Thanks Gus, that is a good point and you are correct Style Neutral does have far more stocks than the other styles. Surprising how high some of the Stock Ranks are in that style also.

MiserableJacktPotato

I've never understood how the claim "super stocks" outperform stacks up because, in my experience, the stock style seems to change on a regular basis. I have a buy and hold (generally) strategy so it would be interesting to know if the 5 year return on "super stocks" is the same stocks all the way through or if they change them regularly. There's probably an article somewhere with how they worked it out but who's got time to go look for it?

WarrantStar

Very interesting. Maybe it could be that the Neutral category are generally in a transition from one style to another. Eg maybe transitioning from a losing style to a winning style. This is pure speculation on my part because I have no evidence to back it up. But it seems quite plausible to me.

Ok, on the "Today" page, if you hit "view" on the Stockranks section, it does say they rebalance quarterly. I wonder how many shares drop in and out each time, if you put a nominal 1% cost for each transaction (stamp duty is 0.5% so that's not unreasonable in my view) that could soon mount up and eat a big chunk of gains.

Looking at some of the high Style Neutrals, I feel some are better than Super Stocks, compare Renew Holdings (LON:RNWH) Q 82, V 51, M 94 with Rm (LON:RM.) Q62 V 60, M 67.

Rm (LON:RM.) seems more neutral to me. If Renew Holdings (LON:RNWH) value dips below 50, I think, it will be a High Flyer.

I will be looking more favourably at the higher ranked Style Neutrals in the future.

Edward Croft

It's important to differentiate the performance of "Style Neutral" as a whole from the tracked screens.

The tracking on the screen pages (e.g. here) is just for the top 25 candidates ranked by a specific metric in each case. So for "style neutral" it's the top 25 highest StockRank Style Neutral shares that are tracked in the basket. The average rank in that basket is probably StockRank 88 or so.

Compare the performance of "Style Neutral" as a whole, which has 523 shares in the bucket, and you'll find it's far lower (and will have an average StockRank nearer 50). I haven't updated these charts in some time but here's a version from October 2019 for UK stocks. I will see if we can run the performance history again - ideally I want us to get these charts in the product.

One third of the market has a 'winning' style, one third a 'losing' style and one third 'style neutral' - so yes you'll see a lot more shares in the neutral bucket than others.

Do read up about the Style Classifications here in the Guide.

Ray - it's not surprising that Style Neutral shares can have high StockRanks. That's expected by design. A Style Neutral share doesn't have a dominant factor profile towards Q, V or M individually or together... but it can still have good exposure to some or all three.

e.g. a Q:90, V:75, M:50 QVM ranked share may have an overall StockRank of 90, but as it's not dominated by any individual or pair of ranks in comparison to the others so it may be Style Neutral.
You can take the same ranks and drop the lowest rank to 20. Q:90, V:75, M:20 and you'd find it classified as a "Contrarian" share. Why? Because contrarian shares have low momentum.

This kind of result may appear anomalous, but it's logical if you consider the Styles as being the corners of an 8 sided cube with Q, V and M on the edges. Anything that pulls the matrix of ranks towards a corner leads to a 'style' classification that is non-neutral.

Ed, thanks. Actually it was quite surprising to find high SR in the Style Neutral, I was expecting mostly one around 40-60 SR. One has Q 82, V 51, M 94 with a SR of 91. Yet some super stocks have all the ranks in the 60s. I'm saying it's wrong, it is just not what I expected to see.

Silver Moon

Companies keep changing from one style to another, not set in stone. I wouldn't churn my holdings to try and keep Neutral stocks any more than to keep in with Super stocks.

5th Oct '21

I would not sell because it is a Neutral Stock. I just feel that they have been overlooked as Super Stocks have been in the spotlight on this site.

So no churn on my part.

Ed, thanks for the chart, I would be interested in seeing it updated, there has been a lot of change in the last 2 years.

Generally I think Superstocks do out perform the others but when market falls they do seem to fair worse, see March last year.

Hartshay

Momentum traps of the adventurous or speculative types have made me most money .. but I do lots of research and invest in mining juniors

Looking at performance over more recent period there are some surprises.

Sucker Stocks are the best performing over the last 2 years, I knew about last year but I did not expect Sucker Stocks to be the best this year, YTD:

Sucker Stocks + 40.87%

Momentum Traps +24.43%

Style Neutral +24.43%

Super Stocks +23.83%

High Flyers +18.45%

High Flyers have not performed that well over the last 3 years only up 18.46%.

Looking at Ed's chart Contrarian has not performed well over any period, so I think it should not be a winning style.

On performance charts I wish Stockopedia, would use a wider range of colours, it is very difficult to tell some of them apart, especially when using an ipad. 80-90 and 90-100 colours are too similar, there are also a lot of grey bands, why not use a wider range of colours?

" if you consider the Styles as being the corners of an 8 sided cube with Q, V and M on the edges. Anything that pulls the matrix of ranks towards a corner leads to a 'style' classification that is non-neutral."

Thinking about this that's what I thought but some of the Style Neutral have high ranks say M 90, Q 80 and V 51, yet some Super Stocks can all be in the 60s. For example Titon Holdings (LON:TON) Q98, V81, M50 and £RM. Q62 V 60, M 67

If the ranks are all in the 60s then they are not going near the corners?

epo001

6th Oct '21

A cube (e.g. a regular dice) has 6 faces which I think is what you meant. An octahedron has 8 faces and is beyond my ability to visualise in this context right now. I agree about the poor colour palette in the graph, different styles of dotted line perhaps?

Winning/Losing Styles

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Rusty2

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