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I first came to the thoughts in this post when I noticed that for the universe of stocks that I track, the median Quality Rank was about 63 rather than 50 as you would expect. So I decided to have a look at how the QVM ranks change with Market Cap, as my universe is limited to stocks with Market Caps over about £90m. Jim…

An examination of H2 2018 Anyone who was invested during 2018 cannot have failed to notice that everything was going really very nicely until about September - and then everything fell off a cliff. Interestingly, NAPS2018 seemed to start to show weakness from about June 2018, but the rest of us caught up later and eventually the stocks which seemed to have the highest momentum…

One of the simplest models of stock prices is geometric brownian motion (GBM). This model gives rise to the idea of characterising a stock's performance by its mean annual return and volatility - which most of us are very familiar with. But do we have a good grasp of what different values for volatility feel like? How much volatility are we comfortable with in a…

Here is a chart of the deciles of performance across all shares with a market cap greater than about £80M Year-to-Date: The big drop in sentiment occurred in October but we can see that upward progress had begun to stall from June onwards. Now what is interesting is to compare your own portfolio against these deciles and characterise its performance in terms of the percentage…

(Looking at the behaviour of stock fundamentals beyond two sigma.) Motivation The genesis of this post was watching all the high-QM low-V stocks diving in the recent fall. All the backtest data says that you can't have too much quality or momentum when times are good. But how much is too much when things get a bit tricky?Some time ago I wrote a post about…

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With BT and Babcock I think the fall has been largely due to falls in Broker forecasts for EPS and DPS over the last few months. For Easyjet, the fall is linked to a drop in Piotroski F score from 7 to 4 which has dragged the Quality Rank down. I think this might be related to changes in long term debt/assets recently.

If you had something like a Maxwell's Demon for stocks which told you whether a stock was going to be a "winner" or a "loser" over the next year, then sucker stocks would be a happy hunting ground.But of course you can't. You are being beguiled by volatility - the same attraction which makes people play the lottery or bet on casino games where there…

I did a quick plot of the 2018 NAPS stocks performance and Stock Rank over the year 2018. Only one stock gets as low as SR=40 (VOD). INDV which is the worst performer over the year has a SR which briefly dips to 68 and then rises again. Obviously you can tinker with the rules further. Maybe look at Q V M  separately, etc, etc.…

Taking your final point about stop-losses, I'm not sure I follow why this is the case. If one were trading the volatility (either instead of, or while investing in the underlying trend), then wouldn't a reasonable stop-loss make sense to reduce the risk that the volatility swings are against your last trade?The problem with stop-losses on very high volatility stocks is that swings of +/-…

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