Keen readers of the Momentum Monday piece would have noticed a new inclusion in the report.
Titled “ Momentum Movers,” as is the case with the other lists in the report, they are not intended to be replicated as a portfolio. Rather they are designed to generate ideas for further investigation and then for you to overlay whatever metrics you prefer to whittle the list down.
In this piece I will explore the rationale of the two tables and how one may apply it within their own total strategy.
First, a bit of history. As you know Stockopedia is a tool… not a tip sheet. The power in Stockopedia is the TIME it saves me by standing on the shoulders of investing giants and benchmarking businesses against one another. The relative nature of the StockRanks means I am not just trying “to find a good stock”. Rather “I am trying to find a good stock compared to others.”
Further, I am NOT reinventing the Momentum Rank. To learn more about that measure and the factors that go into (including analysts revisions if available) click here to read it in detail.
To that end, when I look at StockRanks, I don’t just look at the absolute number. Obviously holding stocks that are 99 or higher might make me feel good… but the reality is in a relative sense where moves can only go between 1 - 100, the ranking will more likely go down, rather than up if you are holding the best of the best all the time. This is a key difference between relative and absolute style investing.
What I like to do is compare stocks in similar industries and with similar operations (if possible) in order to ascertain whether company A is performing better than company B in a sector where dynamics are very similar. For example I may be looking at two Fund Managers where the StockRank is above 90, which is to be expected given the capital light nature of each business. However when I compare one against the other and then I compare it against stocks in the similar sector then it becomes illuminating. There really is no point comparing a GQG (Capital light strong margins.) with a WOW for example (Capital heavy, tighter margins)
But this isn’t the only light Stockopedia shines…
