New Year Naps - Top Stocks For 2024 And A Few Random Samples

31st Dec '23 by Edward Croft

80 comments 16521 reads

It’s been a topsy turvy year in the UK stock markets. A bull trap rally into February heralded a slow grind down towards new lows in late October. It seemed like yet another year of declining UK stock markets was on the cards, but Santa’s Rally brought some cheer with a rapid recovery from the lows. Most UK indices posted gains for the year: FTSE All Share +3.8%, FTSE 100 +3.8%, FTSE 250 +4.4% (as of 28th December). It’s been more of a struggle in the FTSE AIM All Share , which was down 8.2%. FTSE indices are market cap weighted, which isn’t reflective of most private investor portfolios, so I prefer to benchmark against the equally-weighted, annually-rebalanced 90+ StockRanks, which are up 4.4%.

Naps Portfolio Performance

It’s within this muted backdrop that I compare the performance of the 2023 NAPS Portfolio. This is the “No Admin Portfolio System” that I’ve now been running here for 9 years.

It’s a simple, systematic investment strategy that takes no more than an hour to administer each year. There’s no stock picking, no reading of the runes and no emotional hemming and hawing.

It’s based on the principle that good, cheap, strong shares tend to beat the market - on average over the long run. So if you buy a diversified portfolio of these kinds of shares, you should do fine.

In essence, the algorithm is: Buy the 20 highest StockRank shares, diversified across ten sectors. Once per year, rinse and repeat. I’ve fiddled with the rules a bit over the years, probably to little gain, but the long term performance has been quite satisfactory with a 182% gain over 9 years.

The above charts do exclude dividends and transaction costs. Including dividends for the FTSE All Share gives the total return a boost to 60% over the last decade. Still a wide margin away with the NAPS having typically yielded dividends of over 3% annually.

Nonetheless a fairer comparison may be versus Actively Managed Equity funds in the UK, as if you can’t beat fund managers, there’s little point running your own money. While the NAPS only has 9 years history, it’s beaten the performance of all 187 funds in Trustnet’s “UK All Companies Sector” fund database over 10 years. Over the last 5 years,…

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Edward Croft

3rd Jan

"The “standard deviation” was 4.8%, which essentially means that two thirds of the portfolios returned between -4.8% and +4.8% of the average. So two thirds of the portfolios returned between -3.4% and 6.2%."

Michael - you are absolutely right... I actually wrote this a few days before New Year when the return for the year was bang on 0%... so the copy was right then, but I updated all the performance figures for the year end numbers but failed to update this range!

Thanks for spotting. I have edited.

@Blissgull - unfortunately I am not tracking the SNAPS performance any longer. It would indeed be interesting.

Michael_P

Thanks Ed - that explains it. Given the wide annual variability of running 1 portfolio like this it does make sense to have more than 1 running each year. We can also get historic performance of QVM deciles and from guru screens so for me the value of model portfolios would be largely from the commentary and from a commitment to run them for at least 5 years say to give a better sense of long-term performance as the NAPS approach has provided.

Monty Carlo

If Stockopedia was FCA regulated Ed would not be permitted to publish this article. No regulated fund manager could ever publish anything like this, quoting statistics based on capital perfomance only.

If Stockopedia wants to take shots at the fund managers and decry their performance (and somebody should, I've no complaints about that) it may wish to consider publishing the performance of the NAPS portfolios to GIPS standards.

Then start throwing stones.

In the meantime, perhaps best not to stick out statistical analyses based on partial data. What on earth is the point of quoting standard deviations when your sample mean falls below the dividend yield.....??!!

texican

10th Jan

For the uninitiated, could you please explain main aspects that should be taken into account to meet GIPS standards?

13th Jan

Most major asset managers will publish their performance to GIPS standards so that investors know they are comparing apples with apples.

Stockopedia can't do it:

"Because the GIPS standards require that the total return for the
benchmark be presented, a price-only index will not satisfy the
requirements of the GIPS standards."

Stockpedia is unable to factor in dividends - the charts are price only and will take a dip every time an equity goes ex-dividend (or a very big dip for special divis). Similarly it can make no allowance for the compounding of dividends. Over longer time periods that is like ignoring the entire positive return from the UK market.....and the price/date at which dividends get reinvested matters, you can't fudge things by adding a dividend yield to the capital performance.

Total return calculations are difficult and require accurate dividend histories as well as robust corporate action data for splits etc. However, there are retail products that can do it - Sharesight being a good example.

Stockopedia doesn't even include total return indices - if you load up your stocks into a Folio and then select an index as a comparator, that index will be price only. No fund manager would ever be permitted to do this - it would always be total return.

I questioned Stocko regarding the FTSE Allshare available as a benchmark for Folios, and the response was that they had chosen not to make the Total Return version available for "business reasons". Which is rather galling if you just spent a couple of days loading up your dividend history into Folios.

That could be because FTSE are charging more than Stocko wants to pay, or because it would make Folios look like they were underperforming (maintaining dividend data can be hard work).

16th Jan

very helpful, thank you, and a salutary reminder to watch out for!

geoff9001

17th Jan

A useful piece of work. It shows what we are up against and explains why annual investment performance can be so variable.

Thank you.

Lincs

3rd Feb

AAF - ouch, not a good start to the year for one of the 2024 NAPS investments. Depreciation of the Nigerian naira leading to a virtual halving in relation to the US dollar. See news piece copied below. I've had this on a watch list for ages but it never felt quite right to hit the buy button. This level of currency volatility has suprised, as has the rise in SP. Company reports in US$.

For anyone more knowledgeable than myself (not difficult) will the currency depreciation not cause a huge drop in any forcasted future revenue? Talk of 'constant currency' metrics is all well and good but what matters is the ability to pay international dividends and capital costs - that's going to be a head wind. The virtually halving of the naira makes me think this co. is going to have to run faster just to stand still - sure it has admirable growth plans and share buy backs planned but if the value of your income stream is dropping dramatically your fundamentals are going to suffer.

TOP NEWS: Airtel Africa shares up as plans share buyback; profit down

1st February 2024

(Alliance News) - Airtel Africa PLC on Thursday said it plans to launch a share buyback programme starting next month, as it reported a decline in profit and revenue amid a depreciating Nigerian currency.

The Africa-focused telecommunications firm said pretax profit fell to USD43 million in the third quarter ended December 31 from USD285 million a year before.

Revenue fell 8.3% to USD1.24 billion from USD1.35 billion. Total finance cost more than doubled to USD365 million from USD161 million, as the company noted an impact from foreign exchange losses due to the devaluation of the Nigerian naira.

On December 31, a dollar bought around NGN897, doubled from NGN448 a year before.

The naira plunged after President Bola Tinubu removed Nigeria's foreign currency controls. On June 17 alone, the dollar jumped by 41% to NGN656.51.

Despite the profit decline, Airtel Africa aims to launch a share buyback programme of up to USD100 million over a 12-month period, starting early next month.

Meanwhile, the company confirmed that Sunil Taldar will become chief executive officer on July 1. Taldar had joined the company in October.

Outgoing CEO Olusegun Ogunsanya said: "This strong operating performance has limited the impact that currency movements have had on the group. In this regard, whilst further currency devaluation, particularly in Nigeria, has weighed on our reported financial performance, it will not affect the execution of our growth plans."

Airtel Africa shares were up 3.7% to 116.40 pence each on Thursday morning in London.

derekwhogg

7th Feb

Good Energy has also tanked since the start of the year and in my NAPS portfolio is showing a 23% loss - 8% down today alone - which makes me wonder if I should just cut my losses on this share, and redeploy the money in June at the 6 monthly review of the portfolio, rather than just hoping for a recovery.

I know selling is not in the spirit of the no-admin approach, but I am inclined to being more active this year, after the last couple of years which haven’t been great.

I noticed that Good Energy started falling after a recent Mello presentation. if anyone here watched that presentation, you could perhaps fill Derek in with its contents. it might have been the same presentation that is on InvestorMeetcompany though.

GOOD Is a speculative small cap - so volatility of 45%-70% per year is par for the course (either way!).

One has to make a decision as to whether to use stop losses or not and at what level. It really does depend on one's personal circumstance, timeframe, activity level, capital preservation needs, volatility of the share etc. We can't give financial advice of course, so it's really a personal decision.

Nice to see Redrow pop up 15% today, which, of course, compensates. It's pretty normal in the NAPS for some Stocks to do well and others to do poorly. In any average year over the last 10, 90+ StockRanks tend to have a distribution of 55% winners and 45% losers, but the winners tended to win more than the losers lose. In bullish markets, the distribution can be as high as 80/20.

Logical David

Hi Derek,

I own and I'm watching Good Energy (LON:GOOD) and as you state it has dropped around 23%.

Looking at the chart below the share price has dropped down to the support line (red horizontal dotted line). Hence, the share price might bounce back from its support line because twice previously the share price has bounced back from support and gone on to make new highs. The good news is that the 55dma (black line) is well above the 200dma (red line). Should the black line cross below the red line this is known as the Death Cross and at that point I will definitely sell.

Likewise, GOOD has a resistance line around 420p so should the share recover then it will probably take a few attempts to breakout above this price level. If you look at the Stochastic it is down to 10, anything below 20 in my opinion is viewed as oversold. I'm happy to keep holding GOOD because it has some very good fundamentals. As Ed has pointed out, volatility is to be expected with speculative shares. One option would be to give GOOD until the end of the week and see if the share price starts to recover, if is doesn't then look to sell it next week, this is something I've done in the past whilst I've slept on a share for an extra day or two.

David.

rmillaree

8th Feb

I understand fully why stocky doesn’t include divi data for commercial reasons - anything that requires extra costs and man hours has to be paid for somewhere - I accept this as the tools we get here fir highlighting investment choices are more than enough for my needs- but one does need to understand the limits of data screens etc if the elephant in the room of most of the positive return by way of dividends excluded from much of the output info.

Ref Good energy would I be correct in presuming that they rely on the largesse of customers to pay above cap prices (voluntarily) so they can be seen to be getting top banana green credentials? If this is the case I would massively worry that if we were to get glut of cheap energy deals could that not put them in a position where they couldn’t cope if the price differential was too much? At present it all seems like a closed ship cartel with limited supply at too whack prices - at some stage though I would expect more options for customers and better deals to come to market ? When that would be I know not. Another worry would be that now green is big and established enough any positive subsidies would start to be removed as the main job over getting green to be the majority player in town is done.

Are holders happy this company can compete on open fair and free of subsidies and box ticking world?

Many thanks to both David and Ed

ROCE Balboa

16th Feb

I have started a NAPs portfolio (my first) at the end of January 2024 and so was feeling as though Good Energy (LON:GOOD) might be a bit of a turkey as well, being down now 28%. I partly blame the fact that, despite qualifying for 7 Long screens, it may be facing a negative pile on given that it also qualifies for 1 short screen (based on it's Beneish M-Score). The suggestion being that it has a high risk of earnings manipulation given that it currently faisl 4 of 8 M-Score tests: reduced gross margin, slower depreciation rates, slightly excessive accruals, and excessive sales growth. I put these down to the change in business model in 2022 that has been described above and (I hope) merely adjusting to a new (improved) normal. My faith is also maintained by the fact that two directors have recently (12/2/24) bought new shares suggesting that they believe the numbers are not too good to be true. Not massive investments on their part but they are not jumping ship despite the market jitters and see it as an attractive price point. Besides that, PER(f) 8.2, no debt, ROCE more than doubled to 47.9, an increasing dividend and Book Value ps, EPS growth of 55.7% at a PEG of 0.2, there's a lot to like...

I will be waiting until 2023 results are out on 15/3/24 (beware the Ides of March) before deciding what to do but am hopeful that once last year's results are in that will provide a likely moment for the share price to take off again.

M48

20th Feb

As well as the modest director buys, I see that Good Energy (LON:GOOD)'s broker forecast for 2024 on the StockReport has ticked up in the last few days. Also an intriguing TR1 with Ecotricity suddenly having 26% of the shares - knowing hardly anything about this company, can anyone quickly explain how this has likely reached this position with so little fanfare? EDIT - think I've answered my own question, linked to recent acquisition..

DWit199

Ecotricity have held shares in Good Energy (LON:GOOD) since 2016 reaching 28% in 2022 when they held 4,740,091 shares. I can't see any other disclosures since then by ecotricity and the current disclosure states they hold the same number of shares, 4,740,091. There was a recent placing of 1,322,000 shares, so the total shares in issue has increased to 18,216,130, resulting in Ecotricity's holding reducing from 28% to 26%.

Thanks, think I was editing my post as you posted. The TR1 could have made this clearer but I guess those close to the company, unlike me, would have known what was happening anyway.

dahhad

Tue 3:01pm

I was just wondering if there is to be a SNAPS24? I found the NAPS23 very useful

New Year Naps - Top Stocks for 2024 and a few random samples

Naps Portfolio Performance

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Edward Croft

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TOP NEWS: Airtel Africa shares up as plans share buyback; profit down

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