The Madness & Wisdom of Crowds in 2024

2nd Jan by 14 Double Up

9 comments 1213 reads

Every year Tim & Typo run a simple annual stock challenge, you pick 5 stocks at the start of the year and come back 365 days later...

This year there are 453 entrants, and when the competition closed (when markets opened today - January 2nd 2024) you can then see the five stock picks of all entrants, I couldn’t help wonder what could I learn from this selection of stock picks from the Internet’s finest investors? Using a spreadsheet, Stockopedia StockReports and Folio tools to analyse the stock selection of all 453 participants, would it be a case of the wisdom or madness of crowds? In this first post, lets take a look at the 10 most popular stock picks…

Table: Top 10 Most Popular Stock Picks in the 2024 T&T Stock Challenge

NAME	No. Participants Holding Stock	Percentage of Participants Holding Stock (453 Entrants)
Afentra (LON:AET)	39	8.6
Marks and Spencer (LON:MKS)	38	8.4
Rolls-Royce Holdings (LON:RR.)	36	7.9
On Beach group (LON:OTB)	33	7.3
Card Factory (LON:CARD)	31	6.8
Liontrust Asset Management (LON:LIO)	27	6
Warpaint London (LON:W7L)	25	5.5
Avacta (LON:AVCT)	24	5.3
Jet2 (LON:JET2)	23	5.1
MS International (LON:MSI)	21	4.6

An equally weighted portfolio of this years top 10 stock picks, held for the last year (2023), would have delivered a whopping 53% return in the last 12 months.

Is it an anchoring bias to recent performance, or momentum investing as a preferred investment style?

Using some of the Stockopedia allocation tools, I’m impressed with the diversity of the top 10 stock picks (it’s certainly better than my own portfolio!).

We only have two ‘rogue’ stocks, one being a sucker stock (Avacta (LON:AVCT) ) and the other a momentum trap (Afentra (LON:AET) ), everything else scores 70+ on the Stock Rank. Removing these two rogue stocks would have boosted returns to 62% over the last 12 months!

Curiosity got the better of me at this point, the power of Stockopedia to run a portfolio against historic stock prices is awesome for an amateur investor like myself, how would a portfolio of the top 10 most popular stock picks from the 2023 T&T stock challenge fair this last year?

Let’s have a look, initially it looks very similar to this years portfolio, with…

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Rusty2

3rd Jan

I don't see the point of putting this years selection, in last year, that is hindsight investing. Some of the big NAPs winners did not fare well, if held for another year and some of the losers did well.

Never heard T&T Annual Stock Challenge before.

M48

I think I’m right that this competition is mainly promoted by cockneyrebel on Twitter etc. and what hits me instantly is several of the stocks you identified being those he’s most recently discussed. So it may just be an echo chamber for his thinking rather than a summation of the thoughts of independently minded investors. Probably not surprising if that’s the case, but a shame perhaps.

If so then surprising that Card Factory (LON:CARD) has been selected and not Watches of Switzerland (LON:WOSG). Believe CR sold quite a lot of CARD and bought WOSG. I do get his weekly email which is interesting but don't use twitter.

I take your point but I wasn't trying to suggest it's a perfect correlation. Perhaps too some have accepted he just had to reduce his weighting in Card Factory (LON:CARD) without having a diminished view on its prospects. And I wasn't trying to pick on one commentator, there are other commonly picked shares that I'd argue are ramped equally hard, or harder, by others. It might be an interesting exercise to go down to find the first 10 that haven't been, but then I tend to think it's just best to do your own thing. There's so much noise to mess with your mind, it's not a bad thing sometimes to ignore what everyone else is saying.

davidjhill

Two observations

1) This does indeed look like a similar copy of Cockney rebels X with two notable omissions - those being Avon Protection (LON:AVON) and Watches of Switzerland (LON:WOSG) so be interesting to see whether those two are just outside of the top 10 as well. Remember his letter is read by 2500 people now so there is definitely a bias.

2) What you could be seeing though is the effect of hot money - ie half of those stocks had a great 2023 as turnarounds. Anyone that has been buying during the year on the basis of great gains expects the same again, without perhaps consciously realising that they are crowded trades and that much of the recovery may be priced in. That doesn't mean they won't perform of course but it does risk a hot money outflow.

I hold more than one of these myself and will buy others if they come back a bit as I think they are great businesses but timing is as important.

14 Double Up

Hi M48, Rusty2 & davidjhill, thanks for the info and taking the time to comment. I can’t vouch for the integrity of the comp, the veterans tab suggests it’s been running since 2003, I’ve used it for the last year or two with a bunch of mates just for fun. I do see Cockney Rebel and various other Fintwit handles in there, indeed the top 10 does suggest it’s heavily influenced by these folks. It was merely an act of curiosity, the middle of the pack has more diversity and there is a very long tail to the selection distribution that unearthed some interesting micro caps. I don’t hold the stocks in the top 10 and unlikely to do so, but Liontrust Asset Management (LON:LIO) looks interesting, I’m not convinced the bear has finished with us yet.

I do hold 5 of those at the moment and have sold recently out of 2 others. I will probably buy those back if there is a dip. Also considering buying MS International (LON:MSI) if the price drops. Everything apart from the 2 rogues.

Snowbum

I hold Arrow Exploration (LON:AXL) , well worth a look if you like the sector. Debt free, oil flowing, reserves rising…. looks like a proper cash machine over the coming years.

Arrow Exploration (LON:AXL) looks good and has done well the last couple of years - well done, I’m neck deep in oilers, desperately want to diversify my portfolio away from O&G.

The Madness & Wisdom of Crowds in 2024

Every year Tim & Typo run a simple annual stock challenge, you pick 5 stocks at the start of the year and come back 365 days later...

Table: Top 10 Most Popular Stock Picks in the 2024 T&T Stock Challenge

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14 Double Up

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