The SNAPS Portfolio 2024 - Selecting Stocks When Expecting The Unexpected

15th Jul by Edward Croft

18 comments 2982 reads

What a shocking weekend in America. The full ramifications of the Trump assassination attempt are yet to unfold, but this is yet another illustration of increasing political turbulence and uncertainty on both sides of the pond. This creates a difficult environment for investors and one which I’ll be musing on later in this article. Nonetheless, in the short term, markets continue to have a positive frame of mind, with the US futures indicating strength at the open. At the end of last year, the UK stock markets flagged an extreme oversold indicator, followed by a strong change of trend. I’ve been fully invested since, and see no reason to change that stance.

The NAPS year to date

The NAPS Portfolio has outperformed all the major indices and continues its strong run of form since inception almost ten years ago. By June 30th, the portfolio had returned almost 14.8% (now 18%), versus the FTSE All Share at only 5.2% and a flat AIM market. Both the portfolio and the index have a more than 3% dividend yield which push these returns further. The NAPS has even continued its outperformance against the S&P 500 which had returned 10.8% by the same mark.

The NAPS Portfolio is a simple systematic investment process, that buys a portfolio of the 20 highest-ranked stocks distributed across ten sectors (read up on almost ten years of history here). It’s effectively a well constructed sample of high ranked stocks, so I always like to compare the portfolio against the average return of the 90+ StockRank set. While this year’s outperformance is down to luck, after a few difficult years for UK investing, it’s gratifying.

While the aggregate statistics have been strong, there’s no denying that 2024 has been a stock pickers market. Paul and Graham’s watchlists have trounced the NAPS Portfolio year to date, with 31% and 35% returns as of today. Their standout selection, CMC Markets (LON:CMCX) , has more than tripled. Congratulations to them, and to every investor in the community that has beaten the NAPS. It’s in markets like these that smart, discretionary stock pickers really can make a difference. Please do let me know how you are getting on in the comments below.

The underlying portfolio performance

Breaking down the…

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Daniel

15th Jul

Many thanks for the update, Ed.

Have you given any further thought on whether the NAPS portfolio will continue in 2025 and beyond?

Epitychia

Thanks Ed, I bought Turchin's book.

prem14

Could Stocko IPO an investment trust based on this NAPS portfolio? Maybe subscribers here could become investors. I can. It will help stocko grow a bit as a company.

yiannos1

I agree that it’s all about good risk management at the end of the day.

A couple of ex holdings of mine in there McBride (LON:MCB) and IG Design (LON:IGR) and a couple that I am looking at the moment but not quite convinced yet Enwell Energy (LON:ENW) and Intercede (LON:IGP).

Protectionism and deglobalisation are unpredictable and the consequences could be devastating. What will happen if China retaliate and decide to sell their US and European bond holdings?

Thanks for the article very interesting indeed.

All the best

Honey Badger

Thanks Ed. I’ve operated the Naps portfolio for four years now with a large part of my SIPP - so real money! It starts and ends mid August, therefore approaching the end of the fourth portfolio. Year 1 +28%; Year 2 -25%; Year 3 0%; Year 4 (to date) +20%. For the past few years I stuck to the QM/VM model but will revert this year to QVM, as you have done. I have wondered whether the time of year the process begins has any bearing, but although it throws up different stocks (largely) to the ones you pick it doesn’t seem to make any difference to the overall outcome. The process does also highlight stocks I wouldn’t necessarily come across otherwise and I do keep some on after the portfolio ends. Recent examples would be ME International (LON:MEGP) and Georgia Capital (LON:CGEO) . I was also stuck with Ros Agro (LON:AGRO) for reasons you so eloquently describe above! I’ve also found it a good way to educate myself about sectors and companies I would otherwise know nothing about. In the past I have, on occasion, banked some profit but i now let everything run the course of the year. Thanks for the system - a great way to diversify and learn while growing, well most of the time, anyway!

Edward Croft

Tue 8:49am

@prem14 - "Could Stocko IPO an investment trust based on this NAPS portfolio? Maybe subscribers here could become investors. I can. It will help stocko grow a bit as a company."

Quite possibly. It's not something planned currently, but I have assessed this a few times over the years, and moreso this year. There are more options now (ETFs, UCITs, AMCs etc), but the regulatory burden is much higher post Woodford, and so are the costs.

Tue 8:51am

Daniel - yes it's the ten year anniversary in 6 months. We will be reviewing the next steps for the NAPS. I'm sure it will continue, but we may morph the approach in some way. I'm keen to see us mature into delivering a few model portfolios in a more visible way for subscribers.

Jeremy Rea

Tue 10:19am

Edd,

Maybe I am missing something in the diagram for "Turchin's double spiral of well being and elite overproduction" but it shows 'popular wellbeing' rising steadily through the 1940's. I can think one particular thing that happened in the early half of that decade that most definitely did not lead to an increase in, what I would consider, 'popular wellbeing'.

I may have the wrong end of the stick here, but at a cursory glance, the diagram seems to fail the basic logic test.

Jeremy

Nonns

Tue 2:04pm

Lest one needs a reminder that the course of true love and stock picking success is largely a statistical thing mcb proved it this morning!!! The volatility in the price is truly awesome

timarr

Wed 6:47am

A glance at Turchin's criteria shows why popular wellbeing is likely to have risen through the 1940's, particularly after the end of WW2. The four criteria it uses to measure "popular wellbeing"are:

Employment, which rose significantly through the decade, in particular in the US where the war production requirements essentially ended the Great Depression;
Relative wages, as proxied by GDP per capita - basically the proportion of total income paid out in wages;
Health, based on a combination of average lifespan (which surprisingly rose over the decade) and average height (which is obviously a proxy for diet);
Family, proxied by the inverted age of first marriage - people marry younger when they're optimistic about economic prospects.

Basically the data fits the definition, which is all Turchin's model is saying.

What the model also predicts is that periods such as today's, where popular wellbeing is reducing and elite overproduction is increasing, ultimately lead to political instability, often resolved by revolution or war driven by demagogues adopting increasingly extreme positions in order to generate a mass following. To be fair to Turchin he predicted this in 2010.

The solution is basically to raise living standards, which in the UK's case probably means restricting immigration and broadening the availability of the living wage. To make that work we need investment in automation to drive increases in productivity, and given the short-termist nature of our investment institutions that probably needs pump priming by the government.

Wed 7:11am

Interesting, thanks Timarr.

I get the basic logic in the point Turchin is trying to make, I can argue with a few of the assumptions above, but possibly my arguments aren't enough to derail the overall upward movement in wellbeing.

I never put too much faith in models like this, having studied Economics for six years you soon realise that the assumptions that underpin most models are unrealistic or too simplistic, granted that is often due to the sheer complexity of the issue. I suspect this may well be one of those issues that is too intricate to allow for modelling. There are simply too many variables, immigration, pandemics, wars, dictators, natural disasters etc. to allow a detailed prediction.

On a superficial level his predictions may be accurate. I would need to study it more to assess whether they hold true on a deeper level, and more broadly than just the UK.

Interesting nonetheless. Thanks for replying.

Wed 7:53am

Hi Jeremy

There are simply too many variables, immigration, pandemics, wars, dictators, natural disasters etc. to allow a detailed prediction.

Turchin did actually predict a pandemic ... :-/

But I agree, there's a definite whiff of fitting the model to the data here.

Silver Moon

Wed 9:03am

CMC Markets (LON:CMCX) is a classic in my portfolio, a reminder that to make capital gains one must choose very wisely and buy low to make a start to begin with. I bought firstly in October 2020 at 336 pence from whence the price went downhill until I doubled-down BIG TIME at 108 pence in August 2023 having bought small amouts along the way, then CMC Markets turned around and now the share price is back to where it all began for me. Looking for an exit now, the S/R of 94 and Mom of 95 are what is keeping me in. I have set Stop Loss at 254 pence and feel safe with my cost-of-share being 178 pence. What could possibly go wrong?

Wed 9:40am

Ed, I'm very impressed with your Trended Momentum Stocks portfolio which I'm following. Thank you for this, I have renamed it Ever-rising Risers.

AcornInvestor

Wed 12:36pm

Hi SM, after digging around the Stocko website I can't find any reference to an article on Ed's trended momentum screen. Please could you point me in the right direction. Thanks.

stehuk

Wed 12:51pm

Ed's trended momentum article is here. https://www.stockopedia.com/content/didnt-buy-warpaint-why-clear-uptrends-are-the-best-uptrends-and-20-stocks-to-consider-now-998505?order=createdAt&sort=desc&mode=unthreaded

Wed 4:17pm

Pleased that 'stehuk' picked the answer out for you Acorn, I've been trimming our hedge, an annual event. Good luck with what ever you do.

Thu 12:50pm

SilverMoon - it does seem that the Trended Momentum portfolio has continued to trend northwards.

It's up +6.5% since the date of publishing (30th May) versus a flat FTSE All Share and AIM down almost 2%.

The SNAPS Portfolio 2024 - selecting stocks when expecting the unexpected

The NAPS year to date

The underlying portfolio performance

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Edward Croft

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