Lately, I had been looking at creating some screens on Stockopedia.
Here are the performances of some of the most important scores on Stockopedia:
- M (momentum) +128%
- G (growth) +125%
- V (value) +87%
- Q (quality) +69%
- FTAS (FT All-Share) +44%
As you can see, all the scores beat FTAS. Momentum lead, which does not surprise me, because I had discovered momentum to be a good performer on previous occasions.
The surprise performer is growth, which from time-to-time performed better than momentum. Growth is the least-respected score, both by Stockopedia and private investors generally. The presumption is that people tend to overpay for growth companies, which are either story stocks, growth that materialises but does not warrant the price paid, or is subject to gross misperceptions about the actual growth prospects themselves. It’s a fair assessment, I am not arguing with it; I am just pointing out that growth happened to have worked extraordinarily well, at least in the period under review.
It seems, then, that if you want to use the rankings to build a portfolio, you might use either just momentum, or a combination of momentum and value.
One idea for a screen I devised is to look for shares where EV/EBITDA was less than 7.5, and whose M score was in the 90’s. One company that almost qualified was bus company GOG (GO-Ahead Group). Its scores were: Q 95, V 84, M 86, SR 99, EV/EBITDA 3.82. Strictly speaking, of course, GOG failed on the M score, but it was close.
So GOG offered good value and good momentum. The fly in the ointment is that it issued its H1 results today, sending the shares down 13.4% to 1978p. They reported “full year expectations lowered due to challenges in GTR and a slowdown in passenger numbers in regional bus”.
If I held the shares and saw the market’s reaction, I would have bailed out, and concluded that momentum score was henceforth meaningless for this company. That’s not what I wanted to see, of course: devising a strategy in which a candidate share (almost) immediately blew up in my face. Perhaps it was just an unlucky break, and not necessarily indicative that it was an ill-conceived idea.
“Dearg Doom” wrote an article on Stockopedia a few days ago: “Knowing when to sell a stock is always difficult!”. I had expressed some of my thoughts about using SMA (Simple Moving Averages). The link to the article and comments is here:
One chart that did catch my eye was CPR (Carpetright). Rather than reproduce the chart in the article, I thought it would be rather fun to try out Stockopedia’s new charting functionality. The chart is below.
What attracted me was the likelihood of momentum reversal. It’s momentum score is 14. A mere glance at the chart shows you that momentum is bad in any event. Its value score is 87. So here we have an interesting situation. The shares are cheap, the momentum has been bad in the past, but it is now trading above its 50dMA in what appears to be a reversal of trend. What’s more, on 31 Jan 2017, it issued its Q3 trading update, which raised the share price 8.8%.
CPR reminds me of DTG (Dart): terrible momentum, cheap, but with a trading update that caused a re-assessment of the company.
So I am going to stick my neck out and say that I expect the share price of CPR to be higher in 6 months time than it is now. Let’s see, shall we?
I own no shares in CPR or GOG. This is just for a bit of fun.
Stay safe out there.
CPR 208p. ASX 3953.