I’ve chosen a selection of ‘NAPS’ for 2016. To recap the idea being to see if my choice of companies (no changes allowed during the year) beats my personal portfolio by the end of the year and how it compares to the Stockopedia mechanical NAPS and FTSE/AIM indexes. I’m also hoping to establish over a long time frame whether i can successfully pick stocks.
I’m also hoping that my personal knowledge and insight might help to boost performance against a mechanical selection…. or ultimately will my over confidence be shown for what it is. I think the latter may be proved correct but i can’t help but hope otherwise 🙂
This years selection:
And using the Stockopedia value vs quality ranks bubble chart we get the following picture:
This gives me confidence i’ve chosen generally better value & higher quality companies. The outliers are the oil stocks, a gold miner and BooHoo who i believe has potential to be a long term star.
These selected ‘low stock rank’ companies are the key differences between a Stockopedia stock rank selected portfolio and my NAPS where i use a bit of personal judgement.
Oil, which i may do a separate post on if i have time, cannot i believe stay at $33 a barrel for much longer – its below the cost of production for large parts of the world, capex is being cut leading to lower future supply and ultimately current supply is only 1 – 1.5mmbl/day greater than demand. Total supply is about 95mmbl so the margin is actually quite small. Figures show global oil demand is continuing to rise something like 1.5mmbl/day each year and supply i’m sure will be showing signs of decreasing imminently – due to natural oil field decline rates which are anywhere between 8% and 3% annually (this is where if companies do not invest in their producing oil fields, production actually falls away – it needs continuous investment to maintain, let alone increase). Hence i think supply will fall below demand within the next 2 years with potential for a price spike. Oil in this sense is perhaps unlike other commodities eg copper where mine production does not drop away with significant capex cuts, whereas oil field production does. Anyway – i think ignoring the media headlines and doing a little research of the fundamentals suggests that this may be a once in a generation buying opportunity. For some good discussion on this see here.
BooHoo looks like an excellent GARP stock and as most of us know, growth stocks rarely look cheap and investors often over pay for growth, however i thin with BooHoo at 36p you are not. Paulypilot has done plenty of analysis and i agree with it. You can find some of it here, here and here.
Oh and Randgold Resources. Im not a gold bull, i’ve researched it and there are so many divided opinions from end of the world as we know it survivalists advocating stockpiling of gold coins so those who look at gold as nothing more than a pet rock. I’m neither, but if the price falls below global costs of production i’m interested. Assuming demand remains unchanged, supply must decline in the medium term. Gold is not far from this point globally by some reports. Many gold miners will be high grading and cutting back on exploration. If the price remains as it is at levels that discourage exploration then at some future point supply will fall below demand as mines around the world are depleted. No-one knows when this will be but i’m certain there will be another great gold bull run again at some point in the future. This could be 5 years from now so i’ll keep watching and waiting for clues, with only a modest exposure through one of the best gold miners there is.
Further posts if time allows will give some detail on why i think each of the selected companies will do well.
All the best,
Shaun
