Compound Income
  • Blog
  • Scores
    • Scores Presentation
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact



Compound Income Scores Portfolio.

20/4/2015

0 Comments

 
Picture
Introduction
Regular readers will know that I recently launched the Compound Income Scores (CIS) which I believe are a good way of identifying potentially attractive shares which may be worthy of further research. However, while the thinking behind them is backed up by academic research and years of practical experience, I have not been able to back test them to prove how effective they are.

So partly for my own purposes, but also to provide a portfolio for the site, I have decided to launch a "mechanical" portfolio based on stocks which score highly on the CIS. I say mechanical because I am going to allow it to be driven by the Scores without too much input from myself, other than applying the screening criteria and making sure it is not over exposed to expensive stocks or one sector. This way we will be able to see how a portfolio based on high CIS scores performs and for my own purposes I'll be able to see how it compares against my own portfolio.

Methodology
As explained in the introduction the portfolio will be based on top scoring CIS stocks selected from the top decile initially.
Arguably
if I was trying to purely measure the Scores I should just pick the top stocks without qualifications or any screening but since I want it to reflect what I normally do, the main screening criteria applied over and above being in the top decile are as follows:
  1. PE<=20 - this ties in with my own value / sell discipline as I do not tend to buy stocks on this kind of valuation.
  2. Dividend Yield >=2% - again because this is what I use for buying and as a potential sell trigger.
  3. Earnings Yield >=5% - another valuation check to make sure it is not buying expensive stocks given my value bias.
  4. Market Capitalisation >= £50 million, again this reflects what I tend to do.

The Portfolio

To try and make it realistic for what reader might be doing I have assumed a starting capital of £30,240 which represents two years ISA allowances for the tax years 2014/15 and 2015/16. This is then allocated across top decile CIS stocks, after the above filters have been applied, in equal weights across 20 holdings to get a reasonable balance between diversification and position size / costs.

On costs I have factored in commission of £5 per trade and stamp duty of 0.5% where applicable (Nil for AIM stocks) with all the initial purchases made at closing prices on the 2nd April 2015 as I did it over the Easter Weekend.

Maintenance
Again in the interests of time and costs I have decided for now to try re-screening on a quarterly basis as buying costs for the whole portfolio came out at 0.66% split equally between stamp and commission. So 100% turnover would therefore cost 1% of the portfolio. I'm thinking at this stage that I might keep existing stocks down to a CI Score of 60 or perhaps 75, but I'll have to see how it goes and balance the turnover with the portfolio exposure to the Scores. Alternatively I might be able to do it based on only holding top decile - I guess I'll have to wait and see how this live experiment goes and what sort of turnover it might entail.

As another test of the Scores and with an eye on costs and time constraints I'll also maintain a list of the initial holdings and review these on an annual basis to see how effective the Scores are doing it that way and how the turnover and performance pans out that way in comparison with the quarterly version.

Summary & Conclusion
The CIS Portfolio is designed as a test of the effectiveness of the Compound Income Scores and as
I have been promising for a while to do a portfolio on the site, this provides one. It is also something for me to compare my own performance against to see if I should be following the Scores more closely in my portfolios. While this may be not what I originally had in mind, I think it should prove useful for me and hopefully for readers too.

It will be interesting to see how this live experiment goes, although in the short term it may well be volatile, but I believe that over time it should do well.
The rational for making it mechanical is based on the experience of The Little Book That Beat the Market - by Joel Greenblatt. He had a quantitative system which seemed to perform well, although in a volatile fashion. However, he found that when investors used it they failed to get the same returns as the model due to them picking and choosing and thereby excluding some of the big winners which on the face of it seemed unpalatable.


In the meantime I may comment on some of the stocks that feature but I probably won't comment on the whole list all the time apart from perhaps monthly updates and certainly when I do the quarterly re-screening around the end of each quarter going forward from here.

For now you can see the portfolio and transactions by clicking here or in a sub heading under the Portfolio tab at the top of the site. You might also be able to use this file as a template for your own portfolio and get the Scores for your portfolio too if that is something that interests you.

Finally I would stress that this is a "Mechanical" Portfolio purely selected from high scoring stocks on the Compound Income Scores. While I believe these should identify potentially attractive stocks, please note that I have not carried out any further due diligence on the stocks. So if you are attracted to any of the names you should certainly do your own research.





0 Comments



Leave a Reply.

    RSS Feed

    Google+

    Archives

    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    August 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014

    Categories

    All
    32Red
    Aberdeen Am
    Admin
    A G Barr
    Alliance Pharma
    Alternative Telecoms
    AMEC
    Amino Technologies
    Amlin
    Anglo Pacific
    Asset Allocation
    Auto Trader Group
    BA Systems
    BATS
    Behavioural Finance
    Bellway
    Berendsen
    BHP Billiton
    Bloomsbury Publishing
    Bodycote
    Books
    Bovis Homes
    BREXIT
    Britvic
    Catlin-group
    Central Asia Metals
    Centrica
    Character Group
    Churchill China
    Cineworld
    City Of London Investment Group
    Clarkson
    Commercial Property
    Compound
    Computacenter
    Connect Group
    Croda
    Currencies
    Demographics
    Diageo
    Diploma
    Directors Dealings
    Dividends
    Easyjet
    Economics
    Emerging Markets
    Emis
    Empiric Student Property
    Etfs
    Fairpoint
    Ferguson
    Ferrexpo
    Finsbury Foods
    Food Retailers
    Forterra
    Games Workshop
    Gateley
    Go Compare
    Goid
    Greene King
    GSK
    Hargreaves Services
    Hays
    Headlam
    Hedge Funds
    Hill & Smith
    House Builders
    Howden
    HSBC
    IG Group
    Imperial Tobacco
    Indivor
    Inflation
    Insurance
    Intermediate Capital
    Interserve
    Investec
    Investment Trusts
    It
    ITV
    James Halstead
    Jarvis Investment Management
    JLT
    Jupiter Fund Management
    KCOM
    Kingfisher
    Legal & General
    Lloyds Bank
    Maintel
    Man Group
    Market Timing Indicator
    Market Valuation
    Marston's
    Matchtec
    Media
    Merlin Entertainment
    Micro Focus
    Mining
    Mitie
    Miton Group
    Moenysupermarket
    Mondi
    Moneysupermaket.com
    Music
    National Grid
    N.Brown
    News
    Next
    Nichols
    Norcros
    Oil
    Page Group
    Paypoint
    Pennon
    Persimmon
    Personal Finance
    Pharmaceuticals
    Phoenix Group
    Photo Me
    Photo-Me
    Plus500
    Podcasts
    Polar Capital
    Politics
    Portfolio
    Portmeirion
    Provident Financial
    PZC
    Qinetiq
    Ramsdens Holdings
    Rank Group
    Reckitt Benckiser
    Renewable Energy
    Renew Holdings
    Renishaw
    Research Papers
    Restaurant Group
    Retailers
    RIO
    RM Group
    Rolls Royce
    RPC
    RPS
    Safestore
    Sage
    Sainsburys
    Savills
    Schroders
    Scores
    SCS Group
    Sell Discipline
    Shareholder Yield
    Share Picks
    Short Interest
    Somero
    Spectris
    Sprue Aegis
    SSE
    Stock Spirits
    S & U Plc
    TalkTalk
    Taptica
    Tax
    Technology
    Telecoms
    Tobacco
    Trading Ideas
    TSB
    TUI
    UK Market Update
    Unilever
    Utilitywise
    Value
    Victrex
    Vodafone
    VP.
    Water Utilities
    Watkins Jones
    WH Smiths
    William Hill
    Wynstay
    XL Media
    XP Power
    Yield
    Zytronic

    googleda4a17cac6d02bb9.html
    File Size: 0 kb
    File Type: html
    Download File

Powered by Create your own unique website with customizable templates.
  • Blog
  • Scores
    • Scores Presentation
  • Portfolio
    • Table of Returns
  • Resources
    • Check list
  • About
  • Contact