Sunday, 10 November 2013

Review of Stockopedia

Stockopedia is  a UK based stocks and shares information service. There is some basic information available for free and a subscription is required to access the premium content. It currently costs £19.95 a month to access all their data on UK stocks. Is this worth paying for?

In a word, yes! Although ultimately all the underlying information is public data, Stockopedia does an excellent job of organising this information so that you can quickly make sense of it. Every UK listed stock has a raft of colour coded indicators and metrics. There are a range of different valuation tools that you can tweak to your hearts desire. There are also a host of different charting tools and metrics. Whatever you investing style, there are are a set of visually informative and easy to use tools to help you.

Stock screening

While all equities information services these days offer screeners, Stockopedia's is the best I've come across. It has a huge range of screening parameters and you can either create your own or 'fork' a pre-cooked screen from one of more than 65 guru screens. So if you want to emulate your favourite investment guru, Stockpedia makes it easy.

Stockopedia have also created their own unique guru screen called the "Screen of Screens". This counts the number of times a particular stock appears on any of the other long guru screens. This is an interesting idea as it highlights stocks that are attractive from a number of different angles. A hypothetical portfolio based on this screen has returned 77 per cent since the December 2011 compared with about 24 per cent for the FTSE 100.


In the last couple of months, Stockopedia have been experimenting with something they call "StockRanks". These are composite metrics for four broad factors, namely value, quality, growth and momentum. For example "value" combines six different valuation metrics namely: P/E, P/S, PBV, PFCF, earnings yield, dividend yield. Stocks are ranked in these score with 100 for the top scoring stock down to 0 for the lowest. Each of these ranking factors can then be combined depending on your investing style.

Initially, Stockopedia combined all  four ranking factors into a single composite score. However, their preferred composite measure now omits growth, just combining quality, value and momentum. Their research has established that there is a tendency to overpay for growth. Therefore, it is not a strong predictor of future share price movements.

More thoughts on Stock Ranking

I think that stock rankings are better than screens. A stock screener is essentially a checklist and if a share narrowly fails just one test, then it is screened out even if it scores very strongly on other criteria. Thus, stock screening will tend to leave some good candidates hidden. Ranking methods allow stocks to be weighted so that some moderate weakness in one criteria will not necessarily override strengths in others. Thus stock screens are quite blunt instruments, while stock rankings offer more careful calibration.

This idea of ranking stocks across multiple dimensions is key to my investment appoach. Greenblatt's argues that although his Magic Formula does not work all the time and the investor just needs to be patient. However, this doesn't seem completely satisfactory. If you are going to take a mechanical rules based approach to investing, it seems reasonable to aim to have something that works, if not all the time, then at least as often as possible.

The stock market goes through phases where certain investment styles do better. Over the last few years, value investing has performed better than quality based approaches. Momentum approaches have done particularly well in 2013. However, rather than trying to guess which style is going to do well in future, why not select stocks that have a number of strengths that should do well regardless of what particular style is performing best at the time? Stockopedia's StockRank does exactly that and therefore this is now the main basis on which I select stocks.


The only slight quibble I have with Stockopedia is the lack of any back-testing feature. The reasons given are that historical data are either unreliable or prohibitively expensive. However, some back-testing functionality may become available over time as Stockopedia build up their own data.

I went through a phase of doing a lot of back-testing for which I used Sharelock Holmes. This is what got me thinking about the limitations of stock screening and that some kind of weighted method on key metrics would work better. I didn't really pursue it as I didn't know how to go about it. Now that I have come across StockRanks, my conclusion is that these are going to be pretty hard to beat in terms of any mechanical rules based investing so back-testing seems like less of a priority.

Closing thoughts On Stockopedia

I really like the philosophy of Stockopedia. They are geared towards the DIY investor and do a great job at de-mystify equity investing. Why pay fees to fund managers, very few of whom consistently beat the market when for a modest fee you can access information and tools that give you every chance of doing better? Stockopedia has become my main source of information on UK stocks and I would be lost without it.

If you want to try it out go to the Stockopedia website.

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