value and opportunity

It seems that I begin to harvest my successes as an investment blogger. After getting a free book, I now received already for the second time (temporary) free access to a stock screening tool. I wonder what comes next……maybe someone offering me 100 mn EUR to manage ?? 😉

A year and a half ago, I checked Tim Du Toit’s Eurosharelab screener which looked like a fair deal and a good tool

Now I checked the Stockopedia tool. I did only check the screening tool, they offer a lot of other stuff but I am not really interested in that.

From the beginning, I found their tool very easy to use. I don’t know the current status of Eurosharelab, but for me the biggest plus of the stockopedia screener is the fact that one can set up custom screens based on a large number of different variables. I was able to create my custom screens without reading any manuals etc. The navigation is very good, I liked especially the “Bloomberg” like selecting of fields for the queries.

The results are presented very well, it is very easy and convenient to drill down into the stocks or to check the fundamental data. This is even better than in Bloomberg and a big advantage of the fully web based technology. The speed of the queries was OK, could be a little bit faster.

I also liked the existing “Guru” screens, especially the “Screen of Screens” which kind of aggregates all existing screens. (Note: EGIS is the second best stock there after Dart. It looks like that my Boss model is not totally useless…..)-

The list of “in and outs” is interesting, too, where one can see which stocks newly qualified for the top positions and which stocks dropped out. The single stock monitor also looks very comprehensive, with a good data history. Up until now they offer only Europe but including many exotic countries like Bulgaria etc.

All in all it is a very good tool which is a lot of fun to work with. They told me that they would charge normally 499 GBP p.a. but if someone is interested, they would offer a “special rate” of 399 GBP. If I recollect correctly, Eurosharelab had also 3 month access which could be interesting for people who don’t need such a tool permanently.

For small investors, they should consider if the really need this. If you for example have a 50 K GBP portfolio, the 500 GBP full rate would eat up already a full 100 bps of annual returns or depending on what you expect at least 1/10th of your total return if you make on average 10% p.a.

Quantitative investing & Data issues. Example “Magic Sixes”

As I have written many times, I like using screeners as a basis, but I do not think that quantitative value investing, especially in the small cap sector, makes a lot of sense. The major issue is data quality.

In order to test the data quality of the Stockopedia screener, I did the following:

I set up a custom “Magic Sixes” screen (P/E lower than 6, P/B lower than 0.6, Div Yield higher than 6%, Europe) both, in Stockopedia and Bloomberg and compared the results. The results were quite surprising for me. Stockopedia returned 28 stocks, Bloomberg 19 stocks, but only 2 stocks showed up in both lists.

Here you find the results:

Stockopedia Magic Sixes		Bloomberg Magic Sixes
		C21	21ST CENTURY TEC
AIRC	Air China
AURG	Aurskog Sparebank
		BTT	BABCOCK-BSH AG
BQRE	Banque de la Reunion SA
BTG4	Bertelsmann SE Co KGaA
ELMU	Budapesti Elektromos Muvek Nyr…	ELMU	ELMU NYRT
CAT31	Caisse Regionale de Credit Agr…
CCN	Caisse Regionale de Credit Agr…
6C4	Chimimport AD Sofia
CICG	Cinkarna Celje dd
CSFG	CSF
CTC	Cyprus Trading
DOM	Domstein ASA
		DIOD	DIOD
		MLDYN	DYNAFOND SA
		MLEDS	EDITIONS SIGNE
ERME	Ermes Department Stores
EMASZ	Eszak Magyarorszagi Aramszolga…
		MLEVE	EVERSET
RAM	F Ramada Investimentos SGPS SA
		BSG	GERMANIA-EPE AG
HJH	H.J. Heinz Co
HF	HF SA
HGM	Highland Gold Mining	HGM	HIGHLAND GOLD MI
HSPG	Holand og Setskog Sparebank
		INOX	INOX
MELG	Melhus Sparebank
		KYTH	K KYTHREOTIS HOL
		KDHR	KMECKA DRUZBA
		OAB	OAB OSNABRUECKER
		PVA	PESCANOVA
PVL	Plastiques du Val de Loire SA
		1PL	POWERLAND AG
5BU	Real Estate Fund Bulgaria ADSI…
		ALRIC	RICHEL SERRES DE
SALB	Salling Bank A/S
		SHFT	SHAFT SINKERS HO
SPOG	Sparebanken Ost
PLUG	Sparebanken Pluss
SVEG	Sparebanken Vest
SHL	Stademos Hotels
		SZI1	STOLBERGER TEL
TOTA	Totalbanken A/S
		59X	UNIPHARM AD-SOFI

Only Highland Gold Mining and Budapesti Elektromos showed up in both tools. When I digged into the detailed data, I was even more surprised. In total, I had 43 “diverging” entries. From those, 7 stocks were stocks where there were large bid/ask spreads and depending on the price the stock would either have 0.59 as P/B or 0.61 for instance, so this is a pure technical issue.

On the other hand, 20 diverging stocks were clearly mistakes in the data of Stockopedia (either wrong, outdated or missing data) and still 16 stocks were clear data mistakes by Bloomberg.

I emailed a little bit back and forth and it seems that they get their data from Reuters and are working hard on improving data quality. But nevertheless it is for me highly revealing that based on two different data sources, you get 2 almost completely different set of stocks with a few relatively basic filters.

Clearly, the Magic Sixes filter at the moment only throws out micro cap deep value stocks, where data is always an issue, but still, I wouldn’t have expected such a result. Also rankings might help to a certain extent. Nevertheless that mae me highly suspicious of any “automated” Value trading strategies no matter how good they look in backtests.

Summary:

I really liked the Stockopedia tool. If I would not have access to Bloomberg, I would seriously consider their tool . Although I would always use it as a screener only, not as a basis for a trading strategy,

Maybe it is not representative, but my Magic Sixes example clearly shows that data sources alone can have a huge impact how portfolios look like even if you use the exactly same criteria.

If one really digs deep into data like I had to for my boss model, one would detect even more disturbing data issues, but that is a topic for another post.

DISCLOSURE: I got free access to the tool but I do NOT get any referal fees etc.