Tips & Ideas 

Tips of the Week Review 2019

Tips of the Week Review 2019

Our weekly tips from the past 12 months have put in a good performance. We offered up 200 Tips of the Week during 2019, of which 139 were buys and the rest sells. Based on an average holding period of just under six months (the tips are issued throughout the year), the average buy produced a capital return of 14.3 per cent and 5.8 per cent outperformance of the market. The average sell was up 3.9 per cent, which was 3.0 per cent less than the performance of the market.

 

 

A year of change

When I wrote this review last year, I said readers could expect to see changes in the way we went about tipping shares during 2019. With hindsight, it would have been better to have said readers would “experience” changes. That’s because the changes that have been made to our tips process – and they have been quite substantial – have been kept out of sight. Behind the scenes we’ve been busy, though. While it is always dangerous to read too much into relatively short-term results, we hope these behind-the-scenes efforts are reflected in the encouraging performance of the weekly tips from the past 12 months. 

During the year we’ve sought to improve three aspects of the Investors Chronicle’s share tipping process: idea generation; analysis; and judgment. This year we plan to make these changes more explicit in the tips section of the magazine and make them of more value to readers. Here’s what we’ve been doing to improve our tips process during 2019:

 

1. Idea generation

During the year we’ve increased the focus we put on certain cues from the market to direct our writers’ research efforts. We’ve done this by instigating weekly screens shared across our writing team that monitor momentum, broker forecast changes, fund manager best ideas, director dealings and short-selling activity. We plan to make highlights from this ideas gold mine accessible to readers during the coming year. 

We’ve also been using the regular screens that feature as part of our IC Alpha reports to generate ideas. Our hope is that by piggy-backing on these Alpha screens, the Alpha publication will create value for readers that subscribe only to the magazine, as well as more value for those who pay for extra Alpha content.

 

2. Analysis

To help focus our research efforts we’ve created a standard analysis tool that highlights key performance trends and red flags, along with a number of important momentum and valuation measures. 

In particular the 10 red flags we now systematically monitor – often hidden in companies’ balance sheets and cash flow statements – can be particularly helpful in avoiding trouble. These red-flag ratios include five-year histories for: receivables/sales (whether customers are paying invoices in a timely manner);  stock/sales (the proportion of cash cost of sales kept off the income statement), the level of adjustments made to reported profit; and 5-year cumulative free-cash conversion (whether profits turn into cash over the long term). While not all red-flag warnings turn out to be a genuine reason for concern, investigating any warning signs is very important and is now more deeply ingrained in our writers’ analysis. 

 

3. Judgment

The last half century has seen a burgeoning understanding of the psychology of decision-making and judgment. This has provided the foundations for a field known as behavioural finance. A key insight is that the human mind struggles to pull together large amounts of complex, and often seemingly contradictory, information to make black-and-white (buy/sell) investment decisions. 

Since the middle of June, alongside our buy and sell recommendations, we’ve been using a stock scoring system that attempts to unbundle the judgments our writers have to make to form a buy or sell view. The system draws heavily on research into what 'factors' (stock characteristics) influence investment returns as well as lessons from behavioural finance. 

The key purpose of this scoring system has been to support our writers when they come to decide whether a share rates a buy, sell or hold. However, while the system has only been in operation for a relatively short period of time, it’s of real interest to us that the near half of tips that have fallen into the 'sweet spot' for our scoring system since mid-2019 have so far performed significantly better than the tips overall. 

 

What does it all mean?

Enough about the changes made to the tips process last year and on to the meat: how last year’s tips performed. 

As already mentioned, 2019’s Tips of the Week produced strong returns overall and on aggregate represent the best performance for a number of years. But before digging into the details, there are some key features of this review that are important to highlight. The first is that this magazine makes a lot of share tips and inevitably this means the average performance of the weekly tips will tend towards the average for the market (what statisticians call reversion to the mean). The sheer quantity of tips the magazine provides also means there will almost always be some shares that do very badly as well as others that do very well. 

Meanwhile, although this is a review of a year’s worth of tips, as the tips being reviewed are issued throughout the year, the average holding period being assessed is a bit under six months. The average figures given in this review should therefore be regarded as six-month (ish) performance and not one-year performance. 

Buy tips are considered closed when we move our recommendation to sell, while sell tips are considered closed when we move our advice to either hold or buy (ie off a sell rating).

To calculate relative performance, shares are measured against the most closely fitting of the FTSE 100, FTSE 250, FTSE All Small, FTSE Aim All-Share or most relevant international index. 

The performance figures do not include contributions from dividends or the impact of dealing spread (the difference between the price shares can be bought for and sold at). Including these factors would have shaved about 0.8 per cent off the overall performance of our buys. This calculation is based on the average buy from the year having a spread of 0.5 per cent and on average offering a dividend yield slightly below that of the market at 2.6 per cent compared with 2.9 per cent. The spread on the sells was 0.3 per cent. The average sell’s dividend yield is 3.4 per cent, however this historical figure is somewhat misleading as many of our sell tips are made on shares in companies that have already announced future dividend cuts or are expected to cut in the future.

With all this in mind, the average performance of our 139 buy tips in 2019 is 5.8 per cent better than the market, which represents a 14.3 per cent gain in absolute terms. Meanwhile, 65 per cent of the buys have outperformed the market. The success rate for sells is worse, with only 43 per cent performing worse than the market. However, having identified a number of big fallers, the sells still underperformed the market on average by 3.0 per cent, although given the overall strength of the market, in absolute terms this translated into a 3.8 per cent gain. 

 

The detail

As usual, during the year we’ve tried to provide readers with ideas incorporating a range of investment approaches and market capitalisations. The charts and tables below are really the best way of assessing the breakdown. This year our tips have shown a bias towards 'growth' stocks, although the performance of this style of tip (a capital gain of 17.2 per cent and 8.3 per cent outperformance) has arguably helped justify the tilt. 

The only type of buy tips that have underperformed during the year are the high-risk 'speculative' tips we’ve made, which have gained 7 per cent but are 1.1 per cent behind the market. Indeed, all of the five worst performing buy tips from the past 12 months fell into our 'speculative' category. 

The charts below provide  a more detailed breakdown of the parts of the market our tips came from, the proliferation of different tip styles, and a performance breakdown on the same basis. The two accompanying tables, meanwhile, provide details of all the buy and sell tips issued during the year. 

 

 

All the buys

Name TIDMTip DateDate ClosedTip StyleIndexPerformanceIndex Perf.Out/Under Performance
JD Sports Fashion JD.11/01/19 GrowthFTSE 250112%19%78%
Kainos  KNOS18/01/19 GrowthFTSE All Small90%9.7%74%
Spirent Communications SPT15/03/19 GrowthFTSE 25072%13%52%
Avon Rubber AVON08/03/19 GrowthFTSE All Small69%7.8%57%
Diploma DPLM25/01/19 GrowthFTSE 25062%18%37%
Jadestone EnergyJSE01/11/19 SpeculativeFTSE AIM62%7.6%50%
Countryside Properties CSP14/06/19 GrowthFTSE 25060%16%38%
Petropavlovsk POG01/02/19 SpeculativeFTSE All Small57%8.5%45%
Liontrust Asset Management LIO05/07/19 GrowthFTSE All Small48%8.4%36%
Hotel Chocolat  HOTC01/02/19 GrowthFTSE AIM46%4.0%40%
Marshalls MSLH22/03/19 GrowthFTSE 25046%16%25%
Team17  TM1703/05/19 GrowthFTSE AIM45%-1.3%47%
Speedy Hire SDY04/10/19 ValueFTSE 10044%6.4%35%
Restore RST21/06/19 IncomeFTSE AIM39%2.7%36%
XP PowerXPP09/08/19 SpeculativeFTSE All Small39%13%23%
Games Workshop  GAW17/05/19 GrowthFTSE 25039%13%23%
Renew  RNWH16/08/19 GrowthFTSE AIM39%11%25%
Workspace  WKP19/07/19 IncomeFTSE 25035%13%19%
Learning Technologies  LTG09/08/19 SpeculativeFTSE AIM34%8.2%24%
Ideagen IDEA27/09/19 SpeculativeFTSE AIM32%9.8%20%
boohoo  BOO23/08/19 GrowthFTSE AIM32%10%20%
Marlowe MRL30/08/19 GrowthFTSE AIM31%9.9%19%
CLS  CLI26/07/19 ValueFTSE All Small31%9.8%20%
Belvoir  BLV12/04/19 IncomeFTSE AIM30%1.7%28%
Oxford Metrics OMG08/03/19 SpeculativeFTSE AIM30%5.9%23%
Secure Trust Bank STB25/01/19 GrowthFTSE All Small30%9.2%19%
Dunelm  DNLM05/07/19 IncomeFTSE 25029%13%14%
Severfield SFR26/07/19 SpeculativeFTSE All Small28%9.8%17%
Helical HLCL28/06/19 ValueFTSE All Small28%8.9%17%
Manolete Partners MANO19/12/19 GrowthFTSE AIM28%2.1%25%
Augean AUG08/11/19 GrowthFTSE AIM27%7.4%19%
Quartix  QTX28/06/19 IncomeFTSE AIM27%4.2%22%
Henry Boot BOOT29/03/19 GrowthFTSE All Small27%8.6%17%
Grainger GRI24/05/19 GrowthFTSE 25027%16%9.6%
Smith & Nephew SN.15/02/19 GrowthFTSE 10027%5.3%20%
Ferguson FERG10/05/19 ValueFTSE 10026%5.7%19%
Redrow RDW08/11/19 IncomeFTSE 25025%8.4%16%
QinetiQ  QQ.19/04/19 GrowthFTSE 25024%11%12%
IMI IMI23/08/19 SpeculativeFTSE 25024%16%7.6%
Wincanton WIN18/01/19 SpeculativeFTSE All Small24%9.7%13%
Capital DrillingCAPD26/07/19 GrowthFTSE All Small23%9.8%12%
Paragon Banking  PAG05/04/19 GrowthFTSE 25023%13%8.4%
St. Modwen Properties SMP06/09/19 GrowthFTSE 25022%13%8.6%
Gamma Communications GAMA04/10/19 ValueFTSE AIM22%11%9.9%
Secure Trust Bank STB16/08/19 GrowthFTSE All Small21%15%5.8%
Entertainment One ETO19/04/1930/12/19SpeculativeFTSE 25021%11%8.9%
Highland Gold MiningHGM01/03/19 ValueFTSE AIM21%4.6%16%
MJ Gleeson GLE22/02/19 GrowthFTSE All Small21%8.1%12%
Regional REITRGL18/01/19 IncomeFTSE All Small20%9.7%9.1%
Legal & General  LGEN11/10/19 IncomeFTSE 10020%5.1%14%
Quilter QLT07/06/19 ValueFTSE 25019%15%3.4%
GlaxoSmithKline GSK15/03/19 IncomeFTSE 10019%5.4%13%
Eckoh ECK12/07/19 SpeculativeFTSE AIM19%4.5%14%
Springfield Properties SPR15/02/19 GrowthFTSE AIM18%5.6%12%
IG Design  IGR04/10/19 SpeculativeFTSE AIM18%11%5.9%
Bank of Georgia  BGEO22/11/19 GrowthFTSE 25018%7.5%9.3%
Focusrite TUNE18/09/19 SpeculativeFTSE AIM17%8.3%7.9%
Ten Entertainment  TEG29/11/19 GrowthFTSE All Small16%7.5%7.9%
Anglo American AAL18/10/19 IncomeFTSE 10016%6.5%8.6%
Pennon  PNN25/10/19 IncomeFTSE 25015%9.6%4.9%
SDL SDL08/02/19 SpeculativeFTSE All Small15%8.9%5.5%
Johnson Service  JSG02/08/19 GrowthFTSE AIM15%4.0%10%
discoverIE  DSCV01/11/19 GrowthFTSE All Small14%10%3.8%
IntegraFin  IHP03/05/19 GrowthFTSE 25014%12%1.8%
Argentex  AGFX25/10/19 GrowthFTSE AIM13%7.6%5.5%
Knights   KGH23/08/19 GrowthFTSE AIM13%10%2.7%
Derwent London DLN15/11/19 GrowthFTSE 25013%7.9%4.5%
National Express  NEX02/08/19 IncomeFTSE 25012%16%-2.7%
Spectris SXS22/03/19 GrowthFTSE 25012%16%-3.3%
Lok'nStore  LOK06/12/19 GrowthFTSE AIM12%5.5%6.5%
Intertek  ITRK11/10/19 GrowthFTSE 10012%5.1%6.6%
FDM FDM06/12/19 GrowthFTSE 25012%4.6%6.9%
MJ Gleeson GLE18/09/19 SpeculativeFTSE All Small12%11%0.8%
Ashmore  ASHM01/11/19 GrowthFTSE 25011%9.4%1.4%
MatchNASDAQ:MTCH11/10/19 SpeculativeNASDAQ Composite Index11%11%-0.5%
FDMFDM31/05/19 GrowthFTSE All Small11%6.1%4.3%
Pan African Resources PAF22/11/19 SpeculativeFTSE AIM11%5.7%4.6%
Avast AVST01/11/19 SpeculativeFTSE 25010%9.4%0.9%
Macfarlane  MACF18/10/19 GrowthFTSE All Small9.6%10%-0.6%
Essentra ESNT30/08/19 SpeculativeFTSE 2508.9%15%-5.0%
Treatt TET01/03/19 GrowthFTSE All Small8.7%6.9%1.6%
Warehouse REIT WHR09/08/19 GrowthFTSE AIM8.4%8.2%0.2%
Howden Joinery  HWDN29/11/19 GrowthFTSE 2507.5%5.6%1.8%
Spirax-Sarco Engineering SPX08/11/19 GrowthFTSE 1007.3%3.5%3.7%
Cello Health CLL29/03/19 GrowthFTSE AIM6.7%4.5%2.1%
Babcock International  BAB06/12/19 SpeculativeFTSE 2506.6%4.6%1.9%
Centamin CEY13/12/19 ValueFTSE 2506.1%1.6%4.4%
British American Tobacco BATS08/03/19 IncomeFTSE 1006.1%7.2%-1.1%
Rotork ROR11/09/19 GrowthFTSE 2505.9%11%-4.4%
RWS  RWS11/09/19 GrowthFTSE AIM5.9%8.9%-2.8%
Greggs GRG07/06/19 GrowthFTSE 2505.7%15%-8.3%
Burberry  BRBY16/08/19 GrowthFTSE 1005.7%7.0%-1.3%
Coats  COA11/10/19 SpeculativeFTSE 2505.3%10%-4.2%
iomart  IOM11/01/19 SpeculativeFTSE AIM5.2%5.3%-0.1%
Begbies TraynorBEG13/12/19 SpeculativeFTSE AIM5.2%4.4%0.7%
Alpha Financial Markets Consulting AFM01/02/19 GrowthFTSE AIM5.1%4.0%1.1%
Hilton Food  HFG18/10/19 GrowthFTSE 2504.8%8.9%-3.8%
NEXT NXT18/10/19 IncomeFTSE 1004.6%6.5%-1.8%
Tritax Big Box REIT BBOX15/03/19 ValueFTSE 2504.4%13%-7.5%
Tracsis TRCS10/05/19 GrowthFTSE AIM4.3%0.1%4.1%
WH Smith SMWH13/12/19 GrowthFTSE 2503.6%1.6%2.0%
Polymetal International POLY27/09/19 SpeculativeFTSE 1003.6%2.6%1.0%
Wm Morrison Supermarkets MRW15/11/19 IncomeFTSE 1003.3%4.3%-0.9%
Frontier Developments FDEV06/12/19 GrowthFTSE AIM3.2%5.5%-2.2%
The City Pub GroupCPC08/02/19 SpeculativeFTSE AIM3.1%5.9%-2.7%
Morgan SindallMGNS13/12/19 GrowthFTSE All Small2.4%4.3%-1.8%
AFH Financial  AFHP02/08/19 GrowthFTSE AIM2.4%4.0%-1.6%
Trans-Siberian Gold TSG05/07/19 GrowthFTSE AIM1.8%4.5%-2.6%
Telford HomesTEF01/03/1930/09/19GrowthFTSE AIM1.5%-4.7%6.5%
Draper Esprit GROW31/05/19 ValueFTSE AIM1.1%-0.2%1.2%
Automatic Data ProcessingNasdaqGS:ADP19/12/19 GrowthNASDAQ Composite Index1.0%1.0%0.1%
TT Electronics TTG26/04/19 GrowthFTSE All Small0.0%5.1%-4.9%
International Consolidated Airlines IAG19/12/19 ValueFTSE 100-0.3%0.6%-0.8%
Renishaw RSW14/06/19 GrowthFTSE 250-0.3%16%-14%
dotdigital  DOTD07/06/19 GrowthFTSE AIM-1.0%2.1%-3.0%
Keystone Law  KEYS21/06/19 GrowthFTSE AIM-1.3%2.7%-3.9%
Johnson Matthey JMAT06/09/19 SpeculativeFTSE 100-1.7%4.6%-6.0%
Huntsworth HNT12/04/19 SpeculativeFTSE All Small-2.6%7.0%-9.0%
Mondi MNDI25/01/19 GrowthFTSE 100-3.1%12%-13%
EMIS  EMIS17/05/19 SpeculativeFTSE AIM-4.0%0.0%-3.9%
Synthomer SYNT08/03/19 ValueFTSE 250-4.6%16%-18%
Energean Oil & Gas ENOG12/07/19 GrowthFTSE 250-4.9%14%-16%
KAZ Minerals KAZ19/07/19 SpeculativeFTSE 250-5.7%13%-17%
Central Asia Metals CAML11/01/19 IncomeFTSE AIM-6.2%5.3%-11%
Young & Co.'s BreweryYNGA26/04/19 GrowthFTSE AIM-6.7%-1.2%-5.6%
Moneysupermarket.com  MONY24/05/19 GrowthFTSE 250-8.7%16%-21%
Yellow Cake YCA05/04/19 ValueFTSE AIM-8.9%3.9%-12%
Advanced Medical Solutions  AMS12/04/19 GrowthFTSE All Small-10%7.0%-16%
Robert Walters RWA17/05/19 GrowthFTSE All Small-11%5.1%-15%
Phoenix Spree DeutschlandPSDL03/05/19 GrowthFTSE All Small-11%4.9%-15%
Midwich  MIDW10/05/19 GrowthFTSE AIM-12%0.1%-12%
Fuller, Smith & Turner FSTA15/03/19 GrowthFTSE All Small-14%6.8%-19%
Joules  JOUL27/09/19 GrowthFTSE AIM-20%9.8%-27%
Somero EnterprisesSOM22/03/19 ValueFTSE All Small-26%8.4%-32%
Allergy Therapeutics AGY25/01/19 SpeculativeFTSE AIM-27%5.1%-30%
SolGold SOLG07/06/19 SpeculativeFTSE All Small-32%6.6%-36%
DanakaliDNK22/02/19 SpeculativeFTSE All Small-34%8.1%-39%
Valeura EnergyVLU23/08/19 SpeculativeFTSE All Small-77%13%-80%
LoopUp  LOOP26/04/19 SpeculativeFTSE AIM-79%-1.2%-79%

Source: S&P CapitalIQ

 

All the sells

Name TIDMTip DateDate ClosedTip StyleIndexPerformanceIndex Perf.Out/Under Performance
Nostrum Oil & Gas NOG29/03/19 SellFTSE All Small-82%8.6%-83%
Kier  KIE24/05/19 SellFTSE All Small-66%5.3%-68%
Xaar XAR15/02/19 SellFTSE All Small-63%8.2%-66%
Indivior INDV22/02/19 SellFTSE 250-62%15%-67%
Funding CircleFCH11/01/1912/08/19SellFTSE 250-62%1.0%-62%
De La Rue DLAR12/07/19 SellFTSE All Small-52%9.8%-56%
Aston Martin Lagonda Global  AML29/03/19 SellFTSE 250-48%16%-55%
Versarien VRS03/05/19 SellFTSE AIM-30%-1.3%-29%
Gem DiamondsGEMD11/09/19 SellFTSE All Small-29%11%-36%
Centrica CNA01/03/19 SellFTSE 100-27%7.2%-31%
Rolls-Royce  RR.12/04/19 SellFTSE 100-23%2.4%-25%
Impellam  IPEL19/04/19 SellFTSE AIM-22%0.3%-23%
IQE IQE05/07/19 SellFTSE AIM-17%4.5%-21%
Victoria VCP19/07/19 SellFTSE AIM-17%4.8%-21%
Fresnillo FRES06/09/19 SellFTSE 100-13%4.6%-17%
Dignity DTY24/05/19 SellFTSE All Small-11%5.3%-16%
Kosmos EnergyKOS29/11/19 SellFTSE 250-9.8%5.6%-15%
Cineworld  CINE27/09/19 SellFTSE 250-4.4%11%-14%
Camellia CAM15/11/19 SellFTSE AIM-3.3%7.4%-10%
Photo-Me International PHTM30/08/19 SellFTSE All Small-3.1%14%-15%
PZ Cussons PZC21/06/19 SellFTSE 250-2.8%15%-15%
NewRiver REIT NRR19/12/19 SellFTSE 250-2.2%1.1%-3.3%
Redde REDD08/11/19 SellFTSE AIM-0.6%7.4%-7.4%
Hunting HTG15/11/19 SellFTSE 250-0.3%7.9%-7.7%
Purplebricks  PURP26/04/19 SellFTSE AIM0.5%-1.2%1.6%
Halfords  HFD11/09/19 SellFTSE All Small1.5%11%-8.8%
Marks and Spencer  MKS28/06/19 SellFTSE 1002.7%2.6%0.1%
Mulberry  MUL22/11/19 SellFTSE AIM5.4%5.7%-0.3%
EVRAZ EVR25/10/19 SellFTSE 1005.6%4.0%1.6%
AA AA.31/05/19 SellFTSE All Small6.1%6.1%0.0%
Domino's Pizza  DOM18/09/1917/10/19SellFTSE 2506.5%1.1%5.3%
Trainline TRN29/11/19 SellFTSE 2509.1%5.6%3.3%
BAE Systems BA.19/07/19 SellFTSE 1009.5%1.4%8.0%
M.P. Evans  MPE25/10/19 SellFTSE AIM11%7.6%2.9%
Castings CGS08/02/19 SellFTSE All Small12%8.9%3.2%
EnQuest ENQ18/01/19 SellFTSE All Small13%9.7%2.7%
Babcock International  BAB05/04/1925/09/19SellFTSE 25014%1.1%12%
Victrex VCT21/06/19 SellFTSE 25016%15%0.7%
Charles Stanley  CAY22/02/1925/11/19SellFTSE All Small16%-0.6%17%
Crest Nicholson  CRST22/11/19 SellFTSE 25018%7.5%9.5%
John Menzies MNZS18/09/19 SellFTSE All Small18%11%7.0%
Balfour Beatty BBY26/07/19 SellFTSE 25020%12%7.5%
Aggreko AGK01/02/19 SellFTSE 25020%17%2.5%
J Sainsbury SBRY14/06/19 SellFTSE 10021%3.7%16%
Jupiter Fund Management JUP08/02/1930/07/19SellFTSE 25021%5.3%15%
Mears  MER14/06/19 SellFTSE All Small22%6.9%14%
Ryanair  RYA15/02/19 SellFTSE 10024%5.3%18%
The Restaurant GroupRTN04/10/19 SellFTSE 25028%14%12%
Standard Life Aberdeen SLA22/03/19 SellFTSE 10029%5.7%23%
Persimmon PSN10/05/19 SellFTSE 10030%5.7%23%
ASOS ASC06/09/19 SellFTSE AIM32%8.6%22%
CMC Markets CMCX12/07/1922/11/19SellFTSE All Small33%0.7%32%
Gooch & Housego GHH16/08/19 SellFTSE AIM33%11%20%
Lookers LOOK02/08/19 SellFTSE All Small36%12%22%
Stagecoach  SGC19/04/19 SellFTSE All Small38%6.5%29%
International Consolidated AirlinesIAG09/08/1918/12/19SellFTSE 10039%4.0%33%
Just Eat JE.31/05/19 SellFTSE 10040%6.4%31%
N Brown  BWNG30/08/19 SellFTSE All Small48%14%30%
Galliford Try GFRD17/05/19 SellFTSE All Small60%5.1%52%
Capita CPI28/06/19 SellFTSE 25061%14%41%
Sophos  SOPH05/04/1915/10/19SellFTSE 25080%3.8%73%

Source: S&P CapitalIQ

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