How Do Our Top Stock Picks Perform Compared To Average Stocks?

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How Do Our Top Stock Picks Perform Compared To Average Stocks?

Transcript

Hello there. In the last video we looked at a list of stocks taken from the website on the 20th of March this year, a list of about 30 top-ranked stocks at that time and we looked at what had happened to them in the intervening time until the present.

I wanted to do a similar thing today looking at some stocks that were on the website from the 27th of March, a week later than the last case study. But I wanted to do something a little bit different today. I wanted to show the results of the top-ranked stocks and how they compare to the same results we would have got from the bottom-ranked stocks.

So if we start here at the Sector Relative Strength table, which has just been updated for Friday the 22nd of May, we go back to the 27th of March which is here. We can sort this descending and we find that, again, it was the drug sector still that is at the top.

Sector Relative Strength Table

And an alternative way to look at this, my preferred way, is to look at the Sector Relative Strength Trendlines chart, which shows us not only what's at the top and what's at the bottom, but it shows us the path that they have taken to get there.

Sector Relative Strength Trendlines

So we see that drugs once again is at the top and, at the 27th of March here, it's had a very nice run-up. It would unquestionably be the sector that we would be interested in at that point.

Sector Relative Strength Trendlines Chart

So we can go and see the stocks that were top-ranked at that time.

This is the exact same list of stocks that were on the website at the 27th of March. We've sorted this by sector relative strength rank descending. So we have the highest sector -- Drugs -- which we've just seen, and we also have the symbols sorted by descending relative strength.

Stock Sector Industry Table

So we have the top-ranked symbols, in the top-ranked sector. And what we're going to do is take about the top 20 or so, and we're going to take them and put them in a list in Amibroker. Which is this list here.

Top Ranked Stocks In A Watchlist

And, just like last time, we have a small piece of code that we can run in Amibroker. We can set the list here which is Case001.

Amibroker Top Ranked Stocks Watchlist

We can run the code, and it gives us the amount that the stock has moved from the start date, that we see here, of the 27th of March, up until the 22nd of May which was Friday two days ago.So that was thirty nine trading days. And, in the final column here, we have the percentage change that these stocks have made.

Top Ranked Stocks Results

And, much as last time, we can see immediately that the percent changes is very, very strong, for these stocks, in this sector. And in fact there's not one move here that's negative. All the moves are positive

so we can do the same thing with a list of stocks here, which I've already got in (list) Case002 -- I'll show you what that is in just a second.

It has come from simply doing the reverse here -- we've sorted the sector relative strength rank from lowest to highest. The lowest sector is Aerospace. And I also sorted the symbols here ascending. So we now have 20 of the lowest-ranked symbols in the lowest-ranked sector.

Bottom Ranked Stocks

And what we're going to do here, is compare how these symbols performed, over the intervening period, compared to the top-ranked symbols that we just looked at.

So these symbols have gone into the Amibroker list Case002, which we've just set here. If we run our piece of code here, let's just sort it the same way...

Bottom Ranked Stocks Results

Well, we see straight away that it is very different. We have pretty small gains, and we have a number of symbols here which didn't make a gain, which in fact made a loss.

I've also taken these over to spreadsheets here, Case001 and Case002, so let's have a look at the summary here.

Summary Results Top Ranked Stocks

Case001, which is the top-ranked stocks, there are 18 stocks there. All 18 are above zero, which means they're (showing a) positive move. So we have 100% winning moves there, zero losing moves. The average gain for these is 29.98%, which is very good indeed.

Total gain is not really very meaningful, but we can compare it to the next dataset we look at. It's 539%.

So we go to case002, which is the lowest-ranked stocks in the lowest-ranked sector. As we've just seen a moment ago, we have losing trades here. We have eighteen symbols. Eleven of them put in a positive move, and seven of them had a negative move. So we have 61% positive and 39% negative.

Summary Results Bottom Ranked Stocks

In this case, the average gain is 2.21% and the total gain is 39.83%. Compared to an average gain of 29% and the total gain of 539% (forthe top-ranked list)..

We can see that the top-ranked stocks have done about ten times better than the lowest-ranked stocks. Which is pretty conclusive proof that using relative strength ranking, to rank sort and select our sectors and our stocks, will put us into the stocks that are giving the moves that we need for successful trading.

Comparison Top Ranked Bottom Ranked Stocks Results

We can see very clearly here, the difference between the results we get when we choose a list of top-ranked stocks and the results we get when we choose a list of stocks ranked at the bottom.

I did actually do an intermediate study here. This is Case003, and this has come from sorting this database of stocks from the 27th of march. I've simply looked for those that were ranked around the 50 mark. So they're right in the middle. We've got the top-ranked are up around 100, and the lowest-ranked around one, and the mid-tier ranking is around 50.

We've got 19 of them. We see that -- they're actually very similar to the lowest-ranked stocks -- we've got 12 which made a positive move, 7 which made a negative move. So 63% positive, 37% negative. The average gain is 10% and the total gain is 197%.

Summary Results Mid-Tier Ranked Stocks

So, again, we see a world of difference between the top-ranked stocks here, which gave us 100% positive results, and gave us an average gain of nearly 30%, and a total gain of 539%.

Comparison Top Ranked Bottom Ranked Mid-Tier Ranked Stocks Results

One last thing before we wrap up. These, of course, are not trades. We're not saying that we could capture all of these moves, obviously.

What we are saying is that, if we have two lists, and one of them has 100% positive moves and the average move is very high, and we have a second list which has only 60% positive moves and 40% negative moves, and the average move is very much smaller -- clearly the first of those lists would be vastly superior to trade. And would have great benefits for our trading results.

Certainly it's the one I'm going to choose.

That's it for now. That's it for today. Thanks very much for watching and I'll see you next time.

Bye for now

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