Stockopedia for AIM (and IHT)

Today’s post is about using the the Stockopedia service to find AIM stocks for an IHT portfolio — it’s Stockopedia for AIM.
Cheapskate lurker
Over the close to three years that I’ve been writing this blog, I’ve written about Stockopedia on four occasions:
- My second ever article for 7 Circles was on a presentation I saw Ed Croft give at the London Investor Show 2014
- In 2015 I looked at a seminar that Ed gave on Portfolio Construction.
- In 2016 it was the turn of a seminar on Profit Warnings and what to do about them.
- And earlier this year I covered a seminar on Stockopedia’s Styles and Risk Ranks.
Though I like the look of the service, and admire what Ed and the team are trying to do, I’ve never taken the plunge to sign up for the service.
- It costs £200 pa for the UK data, and I’m just too mean.
- I’ve never even signed up for the two-week free trial, since that didn’t seem like enough time to evaluate it properly.
- It used to be five days, so things are heading in the right direction, but I would have preferred a month and ideally six months to get the hang of the service.
- There’s no monthly subscription option either, so after two weeks you have to commit for at least a year.
And it’s been a bull market over the past few years, and reasonably easy to make money without subscription services.
Other people’s money
So what’s changed?
- I remember Paul Scott talking about the time he helped out at a investment firm.
- He didn’t find the responsibility of looking after other peoples’ money very helpful.
I’ve informally helped people for many years, but now I’m taking on responsibility for an AIM IHT portfolio.
- And we need to invest at close to market highs, both for AIM and the wider UK market. (( For the IHT exemption, you need to hold the shares for two years, so drip-feeding in the cash comes at a potential cost ))
So hopefully, it’s Stockopedia to the rescue.
- I signed up for the trial this morning, with a view to continuing indefinitely if I can work out how to make it add value.
Getting started
Stockopedia has been around for quite a while, and though it’s a well-designed website, it’s rather overwhelming at first.
So let’s start with what we know already.
- The focus here will be my first two articles on the service, since the last two are more specialised.
- Let’s be unconventional, and start with the two I expect to be less useful.
The lesson from the Profit Warnings (PWs) seminar was to sell on the first profit warning, since the vast majority of stocks don’t recover.
- It also pointed out that most PWs come from companies that have underperformed the market over the previous six months — so Momentum can save you from these.
- “Cheap” (low PE) and high-yield stocks were most likely to issue PWs.
The Styles seminar drilled down into the Stock Ranks (more on these in a moment) to broaden the ways of using them.
- There are three Stock Ranks (Quality, Value and Momentum) and users had been crowding into stocks with good scores for all three.
- This seminar looked at how stocks with 2 out of 3 good scores could still be useful (and how stocks with only one good score out of three probably weren’t).
This seminar also covered Risk Ranks (strictly, relative volatility ranks).
- Low volatility (Conservative) stocks do better, but Adventurous and Speculative stocks do well during “Risk On” periods (eg. bull runs).
- So it sounds like we might need to favour Conservative and Balanced stocks as we approach the end of the bull.
It’s worth noting that the risky stocks tend to be smaller and have worse Stock Ranks.
- So their underperformance is not surprising, and can be avoided directly, without using the Risk Ranks.
Stockopedia
On to the more useful articles.
In the first, introductory seminar from Ed, he said that there are three things that work in the stock market:
- cheap (as measured by eg. P/E) is better than expensive
- good (eg. cash generative, low-risk) is better than bad
- leading / improving is better than lagging / deteriorating (momentum)
There are lots of alternative measures you can use to identify these stocks (more detail is here).
The problem is that selecting these stocks is against human nature (Behavioural Finance):
- cheap = problems with the company
- good = boring
- new highs = scary
The Stockopedia Stock Ranks (Quality, Value and Momentum) are designed to get you past this.
- (Portfolios made from) stocks with high ranks tend to outperform.
The StockRanks are normalised scores (1–100) relative to the entire market of 2000+ stocks.
- I’ll be interested to see if I can track the Ranks for a particular stock through time, to see whether it’s position is improving or deteriorating.
Stock screens
Stockopedia use their Ranks, together typically with market cap measures (nothing below a cut-off size), to produce Guru Stock Screens.
But the screens produce only a few candidate stocks, leading to volatility and increased risk of significant drawdowns.
Ed stressed the importance of Portfolio Management: diversification, risk management and rebalancing.
- He recommended between 25 and 50 stocks as the ideal portfolio size.
- We’ll be using 50 for the AIM IHT portfolio.
Portfolio construction
In the second seminar, Ed explained how to put together a portfolio.
He began by describing how he put together his annual NAPS portfolio (stock tips, but with some science behind them):
- rank stocks by descending StockRank (that’s the combined QVM one)
- exclude stocks with market cap less than £20M
- exclude stocks with Bid-Ask spread of 5% or more
- pick the two highest ranking stocks from each of 10 sectors
We might want to additionally:
- Drill down into the QVM Ranks to check that all three are above a threshold.
- Use a bigger minimum market cap (£100M comes to mind).
- Look at the available sectors, and exclude some.
- Diversify across market caps as well as sectors (though our ability to do this will be limited by what’s available on AIM).
Sectors
Ed uses the Thomson Reuters sector classification. It has:
- 10 economic sectors
- 28 business sectors
- 54 industry groups
Ed uses the 10 sector model for his NAPs portfolio:

Lessons
So what have we learned?
1 — We’re looking for 50 AIM stocks.
2 — High Q, V and M ranks are good.
- We might want to check that all three Ranks are above a threshold.
3 — Small-cap stocks are to be avoided.
- I usually use a minimum of £50M and and a share price of 50p in my own portfolios.
- For this IHT portfolio, I’ll aim (( No pun intended )) for £100M and 100p.
- We’ll also aim (( Sorry once again )) to diversify across market caps as well as sectors.
4 — Stocks with a spread greater than 5% are to be avoided.
5 — We’d like a good spread of sectors.
- Some sectors may be excluded.
I also need to look for any Guru Screens that find conservative small cap stocks.
- If any readers know of any good ones, please let me know in the comments.
Rebalancing
We also need to decide what to do about rebalancing.
- An AIM IHT portfolio is essentially a “buy and hold” collection.
- But you are allowed under the BPR rules to sell an asset and rollover the proceeds into another BPR-qualifying asset.
So we will probably sell big losers and trim big winners.
- Stopping out losses at 20% almost always makes sense.
- And with a 50-stock portfolio, we don’t want any individual stock to reach more than 5% of the portfolio.
Home page
So let’s see how easy it is to apply those rules.
Here’s the home page:

Front and centre is Paul Scott’s Small Cap Value Report, which I hope everybody is reading already.
There’s also a lot of UK stock data:
- The index values and daily change, plus a FTSE-100 chart
- PE, Yield and Earnings Growth data
- Advances, New Highs and Stocks above the MA-200
At the top are links to an orientation video, Folios, Stock Search, a Toolbox and Blogs (actually, discussion boards, since readers can post as well as Stockopedia official authors)..
- Interestingly, there’s no button for a stock screener, so I hope that’s under the Toolbox.

Further down the page is a bit about Guru Screens.
- There’s a very persuasive graph of a Composite screen vs a benchmark — I’ll look for this screen later.
- The other blocks are more disappointing, with each of them focusing on daily changes.

The third section covers the StockRanks.
- Growth seems to have been added as a fourth Rank.

The bottom of the page is all about education, with links to seminar videos, e-books and articles.
- According to the “New Features” section, nothing has been added since the Risk Ratings.
Digging down
So I watched the orientation video, which covered:
1 — The daily Stock Report for each company.
- The Stock Ranks are shown in the top right.
2 — You can add a stock to a Folio direct from the Stock Report
- You can also import portfolios from other services (from Google Finance, ShareScope or Excel)
3 — Filters (Stock Screens)
4 — The Discussion Boards (which turn out to be the Blogs)
The Stock Report
Here’s what a Stock Report looks like (I chose Just Eat at random):





I think you’ll agree that it’s pretty comprehensive.
- Note that Growth doesn’t appear in the top right, so it looks like it hasn’t been added as a fourth Rank.
Toolbox

Unfortunately the Toolbox doesn’t have a Stock Screener, so let’s move on to the Guru Screens.
Guru screens

The Guru Screens page lists 66 screens, but the Composite one we saw earlier is not readily apparent.

The nearest that I could find was called “Screen of Screens”.
- This looks for stocks that appear on at least four screens, and tends to choose defensive stocks, which is what we want.
- The screen returns 61 stocks, with a variety of Stock Ranks, and no indication of AIM status.
My own screen
So I took a copy of the Screen of Screens, and renamed it “Screen of Screens AIM” (( Original, huh? ))
I added two new rules:
1 — UK Exchanges includes LSE AIM Market
- I wanted to exclude all foreign exchanges to avoid dual-listings, but that was not possible.
2 — Size Group includes Large Cap / Mid Cap / Small Cap
- I wanted to filter market cap, but all I was able to do was exclude micro caps.

I can’t say that I’m impressed with the results.
- There are only 14 stocks on the list.
- 3 are below my £100M cut-off.
- Three have Stock Ranks below 80, which is where Stockopedia stops using the green colouration.
- Three have F-scores below 6 (and are therefore coloured orange).
And there are plenty of names on the list that I’m not keen to own.
- But at least I’ve discovered how to run my own screens.
Conclusions
I think we’ll leave it there for the first day.
- It’s a slick site, with oodles of data, but I think I’ll need some practice in order to get the best out of it.
It certainly isn’t as simple as pressing a button.
- I’ll be back soon with more in a similar vein, probably starting with a screen built from scratch.
Until next time.
Originally published at 7 Circles.
