Backtested Lazy Strategy—It Destroyed the Index!
- FinancialWisdom
- Jun 28
- 7 min read
Stockopedia’s smart ranking system
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Video Transcript Below:
What if I told you there's a stock picking strategy so simple it takes less than one hour per year to manage, yet it's beaten every single UK fund manager over the past decade? A strategy that turned £100,000 into over £340,000 against FTSE All Share’s £127,000? In this video, we will cover a system so effective that it has outperformed the S&P 500, a growth market index, using only the value-driven UK stocks. The system is Stockopedia's NAPS portfolio
It is something that challenges everything you think you know about successful investing. While most investors spend hours researching companies, reading annual reports, and following market news, there's a mechanical system that's been quietly crushing the competition. The NAPS portfolio - derived from "nap hand," like having an unbeatable hand in cards - has compounded at 13% annually for ten years straight. But here's the kicker: it's so simple that anyone can replicate it. By the end of this video, you'll understand exactly how this system works and why rules-based investing might be the key to building long-term wealth in the UK market.
Let’s start with the foundation: What Makes NAPS Different?
Let me start with a story that perfectly illustrates why most investors fail. Picture this: you buy a stock based on a compelling story, watch it double in value, then hold on because you "believe in the company." Sound familiar? The NAPS system would have sold that stock after exactly one year, regardless of the story. And here's the shocking part - of the top ten biggest NAPS winners over the decade, eight of them either crashed or went sideways after being sold. Only two continued to rise significantly.
This is the fundamental difference between emotional, story-driven investing and systematic, rules-based investing. The NAPS portfolio doesn't care about your feelings, market sentiment, or compelling narratives. It follows a simple set of rules that have been proven to work over decades.
Here are NAPS’ three Pillars of Success
The NAPS strategy is built on what Stockopedia calls the "3D Framework" - three dimensions that separate winning portfolios from losing ones:
First, Drivers - consistently picking high-potential shares. The system uses Stockopedia's proprietary StockRank, which combines quality, value, and momentum factors. These aren't random metrics - they're the three most powerful return drivers proven by academic research over the past century.
Second, Diversity - reducing risk while improving returns. Instead of betting everything on a few stocks, NAPS spreads risk across all ten market sectors. This isn't just about safety - it's about ensuring you capture the next big winner, wherever it emerges.
Third, Discipline - maintaining your edge through time. This is where most investors fail. They start with good intentions but let emotions drive their decisions. NAPS eliminates this human weakness entirely.
Let’s cover the complete NAPS methodology - it is so simple that you could implement this yourself in minutes:
Step one: Sort the entire UK stock market by StockRank in descending order. This ranks every stock by its combined quality, value, and momentum characteristics.
Step two: Exclude small, hard-to-trade shares with market caps below £20 million. We want liquidity.
Step three: Select the top two stocks from each of the ten market sectors. This gives you a diversified portfolio of 20 stocks.
Step four: Buy the entire list and hold for exactly one year.
Step five: After one year, sell everything and repeat the process.
That's it. No complex analysis, no reading annual reports, no following CEO interviews. The entire process takes less than an hour annually.
But why does this mechanical approach work so well? The answer lies in human psychology. We're hardwired to make investing mistakes. We fall in love with stories, we panic during crashes, we chase hot sectors, and we hold losers too long while selling winners too early.
The NAPS system eliminates every single one of these biases. It doesn't care that a company has an exciting new product or that the CEO gave a compelling interview. It only cares about the data - and the data doesn't lie.
Consider this: the system picked Games Workshop when it was unfashionable, rode Jet2's incredible run, and captured IQE's 261% gain in 2017. But it also sold Petropavlovsk before it crashed 96%, exited Frontier Developments before it fell 94%, and got out of IQE before it collapsed 93%. A human investor, attached to these "winning" stories, would have held on and watched their gains evaporate.
Now let's talk numbers, because the results are simply staggering. Over the past decade, the NAPS portfolio has delivered a 241% total return, compounding at 13% annually. To put this in perspective, £100,000 invested in 2015 would be worth over £340,000 today.
But here's what makes this truly remarkable: this performance was achieved during one of the most challenging decades for UK stocks. We've had Brexit uncertainty, six different Prime Ministers, a global pandemic, and a torrent of companies delisting to move to the US. The FTSE All Share managed just 27% over the same period.
Even more impressive? The NAPS portfolio beat the S&P 500's 193% return using only UK stocks. While everyone was saying you needed to abandon the UK market, this simple system proved them wrong.
What's particularly fascinating about NAPS is how it captures multibaggers - stocks that multiply several times over. The system identified 13 stocks that doubled during the decade, with two almost quadrupling. Games Workshop delivered a staggering 269% gain, while IQE returned 261% in a single year.
But here's the crucial insight: the system's discipline saved investors from devastating losses. Of those top ten winners, four crashed by more than 90% after being sold, and four more went sideways for years. Only Games Workshop and Premier Foods continued rising significantly after exit. This proves that having an exit strategy isn't just important - it's essential for preserving wealth.
Let’s now see how the strategy fared agains the competition.
When Stockopedia downloaded data on 175 UK-focused funds with ten-year track records, the results were eye-opening. The NAPS portfolio beat every single one of them. Not most of them - all of them. This isn't just about beating the market; it's about demonstrating that individual investors, using simple rules, can outperform professional fund managers with their teams of analysts and resources.
The win rate tells the story perfectly. The NAPS achieved a 57% success rate - meaning 57% of individual stock picks were profitable. Combined with a payoff ratio of 1.91, where average winners returned almost double the average losses, this created a powerful compounding machine.
Here is how the strategy approached Sector Diversification.
Think of your portfolio like sailing a ship. You need anchors to weather storms and sails to catch favorable winds. That's why NAPS invests across all ten market sectors. You might look at the performance and think you'll avoid telecoms or energy, but there have been significant periods where these sectors dominated returns.
The beauty of the system is that it doesn't try to predict which sector will win next. Instead, it ensures you're positioned to benefit from whatever rotation occurs. One year's sector winner often becomes next year's loser, and the NAPS diversification approach provides both resilience and returns.
More recently, the strategy’s performance continues to be robust. Even in 2025, the system keeps delivering. In the first quarter, the NAPS portfolio hit new all-time highs, up 7.3% year-to-date while the FTSE All Share managed just 0.6%. The portfolio weathered the Trump tariff turbulence and rebounded strongly, proving once again that systematic diversification works.
What's particularly interesting about Q1 2025 is how the biggest winners came from unexpected places. Two junior gold miners - Metals Exploration and Serabi Gold - led the charge, while retailers like Kingfisher and Currys surprised to the upside. Meanwhile, the stocks that performed worst were Yu Group and Journeo - ironically, the ones the portfolio manager knew best. This perfectly illustrates why removing human bias and sticking to the system works.
Stockopedia has also launched a more dynamic version called the QVM portfolio that builds on NAPS principles but allows for more responsive systematic changes throughout the year. Early results show similar performance, validating the core approach while exploring evolutionary improvements.
But let's be honest about the psychological reality of systematic investing. It's not easy. The NAPS portfolio has spent seven of the last ten years in drawdown, meaning it was below its previous high. During the March 2020 pandemic crash, five years of gains vanished in just over a week, with the portfolio falling 47% from its peak.
This is where discipline becomes crucial. If you check your portfolio daily, you'll be disappointed about half the time - the NAPS only rose on 53% of trading days. But if you check just once a year, your chances of seeing a gain jump to 80%. That's 364 fewer opportunities to make emotional decisions that destroy returns.
Here's the beautiful irony of the NAPS system: by doing less, you achieve more. While other investors are constantly tweaking their portfolios, following market news, and second-guessing their decisions, NAPS investors can literally ignore their portfolios for 364 days a year.
This isn't just about convenience - it's about recognizing that most investment activity is counterproductive. The more you trade, the more likely you are to make mistakes. The more you follow market news, the more likely you are to panic. The more you research individual companies, the more likely you are to fall in love with stories that don't translate to returns.
As Jesse Livermore once said: "It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight!" The NAPS system institutionalizes this wisdom, forcing you to sit tight when every instinct tells you to act.
The NAPS portfolio proves a fundamental truth about investing: simple, systematic approaches consistently beat complex, discretionary ones. Over ten years, this one-hour-per-year strategy has outperformed every UK fund manager, beaten major indices, and even topped the S&P 500 using only UK stocks.
The three pillars - focusing on proven return drivers, diversifying across sectors, and maintaining discipline through systematic rebalancing - create a framework that any investor can follow. You don't need to be a financial genius, you don't need insider information, and you don't need to spend your life analyzing companies.
What you need is the discipline to follow a proven system and the patience to let compound returns work their magic. In a world obsessed with complexity and constant activity, sometimes the most radical approach is elegant simplicity. For investors seeking long-term wealth creation, the NAPS approach offers a compelling alternative to the stress and underperformance of traditional stock picking.
If you’re interested in a Stockopedia subscription—which gives you access to StockRank, the foundation of the NAPS strategy—you can get it at a discount through the link in the description below.
Stockopedia 25% Discount Code - bit.ly/2YIcAIn
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