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The STAR monthly updates provide you with a straightforward, structured approach to share selection and equity portfolio management. By means of the regularly updated share ranking lists you have the choice of either closely following the signals given for model portfolios comprising 10 and 20 shares or of devising your own preferred strategies.
It should be stressed that the system is purely mechanical, and does not incorporate any qualitative or subjective assessment. In essence the STAR approach is based on the results derived from a simple algorithm that regularly reassesses the relative share values of the largest 300 quoted UK companies. By taking account of expected corporate growth rates and also the latest stock market valuations of each company's shares STAR delivers a regular framework for investment decision making.
There is no magic or guarantee to the methods used. What the updates do each month is sort out those companies that combine the highest expected rates of earnings growth with the lowest prospective price to earnings ratios. The approach tends towards that of value investing by selecting shares that are temporarily out of favour with investors. Provided that their lack of support is not due to deteriorating profits growth such companies frequently prove to be successful investments. One of the keys to this is to check the trend in earnings forecasts and avoid, where possible, those equities where the share price fall is preceding a significant reduction in earnings estimates.
The basic share ranking methods were developed by MD Management Limited by testing a large number of forward estimates, such as dividends, earnings and cash flow, since 1985 and selecting those that have proved to be successful over the longer term.
However, it must be stressed that there are bound to be periods, especially during a bear market, when these structured methods result in returns that are below the market average. Despite this there have only been five years, 1990, 1996, 1997, 1998 and 2008 over the past twenty-three when the STAR selections (based on the Growth 10 panel) underperformed the market. See the ‘STAR Performance’ section of this website for more information.
The methods of share selection that form the basis of the STAR monthly online updates were developed by John Mulligan while he was the Managing Director of MD Management, in order to provide him with an objective approach for managing his own portfolio of UK quoted shares. In the absence of any regular data source that he could use to select and subsequently manage his shares he devised this structured approach to share selection and management. It is a rigorously researched method of regularly re-rating leading shares according to a number of key fundamental criteria.
These methods have been developed over the past 23 years and are backed by more than 4000 hours research. This has involved a detailed study into the relationship between monthly equity earnings and dividend forecasts since 1985, and the subsequent movement in prices of the relevant shares. The most consistently successful combinations of factors have now been selected for use in STAR.
On 1st March 2009, Whitechurch Securities Limited took over all aspects of producing and managing the STAR Bulletin, though we continue to work closely with John Mulligan. Whitechurch Securities Limited is authorised and regulated by the Financial Services Authority - please read the Risk Warnings and Important Information at the bottom of this page.
The STAR updates provide a regular monthly investment evaluation on 300 of the largest UK quoted companies. They employ methods of evaluating and rating leading UK shares that that provide signals which can be used in the management of a share portfolio. They do all this with the minimum cost and effort.
The STAR updates provide two sets of share selection indicators. One is primarily for growth, while the other is for growth combined with a higher level of income.
One of the main advantages of the methods used for selecting growth shares is that in most years, since 1985, relatively few share switches have been signaled during the course of the year. The records indicate that on average less than one half of the shares in each portfolio were switched in each year between 1985 and 2008.
Each monthly update usually contains a short commentary on the latest movements and trends in the UK stock market as well as charts and an editorial on both the fundamental and technical background to current equity markets. The monthly updates also provide the latest share selections for growth and income portfolios as well as updates on each of the 300 shares monitored.
More specifically the bulletins are usually set out as follows:-
• A regular commentary "Comment and Analysis" section that includes a résumé of domestic and international equity markets. The progress of the UK equity market is also featured in a regularly updated chart, with plots of both long term and short term moving average lines.
• List of Growth BUY signals, split by 10 and 20 listings
• List of Income BUY signals, split by 10 and 20 listings
• List of all SELL signals in the shares covered
Because the STAR updates concentrate on the three hundred largest UK quoted companies you are unlikely to encounter any practical dealing difficulties unless the overall portfolio size is really massive. In essence the STAR approach therefore offers you an extremely low cost and simple way in which you can manage your equity investments.
Although the methods used in the bulletins have been back tested on a monthly basis since 1985 and in most years have provided results vastly better than the main indices, there have been periods when the annual and monthly selections have significantly underperformed the general market. It is therefore important that the STAR methods are viewed over the long term and not used as investment trading signals.
The material contained within the STAR Bulletin is only suitable for experienced investors who have a tolerance for stockmarket risk and a good knowledge of investing in the stockmarket. The information contained in this newsletter is based purely on a statistical ranking of shares based on historical information. The STAR ratings are based solely on projected earnings, current valuation and historic dividend yield data. Any information contained in this newsletter does not necessarily reflect the views of the Whitechurch Securities investment team.
The information in the STAR Bulletin is issued by Whitechurch Securities Limited and is not a personal recommendation. Whitechurch Securities does not issue advice on individual equities. If you are unsure about investments, the deal and transaction costs and taxation you should seek professional financial advice from a qualified financial adviser or stockbroker. Any decision to act on this market view will be your own.
Whitechurch Securities Limited is authorised and regulated by the Financial Services Authority.
Head office: Kings Weston House, Kings Weston Lane, Bristol, BS11 0UR.
