Shares for the future: new scoring splits my Decision Engine
After a welcome break, analyst Richard Beddard has decided what to do with his Decision Engine’s scoring process. The result helps exclude shares that are worrying him.
2nd May 2025 15:00
by Richard Beddard from interactive investor
Having left you on a cliffhanger last week, I’ve decided not to tinker with the Decision Engine algorithm now I’ve returned from holiday.
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23 Shares for the future
On reflection, it’s unnecessary. I was concerned about lower-quality businesses hiding in plain sight in the Decision Engine table. Rather than complicate the algorithm to relegate them to the bottom of the list, I can simply make these shares more visible.
The group of shares that worry me score 6 or less out of a maximum of 9 points for business quality. This is the aggregated value of the scores I give companies for their financial track records, the capabilities of the business and management, and how well their strategies address the risks they face.
Another way of thinking about this number, 6 out of 9, is as a measure of confidence. If I’m as confident as I can be, a share will score 9 out of 9. If I’m confident a share is a lemon, it will score 0 out of 9, and if I’m ambivalent, it will score 4.5. A score of 6 out of 9 implies a confidence level of 66.6%: more than ambivalent, but not a ringing endorsement.
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The other component of the total score, the component I’ve excluded from the calculation of business quality, is price. This is the value traders ascribe to shares. The price score is determined by a formula detailed in this explainer. The maximum score a share can receive for price is +1, no matter how low the share price is. The minimum is -3 for shares with the highest prices in relation to past profits.
The maximum score for businesses that achieve 6 or less for quality is therefore 6 plus 1, which is 7. Often these shares are lifted in the Decision Engine by their low prices because like me, traders are uncertain about them.
I can prevent these shares from creeping into the “buy zone” at the top of the Decision Engine table by making a very minor change to where the dividing line falls between shares that I deem good value and shares that I’m not so sure about.
Hitherto, I have said that every share with a score of 7 or more is good value. From today, I’ve changed that to every share with a score of more than 7.
You might need to read these two sentences again to appreciate the distinction. A share scoring exactly 7 is not good value, but if it scores a fraction over 7 it is. I have to draw the line somewhere, and this is a good place as it excludes the shares worrying me.
From now on, I will present the shares that score more than 7, the “Shares for the future”, on their own. These are shares I think will be good long-term investments.
In today’s table, 4imprint Group (LSE:FOUR), Judges Scientific (LSE:JDG) and Macfarlane Group (LSE:MACF) have all published annual reports and are due to be re-scored. Two weeks ago, I reduced 4imprint’s score by a point to account for the additional risk posed by the cost of tariffs.
0 | Company | Description | Score |
1 | Churchill China | Manufactures tableware for restaurants and eateries | |
2 | James Latham | Imports and distributes timber and timber products | |
3 | FW Thorpe | Makes light fittings for commercial and public buildings, roads, and tunnels | |
4 | Howden Joinery | Supplies kitchens to small builders | |
5 | Dewhurst | Manufactures pushbuttons and other components for lifts and ATMs | |
6 | Macfarlane | Distributor of protective packaging | |
7 | Renishaw | Whiz bang manufacturer of automated machine tools and robots | |
8 | Oxford Instruments | Manufacturer of scientific equipment for industry and academia | |
9 | Solid State | Manufactures computers, battery packs, radios. Distributes components | |
10 | Renew | Repair and maintenance of rail, road, water, nuclear infrastructure | |
11 | Focusrite | Designs recording equipment, loudspeakers, and instruments for musicians | |
12 | Bunzl | Distributes essential everyday items consumed by organisations | 7.9 |
13 | YouGov | Surveys and distributes public opinion online | |
14 | Advanced Medical Solutions | Manufactures surgical adhesives, sutures, fixation devices and dressings | |
15 | Porvair | Manufactures filters and laboratory equipment | |
16 | Jet2 | Flies holidaymakers to Europe, sells package holidays | |
17 | James Halstead | Manufactures vinyl flooring for commercial and public spaces | |
18 | Judges Scientific | Acquires and operates small scientific instrument manufacturers | |
19 | 4Imprint | Sells promotional materials like branded mugs and tee shirts direct | |
20 | Hollywood Bowl | Operates tenpin bowling and indoor crazy golf centres | |
21 | Games Workshop | Manufactures/retails Warhammer models, licences stories/characters | |
22 | Softcat | Sells hardware and software to businesses and the public sector | |
23 | Volution | Manufacturer of ventilation products |
Scores and stats: Richard Beddard. Data: ShareScope and annual reports
Click on a share's score to see a breakdown (scores may have changed due to movements in share price)
If one of the Shares for the Future’s score falls to 7 or below, either because I have reappraised the business or its price has risen, it will join a secondary list of more speculative shares.
17 more speculative shares
I’m still pondering what to do about the second group of more speculative shares. It is effectively a watchlist, but my instinct is to let it dwindle to a group of shares that I would consider buying if their share prices are cheap enough.
The lower-quality businesses, those that score less than 6 out of 9 points for business quality, are Victrex (LSE:VCT), Treatt (LSE:TET), Tracsis (LSE:TRCS), Anpario (LSE:ANP), Marks Electrical Group Ordinary Shares (LSE:MRK) and RWS Holdings (LSE:RWS). They cannot score more than 7, so they do not really belong in the Decision Engine.
I would like to replace them with better businesses - even if those businesses have high share prices, which is why I have singled them out by putting their names in *italics*.
The reason I’m more forgiving of better businesses with high share prices, is that share prices move more readily than businesses improve. I want to keep track of high-quality businesses because one day I may have the opportunity to invest at a reasonable price.
By relegating low-scoring shares to a secondary table and singling out lower-quality businesses in particular, I’m showing that I’m less committed to them. Rather than rescore all the shares in this table each year, I want to find alternatives that are more likely to be Shares for the Future.
24 | *Victrex* | Manufactures PEEK, a tough, light and easy to manipulate polymer | |
25 | *Treatt* | Sources, processes and develops flavours esp. for soft drinks | |
26 | *Tracsis* | Supplies software and services to the transport industry | |
27 | Auto Trader | Online marketplace for motor vehicles | |
28 | Quartix | Supplies vehicle tracking systems to small fleets and insurers | |
29 | *Anpario* | Manufactures natural animal feed additives | |
30 | Dunelm | Retailer of furniture and homewares | |
31 | *Marks Electrical* | Online retailer of domestic appliances and TVs | |
32 | *RWS* | Translates documents and localises software and content for businesses | |
33 | Bloomsbury Publishing | Publishes books, and digital collections for academics and professionals | |
34 | Celebrus | Makes marketing and fraud prevention software, sells it as a service | |
35 | DotDigital | Provides automated marketing software as a service | |
36 | Goodwin | Casts and machines steel. Processes minerals for casting jewellery, tyres | |
37 | Garmin | Manufactures sports watches and instrumentation | |
38 | Tristel | Manufactures disinfectants for simple medical instruments and surfaces | |
39 | Cohort | Manufactures military technology, does research and consultancy | |
40 | Keystone Law | Runs a network of self-employed lawyers |
Scores and stats: Richard Beddard. Data: ShareScope and annual reports
Click on a share's score to see a breakdown of the score (scores may have changed due to movements in share price)
Shares in *italics* score less than 6 for business quality and may be removed
Richard Beddard is a freelance contributor and not a direct employee of interactive investor.
Richard owns many shares in the Decision Engine. He weights his portfolio so it owns bigger holdings in the higher-scoring shares.
For more on the Decision Engine, please see Richard’s explainer.
Contact Richard Beddard by email: richard@beddard.net or on Twitter: @RichardBeddard
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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