Jubak Picks Portfolio Performance 1997-2014
Buy and hold? Not really.
Not by a long shot.
So what is the stock-picking style of The Jubak Picks portfolio?
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I try to go with the market’s momentum when the trend is strong and the risk isn’t too high, and I go against the herd when the bulls have turned piggy and the bears have lost all perspective. What are the results of this moderately active—the holding period is 12 to 18 months—all-stock portfolio since inception in May 1997? A total return of 334% as of December 31, 2012. That compares to a total return on the S&P 500 stock index of 125% during the same period.
Jubak Top 50 Portfolio Performance for 2016
This long-term, buy-and-holdish portfolio was originally based on my 2008 book The Jubak Picks.
Trends that are strong enough, global enough, and long-lasting enough to surpass stock market averages.
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In The Jubak Picks I identified ten trends that were strong enough, global enough, and long-lasting enough to give anyone who invested in them a good chance of beating the stock market averages.
To mark the publication of my new book on volatility, Juggling with Knives, and to bring the existing long-term picks portfolio into line with what I learned in writing that book and my best new ideas on how to invest for the long-term in a period of high volatility, I’m completely overhauling the existing Top 50 Picks portfolio.
You can buy Juggling with Knives at bit.ly/jugglingwithknives
Dividend Income Portfolio Performance for 2016
Every income investor needs a healthy dose of dividend stocks.
Why not just concentrate on bonds or CDs?
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Because all the different income-producing assets available to income investors have characteristics that make them suited to one market and not another. You need all of these types of assets if you’re going to generate maximum income with minimum risk as the market twists and turns.
For example: bonds are great when interest rates are falling. Buy early in that kind of market and you can just sit back and collect that initial high yield as well as the capital gains that are generated as the bonds appreciate in price with each drop in interest rates.
CDs, on the other hand, are a great way to lock in a yield with almost absolute safety when you’d like to avoid the risk of having to reinvest in an uncertain market or when interest rates are crashing.
Dividend stocks have one very special characteristic that sets them apart from bonds and CDs: companies raise dividends over time. Some companies raise them significantly from one quarter or year to the next. That makes a dividend-paying stock one of the best sources of income when interest rates start to rise.
Bonds will get killed in that environment because bond prices will fall so that yields on existing bonds keep pace with rising interest rates.
But because interest rates usually go up during periods when the economy is cooking, there’s a very good chance that the company you own will be seeing rising profits. And that it will raise its dividend payout to share some of that with shareholders.
With a dividend stock you’ve got a chance that the yield you’re collecting will keep up with rising market interest rates.
But wouldn’t ya know it?
Just when dividend investing is getting to be more important—becoming in my opinion the key stock market strategy for the current market environment—it’s also getting to be more difficult to execute with shifting tax rates and special dividends distorting the reported yield on many stocks.
I think there’s really only one real choice—investors have to pull up their socks and work even harder at their dividend investing strategy. That’s why I revamped the format of the Dividend Income portfolio that I’ve been running since October 2009. The changes aren’t to the basic strategy. That’s worked well, I think, and I’ll give you some numbers later on so you can judge for yourself. No, the changes are designed to do two things: First, to let you and me track the performance of the portfolio more comprehensively and more easily compare it to the performance turned in by other strategies, and second, to generate a bigger and more frequent roster of dividend picks so that readers, especially readers who suddenly have a need to put more money to work in a dividend strategy, have more dividend choices to work with.
Why is dividend investing so important in this environment? I’ve laid out the reasons elsewhere but let me recapitulate here. Volatility will create repeated opportunities to capture yields of 5%–the “new normal” and “paranormal” target rate of return–or more as stock prices fall in the latest panic. By using that 5% dividend yield as a target for buys (and sells) dividend investors will avoid the worst of buying high (yields won’t justify the buy) and selling low (yields will argue that this is a time to buy.) And unlike bond payouts, which are fixed by coupon, stock dividends can rise with time, giving investors some protection against inflation.
The challenge in dividend investing during this period is using dividend yield as a guide to buying and selling without becoming totally and exclusively focused on yield. What continues to matter most is total return. A 5% yield can get wiped out very easily by a relatively small drop in share price.
Going forward, I will continue to report on the cash thrown off by the portfolio—since I recognize that many investors are looking for ways to increase their current cash incomes. But I’m also going to report the total return on the portfolio—so you can compare this performance to other alternatives—and I’m going to assume that an investor will reinvest the cash from these dividend stocks back into other dividend stocks. That will give the portfolio—and investors who follow it—the advantage of compounding over time, one of the biggest strengths in any dividend income strategy.
What are some of the numbers on this portfolio? $29,477 in dividends received from October 2009 through December 31, 2013. On the original $100,000 investment in October 2009 that comes to a 29.5% payout on that initial investment over a period of 39 months. That’s a compound annual growth rate of 8.27%.
And since we care about total return, how about capital gains or losses from the portfolio? The total equity price value of the portfolio came to $119,958 on December 31, 2012. That’s a gain of $19,958 over 39 months on that initial $100,000 investment or a compound annual growth rate of 5.76%.
The total return on the portfolio for that period comes to $49,435 or a compound annual growth rate of 13.2%.
How does that compare to the total return on the Standard & Poor’s 500 Stock Index for that 39-month period? In that period $100,000 invested in the S&P 500 would have grown to $141,468 with price appreciation and dividends included.) That’s a total compounded annual rate of return of 11.26%.
That’s an annual 2 percentage point advantage to my Dividend Income portfolio. That’s significant, I’d argue, in the context of a low risk strategy.
Portfolio Related Posts
I’ve been waiting for this for more than a year. And so have a lot of other investors and traders from the market reaction today. Shares of Hain Celestial Group (HAIN) jumped 8.56% today on news that activist investor Engaged Capital had accumulated almost 10% of the company’s shares and was demanding that the company put itself up for sale. Engaged Capital has nominated seven candidates for the company’s board.
Visa (V) is defending its turf in the financial processing market by buying and/or partnering with the new generation of fintech companies. Visa’s latest deal is the purchase of a stake of less than 10% in Finland’s Klarna, The still-private company recently became the largest European fintech player to get a banking license.
The ultimate goal is to convert Vale (VALE), the global iron ore producer, into a true corporation from its current status as a company controlled by a shareholder group consisting of Brazilian pension funds, Brazilian bank Bradesco, and Japan’s Mitsui. This transformation would remove worries that Vale, possibly the most important Brazilian company after Petrobras (PBR), runs its business to suit the government instead of its private shareholders. With Brazil locked into a corruption scandal that has already brought down one president and that now threatens another, removing worries about government manipulation would do nothing but good for the stock.
Cheniere Energy (LNG) has a significant first-mover advantage, I argued upon picking this stock for my Jubak Picks portfolio, since it was the first U.S. company to get a unrestricted permit to export liquified natural gas. Turning that advantage into revenue and earnings, however, always depended on Cheniere’s ability to move sales from the spot market to long term contracts. The company struck two more deals this past week.
In August 2015 Danaher acquired Pall for $13.8 billion. Then in 2016 Danaher spun off most of its industrial businesses into a new company called Fortiv. That left a refocused Danaher with four segments Life Sciences; Diagnostics; Dental; and Environmental & Applied Solutions. The former Pall business went into the Life Sciences segment. Through that segment Danaher is a provider of filtration, separation and purification technologies to the biopharmaceutical, food and beverage, medical, aerospace, microelectronics and general industrial sectors. It’s this business that interests me as a water play in an age of capital rationing for supplies of clean water.
Yesterday, June 8, Alibaba (BABA) forecast that revenue would climb by 49% for fiscal 2018. That’s a solid 10 percentage points above the recent projection from Wall Street analysts. The New York traded ADRs climbed almost 10% on the news yesterday. They’re off 2.04% today against the background of a 1.80% drop in the NASDAQ Composite as a whole.
Before the market open today, Deere (DE) reported fiscal second quarter earning of $2.14 a share. (That excludes the gain from the sale of SiteOne Landscape Supply for $111 million.) Those earnings were 45 cent a share better than the Wall Street consensus of $1.69 a share. Revenue climbed just 2.2% year over year so the beat was largely a result of costs savings, a more profitable product mix, and higher realized prices. Cost of sales in the company’s equipment business fell to 75% in the quarter from a prior forecast of 78%.Deere raised its guidance for the third quarter to an 18% increase in revenue
Shares of Incyte (INCY) are up 7.1% as of 12:30 p.m. New York time on data released before the June meeting of the American Society of Clinical Oncology showing that Incyte’s epacadostat, which is an IDO inhibitor, has proved effective when used in combination with Merck’s (MRK) Keytruda and Bristol-Myers Squibb’s (BMY) Opdivo.