Jubak Picks Portfolio Performance 1997-2017
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 483% as of December 31, 2017. 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 2017
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 2017
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
On the surface the creeping improvement in the price of Emerson Electric (EMR) shares seems odd. The company is a powerhouse in process manufacturing–you know industrial automation, industrial control and safety, and the Internet of Things. And those haven’t been investment superstars during the U.S.-China trade war and in a slowing global economy. Those are the reasons I added the shares to my Jubak Picks Portfolio back in February 6, 2019. But until yesterday that position was underwater.
Adding Taiwan Semiconductor Manufacturing to JubakAM.com Special Report 10 Long-term Picks for a Short-term Market as Pick #6 and to my long-term 50 Stocks Portfolio
To add exposure to the Internet of Things, my choice is Taiwan Semiconductor Manufacturing (TSM), the biggest contract chip manufacturer in the world. I simply don’t know at this stage of the development of the Internet of Things what devices will be winners (or losers), what uses of the technology will add significant value to the sales total of an existing company (and which will be rounding errors to the company’s sales total and hence unlikely to move a stock), and how the Internet of Things will net out for a specific company (that is, will the Internet of Things be a net plus for sales or empower competitors to seize market share.) What I do know without any doubt is that the Internet of things will require lots and lots of chips, most of which will come from an independent foundry such as Taiwan Semiconductor. The market for the Internet of Things will be looking to for more powerful, smaller, and more energy efficiency. Those demands will push the companies that design these chips to come up with new designs that require advances in manufacturing technology. And Taiwan Semiconductor is one of a handful of chip foundries in the world with the intellectual property–and the ash flow–to meet the demands of chip makers.
Looking for an above average yield? Australia’s Westpac Banking looks very attractive after today’s financial sector selling but I’d wait on a likely dividend cut this fall
Today’s weakness in the financial sector on the news that online brokerage Charles Schwab (SCHW) will be cutting commissions on equity and ETF trades to 0% sent the financial sector down to a loss of 2.07% on the Financial Select Sector SPDR ETF (XLF). That drop–plus good news from Australia’s housing market–would seem to open up a window for any income investor looking for an above average yield from shares of Westpac Banking (WBK) without adding big risk to a portfolio. But the opening is deceptive and I’d wait a bit until after the likely announcement of a modest dividend cut sometime this fall.
Ok, one lawsuit/investigation/class action action against a company is bad news, usually, for a stock. Two, though? Time to say, Move along. Especially when the company in question shows a remarkable ability to keep getting sued for the same practices.
Why introduce legislation that will dead on arrival in the Republican controlled Senate? Because House Speaker Nancy Pelosi and other Democrats know that controlling drug prices is extremely popular with voters. And a proposal that is a serious effort to lower drug prices is a hammer that can be used over and over again to beat up President Donald Trump and Republican House and Senate candidates during the 2020 election.
It’s by no means a guarantee of gains, but owing shares of a company that is riding the wave of positive macro and micro trends does indeed usually result in solid profits. On the macro side, Barrick Gold has global trends pointing toward toward higher gold prices as on lower interest rates as central banks try to jump start growth in slowing economies with the spark of cash, cash, and more cash. It can also look forward to rising gold prices as investors worried about recessions, inflated currencies, and financial market risk look to find a safe haven.
Riding the Popeye’s chicken sandwich higher; raising target price for Restaurant Brands International
Today I’m raising my target price for Restaurant Brands International (QSR) because I think the new Popeye’s chicken sandwich has legs. A social media storm has accompanied the introduction of a new chicken sandwich at Popeye’s to compete with Chick-fil-A that has led to the sandwich selling out after massive sales. The chicken couldn’t have crossed the road at a better time for Restaurant Brands International, the parent of the Burger King, Tim Hortons and Popeyes fast food food chains.
Two big clouds of doubt hover over shares of Apple (AAPL).First, will the continuing U.S.-China trade war take another bite out of Apple’s China revenue? And/Or disrupt Apple’s China supply chain, saddling the company with higher tariffs on its made in China iPhones? Back in January shares of Apple plunged to the lowest price in a year-and-a-half after the company cut its revenue outlook for the first time in almost two decades, citing weaker demand in China. Second, will Apple’s new product announcements in September be exciting enough to put some energy into Apple’s sales?