By Peter Brimelow
A DOW JONES COLUMN
Boring works in this erratic market-and sometimes it's exciting.
The top-performing portfolio over the last 12 months by Hulbert Financial Digest count is Toronto-based The Investment Reporter's Speculative Stocks list, up 53.6% through August versus 14.86% for the dividend-reinvested Wilshire 5000 Total Stock Market Index. Currently it consists of just one stock: PFB Corp. (PFB.T).
PFB Corp. is a Canadian stock, and it has, of course, benefited from the Canadian dollar's appreciation. But although you often get fluke results when you look at the top-performing portfolio among the 640-odd portfolios offered by the 180-odd letters currently followed by the Hulbert Financial Digest, Investment Reporter's overall record, which includes a significant exposure to U.S. stocks, is consistently strong. Having the current top-performing portfolio may be atypically exciting, but it's not out of line.
Over the year to date, an average of The Investment Reporter's ten portfolios, arranged according to risk, is up 27.4% by Hulbert Financial Digest count versus 5.75% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
Over the past five years, the letter was up an annualized 5.5%, versus negative 0.52% annualized for the total return Wilshire 5000. Over the past fifteen years, the letter was up an annualized 12.36%, versus a 6.22% annualized gain for the total return Wilshire.
The Investment Reporter gives no investment allocation advice and is therefore treated as fully invested at all times by the HFD. Accordingly, its performance reflects a heart-stopping overall loss 50.9% in the Crash year of 2008, when the Wilshire finished down 37.2%. But it bounced back.
The Investment Reporter's portfolios are divided equally between U.S. and Canadian stocks, but in recent years it has told its subscribers to be only 25% exposed to U.S. equities.
Its top-performing U.S. list, its "Average Risk U.S. Stocks," is up 12.8% annualized, versus 7.13% for the Wilshire since the HFD started following it in 1991. Its current holdings are Paychex Inc. (PAYX) and PPG Industries Inc. (PPG).
Over many years in journalism, I've found that U.S. editors regard Canada as boring. And up to a point The Investment Reporter kind of bears that out. It is fully invested. It offers no exciting macro theories. It doesn't even use technical analysis, just number-crunching fundamentalism.
But it gets results--as does the very similar Canadian service Successful Investor. (This not may not be a coincidence. Successful Investor editor Pat McKeough ran Investment Reporter for many years.)
In its relatively short commentaries, the Investment Reporter is currently showing an intense interest in dividends. It writes, "The fact is, dividend yields are now significantly higher than bond yield...High-quality companies usually maintain their dividends. Many of our Key Stocks raise their dividends regularly. Also, high-quality companies usually remain in business, prosper in good times and share that prosperity with you.
"Just remember to diversify across the five main sectors of the economy: finance; utilities; consumer products and services; manufacturing; and resources. This will reduce the risk to your dividends."
This approach was evident in the service's most recent bulletin, which recommended Chevron Corp. (CVX)
After reviewing the oil company's operations, Investment Reporter noted, "The shares trade at a mere eight times earnings. So there's room for multiple expansion in addition to the positive effect of rising earnings.
"What's more, the stock has a healthy dividend yield of 3.6%, and the dividend is bound to continue to rise in coming years. All told, the shares are an attractive buy for growth and income."
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