Sunday, March 18

Week 350 - Non “S&P 100 Index” Companies in the Extended Version of “The 2 and 8 Club”

Situation:The 2 and 8 Club” has 23 members that we have selected from the S&P 100 Index because those have a dividend yield greater than ~2%/yr, and have had a dividend growth rate of at least ~8%/yr over the past 5 years (see Week 344). By using a larger starting list than the S&P 100 Index, i.e., the Barron’s 500 List, we can add 11 companies to create the Extended Version of “The 2 and 8 Club.” 

Mission: Apply our Standard Spreadsheet to those additional 11 companies.

Execution: see Table.

Administration: All 11 companies meet requirements for membership in “The 2 and 8 Club”: 1) an S&P bond rating of BBB+ or better; 2) an S&P stock rating of B+/M or better, 3) are listed in the Vanguard High Dividend Yield Index and 4) have the 16+ years of trading records that are needed for quantitative metrics using the BMW Method.

Bottom Line: These additional 11 companies help us meet a requirement that academic studies have imposed on stock-pickers who seek to avoid Selection Bias. That requirement is to be actively trading ~40 stocks to have a good chance of beating risk-adjusted returns for “the population intended to be analyzed”, which in this case is the S&P 500 Index.

Risk Rating for the cohort of 34 companies in the Extended Version: 6 (where 1 = 10-Yr US Treasury Notes, 5 = S&P 500 Index, and 10 = gold bullion). 

Caveat Emptor: The risk of loss in a Bear Market (from investing equal amounts in all 34 stocks) is ~12% greater vs. investing in SPY, per Column M of this Week’s Blog and the Week 348 Blog. But price performance over the past 16 years is ~75% better, per Column K of those Blogs. Total Returns since the highest S&P 500 Index peak just prior to the Great Recession have been ~35% greater, per Column C in both Blogs. 

Full Disclosure: I own shares of TRV, WEC and CMI.

"The 2 and 8 Club" (CR) 2017 Invest Tune All rights reserved.

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