Sunday, April 06, 2014

Update – The IBD Top 50 Stocks Strategy

Here’s a late update on the IBD Top 50 stocks investing strategies vs. $SPY

imageThe IBD weekly strategy ending 4/4/2014 had another bad week.  While the SP500 remains near all time highs, the more volatile stocks that make up the Nasdaq and the IBD 50 are getting hit with institutional selling.

The market has been seeing rotation out of the high beta and volatile names into the big cap value names.  Many large institutional investors have to be invested 100% of the time, and when the high beta names stop working, money flows into the names that are more highly liquid and that pay dividends.  These big cap stocks are often seen as “safe,” although they eventually get sold off should the market go into a bigger correction. 

For the week, there were 22 stocks up and 28 stocks down for the IBD 50.  Only 1 of 4 in the top IBD 5 stocks was positive for the week.

The total return since 2/8/2014 is underperforming the SP500.  None of the IBD models has a positive return for 2014.

The portfolio is sold at the closing price Friday night, and rebalanced into the make-up of the IBD top 50.

image The IBD monthly strategy has had a rough April so far.  What’s interesting is that the portfolio was rebalanced after the close on March 31st, so the difference between the weekly and monthly strategies excludes the very positive last day of the first quarter.  What a difference!  (Of course, that day was included in the previous monthly returns, so all is not lost…).

The news media often says that the market hasn’t had a 10% pullback in quite awhile, but if one is following the monthly or weekly IBD holdings, there is more volatility here than in the more widely followed indexes.


As I have been reading reviews of investing and rebalancing into model portfolios, the trading costs of rebalancing weekly or monthly is often discussed.  Going forward, I will list the “in and out” rebalancing costs for each strategy to demonstrate the impact these costs would have on returns.  I will assume a $9.95 cost to sell last week’s or last month’s portfolio, and $9.95 to buy the new weekly or monthly portfolio.  (Imagine the costs of doing this with individual stocks, compared to using Motif).

The Top 25 holdings are listed at at Motif Investing.  (A check as of 3/31/2014 shows that the ability to view all holdings is limited to Motif members and IBD subscribers).

None of the above strategies are a recommendation to buy or sell stocks.  These are model portfolios constructed for entertainment only.

This is the IBD portfolio performance since 2/8/2014.  Each portfolio begins with $10,000 and then invests an equal amount in the top 5, 10, 25 and 50 IBD stocks at the closing prices on Friday for the weekly model, and at the closing prices on the last trading day of the month for the monthly model.  Since IBD changes the make up of their top stocks daily, this will only rebalance on Fridays or end of month.  It is assumed that trading costs are $9.95 to “buy” a model portfolio, and $9.95 to “sell” a model portfolio.  Thus, each weekly or monthly rebalance out of the previous portfolio and into the new portfolio costs $19.90.  Daily changes in the IBD 50 or stock rankings are not considered.  Changes in IBD’s overall market views are not considered.  Stop loss orders or other market timing strategies are not considered. 

Based on a blog entry from Paladin Money.  See Investors Business Daily for more information on the IBD 50.  See Motif Investing for their IBD Top 25 portfolio, and the ability to construct your own portfolio of stocks.

blog comments powered by Disqus