Monday, April 14, 2014

Update – The IBD Top 50 Stocks Strategy

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

image The IBD weekly strategy ending 4/11/2014 had another bad week.  The market has been seeing rotation out of the high beta and volatile names into the big cap value names.  But even the larger cap stocks started getting hit this last week.

For the week, there were 3 stocks up and 47 stocks down for the IBD 50.  Only 1 of 4 in the top IBD 5 stocks was positive for the week.

The IBD models are performing exactly the opposite from when the market was advancing.  When the market was advancing, the IBD 50 stocks easily led the SP500.  But even though these are the top ranked stocks, they are also leading on the way down.  Being in the high-quality names has not been a safe haven!

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.

Trading costs $169.15.

image The IBD monthly strategy is also having a rough April.  Diversification into more stocks has cushioned the blow compared to more concentrated holdings.

The IBD newspaper frequently updates the IBD 50 holdings, but this portfolio remains with the top 50 as of the close March 31st.  If the the high-beta stocks continue to get sold off, it’s going to be a long month for these models.

IBD often mentions that the stock list and updates to the stock list are not to be used as a buy or sell list.  Wise words!

Trading costs $29.85.

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.  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.  Note that Motif limits the size of portfolios to 30 stocks).

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.

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