Saturday, May 03, 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 5/2/2014 slightly outperformed the SP500 for the week, with only the IBD 5 having a negative return.  Three of the top five stocks in the IBD 5 had a negative return.  For the week, there were 33 stocks up and 17 stocks down for the IBD 50. 

ANIK was the leading IBD 50 stock for the week, as the biotechs bounced back.  The weakest IBD 50 stock was AMBA.

The total return since 2/8/2014 is underperforming the SP500.  None of the IBD models has a positive return for 2014.  The more diversified model (with 50 stocks) is performing better than the less-diversified models, and is just shy of having a positive return.

The portfolio is sold at the closing price Friday night, and rebalanced into the make-up of the IBD top 50.  Dividends are excluded from total returns.

Trading costs $248.75.

image The IBD monthly strategy wrapped up a poor April and rebalanced at the close on 4/30/2014. 

For April, 13 stocks in the IBD 50 had a positive return, while 37 were negative.  MYGN led the IBD 50 for April, returning a whopping 23.5%.  The worst performing IBD 50 stock for April was NQ, down almost 30%.  Again, IBD frequently replaces tickers in the IBD 50, so these models reflect “buy and hold” from 3/31/2014.

But it’s a new month, and with two days in the books the IBD50 Monthly models are beating the SP500.  35 stocks in the IBD 50 have had a positive return, while 15 are losing money.

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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