Saturday, October 11, 2014

Update – The IBD Top 50 Stocks Strategy

Here is the latest on the IBD 50 stocks investing strategies vs. $SPY

Another bad week for the IBD 50 portfolios.  Yuck!  image When the stock market is in an uptrend, the IBD 50 portfolios outperform.  When the stock market is heading south, the IBD 50 portfolios do much worse.  There is no surprise what happened here this week.  For the week, there were 0 stocks up and 50 stocks down for the IBD 50. 

XRS led the IBD 50, declining 1.17 for the week.  The biggest loser for the IBD 50 was EMES, down 21.89%.

The IBD 50 portfolios total return since 2/8/2014 are now underperforming the SP500. For anyone expecting a bounce or a rally into the end of the year, what outperforms from here?

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 $686.55.

image The IBD monthly strategy is underperforming  the SP500.

The portfolios concentrated in fewer holdings are performing better than the more diversified portfolios. Only the IBD 5 has a positive return at this time.

The IBD 50 has 2 gainers and 48 losers. 

AAP was the top performer for the IBD 50, returning 1.93%.  The weakest stock in the IBD 50 so far is SLCA, losing 27.02%.

Trading costs $149.25

I will assume a $9.95 trading 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.  The value for SPY is based on buying 2/8/2014.

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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