Dual Momentum Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum.  Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, also details Dual Momentum as a total portfolio strategy.

My Dual ETF Momentum spreadsheet is available here and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”.

Relative momentum is gauged by the 12 month total returns of each ETF. The 12 month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of iShares Barclays 1-3 Treasury Bond ETF (SHY). In order to have an “Invested” signal the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns.

An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3, 6, and 12 (“3/6/12″) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have an average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF.

Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12″).  The test results were posted here.

Below are the four portfolios along with current signals:

Return Data Provided by Finviz

The Dual ETF Momentum spreadsheet also has four additional sheets using a dual momentum strategy with broker specific commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions and the terms of their commission-free ETFs could change in the future.

Dividend Champion Portfolio – February Update

The High Yield Dividend Champion Portfolio is a publicly tracked stock portfolio on Scott’s Investments.  Its goal is to capture quality high yield stocks with a history of raising dividends.

The screening process for this portfolio starts with the “Dividend Champions” as compiled by DRIP Investing. The list is comprised of stocks that have increased their dividend payout for at least 25 consecutive years.  Stocks are then ranked on yield, P/E and 3 year dividend growth rate and assigned an overall rank.

Stocks are sold on the re-balance date (generally around the 5th of the month) when they drop out of the top 15 (to limit turnover) and are replaced with the next highest rated stock.

The top 25 stocks are below and displayed in order of their overall ranking (figures are from the end of January):

Name Symbol Yield P/E 3-yr
Target Corp. TGT 3.72 11.83 13.66
VF Corp. VFC 3.26 17.88 18.69
T. Rowe Price Group TROW 3.20 14.14 12.43
Helmerich & Payne Inc. HP 3.93 999.00 28.76
AT&T Inc. T 4.65 20.08 2.17
Consolidated Edison ED 3.71 18.36 2.90
Altria Group Inc. MO 3.43 26.76 8.59
Old Republic International ORI 3.61 13.00 1.37
Kimberly-Clark Corp. KMB 3.20 20.22 6.21
Coca-Cola Company KO 3.37 25.19 7.72
Eagle Financial Services EFSI 3.38 15.57 2.57
ExxonMobil Corp. XOM 3.58 39.20 6.60
Weyco Group Inc. WEYS 2.98 19.71 5.84
Archer Daniels Midland ADM 2.71 16.77 16.45
PepsiCo Inc. PEP 2.90 22.76 9.11
National Retail Properties NNN 4.17 40.00 3.62
Emerson Electric EMR 3.27 23.85 4.70
Wal-Mart Stores Inc. WMT 3.00 14.48 3.26
McDonald’s Corp. MCD 3.07 22.37 4.98
Johnson & Johnson JNJ 2.83 19.07 6.74
Computer Services Inc. CSVI 2.67 18.92 20.89
Vectren Corp. VVC 3.06 21.96 4.37
Cincinnati Financial CINF 2.83 18.14 4.97
Leggett & Platt Inc. LEG 2.85 18.35 4.10
Universal Health Realty Trust UHT 4.22 48.53 1.61

There is turnover in one position this month.  Universal (UVV) will be sold for a capital gain of 23.6% since its original purchase date of 10/6/2016.  Proceeds from the sale will be used to purchase Kimberly-Clark (KMB).

The current portfolio is below:

Position Shares Average Purchase Price Initial Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VFC 470 57.39 12/7/2016 $26,973.30 $23,199.20 -13.99%
ED 390 70.41 12/7/2016 $27,459.90 $28,977.00 5.52%
ORI 1145 16.22 4/4/2014 $18,571.90 $23,987.75 29.16%
KO 653 41.29 12/7/2016 $26,962.37 $27,138.68 0.65%
TGT 391 68.65 6/3/2016 $26,842.15 $24,797.22 -7.62%
MO 400 58.14 1/7/2016 $23,256.00 $28,516.00 22.62%
TROW 300 71.35 7/5/2016 $21,405.00 $20,199.00 -5.63%
HP 341 80.9 10/6/2014 $27,586.90 $23,535.82 -14.68%
KMB 240 121.24 2/6/2016 $29,097.60 $29,097.60 0.00%
T 650 38.13 3/7/2016 $24,784.50 $26,689.00 7.68%


The portfolio equity curve is below:

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