Ivy & Commission Free ETF Portfolios – November Update

Early in 2012  Scott’s Investments added a daily Ivy Portfolio spreadsheet. This tool uses Google Documents and Yahoo Finance to track the 10 month moving average signals for two of the portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.

The Ivy Portfolio spreadsheet tracks the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.

The spreadsheet’s signals update once daily (typically in the late evening) using dividend/split adjusted closing price from Yahoo Finance. The 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price.  Even though the signals update daily, it is not an endorsement to check signals daily. It simply gives the spreadsheet more versatility for users to check at his or her leisure.

The page also displays the percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10 month simple moving average, using both adjusted and unadjusted data.

If an ETF has paid a dividend or split within the past 10 months, then when comparing the adjusted/unadjusted data you will see differences in the percent an ETF is above/below the 10 month SMA. This could also potentially impact whether an ETF is above or below its 10 month SMA. Regardless of whether you prefer the adjusted or unadjusted data, it is important to remain consistent in your approach. My preference is to use adjusted data when evaluating signals.

Top 50 Trending Stocks

The current signals based on October’s closing prices are below. As with recent months, US equities continue to show strength and developed international equities are also showing strength.

The first table is based on adjusted historical data and the second table is based on unadjusted price data. Adjusted data is my preferred method for averaging prices; however, if you use a charting or financial site which uses unadjusted prices you may see moving average signals closer to those in the unadjusted table:



I also provide a “Commission-Free” Ivy Portfolio spreadsheet as an added bonus. This document tracks the 10 month moving averages for four different portfolios designed for TD Ameritrade, Fidelity, Charles Schwab, and Vanguard commission-free ETF offers.

Not all ETFs in each portfolio are commission free, as each broker limits the selection of commission-free ETFs and viable ETFs may not exist in each asset class. Other restrictions and limitations may apply depending on each broker.

Below are the 10 month moving average signals (using adjusted price data) for the commission-free portfolios:




ETFReplay Portfolio for November

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly.

For 2013 the static basket of ETFs was reduced from 25 to 15. From this basket of 15, the top 4 are purchased each month. The portfolio will be re-balanced at the beginning of each month. When a holding drops out of the top 5 ETFs it will be sold and replaced with the next highest ranked ETF. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

In addition, ETFs must be ranked above the cash ETF SHY in order to be included in the portfolio, similar to the absolute momentum strategy I profiled here. This modification could help reduce drawdowns during periods of high volatility and/or negative market conditions (see 2008-2009), but it could also reduce total returns by allocating to cash in lieu of an asset class.

The top 5 ranked ETFs as of 10/31/13 are below:


VTI Vanguard MSCI Total U.S. Stock Market
HYG iShares iBoxx High-Yield Corp Bond
SHY Barclays Low Duration Treasury
WIP SPDR Int’l Govt Infl-Protect Bond

Since cash (represented by SHY) is the fourth highest rated ETF, anything rated below it does not qualify for purchase. Last month SHY was the third highest rated ETF, so November is positioned less defensively than October.

For November the portfolio maintains positions in VTI and EFA, and keeps approximately 25% in cash. HYG will be purchased using October 31st’s closing price.  A more aggressive approach would disregard the cash filter. However, the objective of the portfolio is balance risk and reward while reducing drawdowns.

The strategy’s performance since inception is below, as is comparative performance of the SPDR S&P 500 ETF (SPY), iShares Growth Allocation (AOR), and the Permanent Portfolio (PRPFX):


Sunday Readings

Below is my investment reading list for this weekend:

The Great American Wall Of Worry – US Stock Market – Chris Vermeulen

Minimum Variance Portfolios: Theory and Empirics at Odds – Turnkey Analyst

Know Your Limits – What is Possible in the US Equity Market? Empiritrage

The Deserted Island Portfolio – Research Affiliates

No, Bloomberg, the managed futures industry is not a scam – Attain Capital Management

Don’t Fear the (Alpha) Reaper – Advisor Perspectives

The Problem With Buybacks & The Dividend Challenge & Probabilistic Investing – Mebane Faber

The Damage to the US Brand & A Code Red World – John Mauldin

Earnings Growth to Ramp Up? Call Me a Skeptic – Sheraz Mian viaJohn Mauldin’s Outside the Box

Weekend Investment Reads

Below is my weekend investment reading list:

Free Webinar: Break Free From Market Volatility with Tim Melvin’s Value Investing Strategy

Larry Swedroe on Small Cap Investing, Part 12, and 3 (Index Universe)

How Investors Lose 89 Percent of Gains from Futures Funds – Bloomberg

Large Buybacks Outperform S&P 500 by 5 Percent per Annum – Value Walk

Living in a Low Return World – Abnormal Returns

Momentum Hierarchy – Optimal Momentum

Mebane Faber on Buy and Hold and The Perfect Asset Class

Naive Risk Parity – Advisor Perspectives

This Secular Bear Has Only Just Begun – Ed Easterling via The Big Picture


Monday Readings

Below are some investment articles I am reading this week:

Mean Regression and the Value Anomaly  – Turnkey Analyst

Momentum…the Only Practical Anomaly? – Optimal Momentum

Is the Stock Market Cheap? Doug Short

Structural Diversification for All Seasons – Advisor Perspectives

Why Most Traders Fail – The Reformed Broker

Taper Capers – John Mauldin

The Ultimate Income Portfolio Revisited – Geoff Considine

15 Biases That Make You Do Dumb Things With Your Money – The Motley Fool

Survival of the Fittest? Bill Gross

Flexible Asset Allocation – Empiritrage

October High Yield Dividend Champion Portfolio

In December 2010, I created a screen/hypothetical portfolio called the “High Yield Dividend Champion Portfolio.” The screen is tracked publicly as a continuous hypothetical portfolio with a starting balance of $100,000 on Scott’s Investments.

Like many of the screens, strategies, and portfolios I track and prefer, the High Yield Dividend Champion Portfolio uses a small number of historically relevant ideas to create a simple, yet powerful investment plan. As I previously detailed, “Some studies have shown that the, highest yielding, low payout stocks perform better over time than stocks with higher payouts and lower yields.”

The High Yield Dividend Champion Portfolio attempts to capture the best high yield, low payout stocks with a history of raising dividends. There are numerous ways to rank high yield/low payout stocks. 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.

In January I announced some changes to the ranking system. We still begin with the Dividend Champion list, which is first sorted by yield and the lowest 50% yielding stocks are eliminated. Eliminating the lowest yielding stocks ensures only stocks with a relatively “high” yield make the portfolio.

The remaining stocks are then assigned a rank based on their yield (the higher the yield the higher the rank), payout ratio (the lower the payout ratio the higher the rank), 3 year dividend growth rate, and 5/10 year Dividend Acceleration/Deceleration (5-year average increase divided by 10-year average increase).  Extra weight is given to yield and payout ratio rankings.

The top 10 stocks based on the new ranking system make the portfolio. Stocks will be sold at 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.

This month, as like last month, there is no portfolio turnover. All current positions will be held until next month.

The top 15 stocks based on my ranking methodology are below and displayed in order of their overall ranking (figures are September month-end):

Name Symbol Yield Payout A/D* 3-yr
Chevron   Corp. CVX 3.29 32.41 0.96 9.68
Helmerich   & Payne Inc. HP 2.90 30.44 1.52 11.87
Altria   Group Inc. MO 5.59 87.67 1.25 8.71
ExxonMobil   Corp. XOM 2.93 31.74 1.08 9.51
WGL   Holdings Inc. WGL 3.93 62.22 1.35 2.89
Target   Corp. TGT 2.69 41.45 1.10 24.74
Universal   Corp. UVV 3.93 33.96 0.58 2.13
American   States Water AWR 2.94 53.29 1.53 7.93
UGI Corp. UGI 2.89 47.48 1.15 10.53
Questar   Corp. STR 3.20 60.50 1.03 9.61
Leggett   & Platt Inc. LEG 3.98 69.77 1.15 3.81
Northwest   Natural Gas NWN 4.34 85.45 1.24 3.81
Clorox   Company CLX 3.48 65.74 0.91 8.91
Tompkins   Financial Corp. TMP 3.29 58.91 0.84 5.70
HCP Inc. HCP 5.13 108.25 1.14 2.82

The current portfolio is below:

Position Purchase Date
CVX 12/6/2012
WGL 12/6/2012
HP 7/5/2013
UVV 4/5/2012
UGI 8/5/2013
LEG 8/5/2013
XOM 4/5/2013
MO 3/5/2013
AWR 7/5/2013
NWN 4/5/2013

The portfolio performance is below along with three benchmarks:

High Yield Dividend Champion Oct

If you enjoy these free tools, please consider making a donation on the home page of Scott’s Investments using the Paypal link in the upper-right corner!

More on this topic (What's this?)
Is time spent learning dividend investing worth it?
7 Higher Yield Dividend Growth Stocks
Preventing Blind Spots in Dividend Investing
Read more on Dividend Investing at Wikinvest