Market Reads

Below is an expansive list of investment articles I have enjoyed this month:

The Reformed Broker:

A Wealth of Common Sense:
 Meb Faber:
Alpha Architect:
Systematic Relative Strength:

Dual ETF Momentum April 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 in the 2013 Year in Review and the January 2015 Update.

Below are the four portfolios along with current signals:

Return Data Provided by Finviz

Dual April

As an added bonus, the 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 – April 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.

I made one change to the screen methodology for 2016 in order to further simplify the process. Stocks from the Dividend Champion list were previously ranked on yield, payout ratio, P/E, and 3 year dividend growth rate.

In 2016 stocks are ranked on yield, P/E and 3 year dividend growth rate.  Payout ratio will no longer be a factor.  The modification has a relatively low impact to screen results.

Stocks will still be 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 using the new method  are below and displayed in order of their overall ranking (figures are March month-end):

Name Symbol Yield P/E 3-yr
Helmerich & Payne Inc. HP 4.68 27.31 114.15
Archer Daniels Midland ADM 3.3 12.14 16.96
AT&T Inc. T 4.9 17.33 2.22
Questar Corp. STR 3.55 21.02 8.1
Emerson Electric EMR 3.49 14.5 5.4
Altria Group Inc. MO 3.61 23.47 8.36
Old Republic International ORI 4.1 12.52 1.39
ExxonMobil Corp. XOM 3.49 21.71 9.73
Eaton Vance Corp. EV 3.16 15.24 9.18
Eagle Financial Services EFSI 3.48 11.65 3.1
Chevron Corp. CVX 4.49 38.94 6.83
Community Trust Banc. CTBI 3.51 13.28 2.25
Universal Corp. UVV 3.73 16.28 2
T. Rowe Price Group TROW 2.94 15.76 15.21
HCP Inc. HCP 7.06 999 4.16
MDU Resources MDU 3.85 25.27 2.9
Consolidated Edison ED 3.5 18.87 2.42
Wal-Mart Stores Inc. WMT 2.92 15.02 7.78
Bowl America Class A BWL-A 4.86 30.43 1.78
United Bankshares Inc. UBSI 3.6 18.54 1.06
Weyco Group Inc. WEYS 3.01 15.85 6.18
National Retail Properties NNN 3.77 40.88 3.11
Target Corp. TGT 2.72 15.58 17.84
Universal Health Realty Trust UHT 4.59 31.6 1.47
Procter & Gamble Co. PG 3.22 27.17 5.99


There is no turnover in the existing positions for this month.

The current portfolio is below:

Position Initial Purchase Date Percentage Gain/Loss Excluding Dividends Current Allocation
CVX 12/6/2012 -8.10% 9.43%
EMR 8/4/2015 7.21% 10.32%
ORI 4/4/2014 10.85% 9.39%
EV 2/5/2016 18.78% 10.77%
ADM 12/7/2015 0.37% 11.19%
MO 1/7/2016 9.36% 11.61%
XOM 4/5/2013 -6.42% 7.45%
HP 10/6/2014 -34.62% 6.73%
TROW 3/7/2016 1.09% 11.38%
T 3/7/2016 1.36% 11.46%



Momentum Portfolio Update

In 2011 Scott’s Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility.  In 2014 I also introduced a pure momentum system, which ranks the same basket of ETFs based solely on 6 month price momentum. The first portfolio was previously called the “ Portfolio” but at the beginning of 2016 was renamed “Conservative Momentum Portfolio” (or “6/3/3 strategy”) to reflect some changes in the portfolio and tracking methodology for both portfolios detailed below.

Bring Your Portfolio Into The 21st Century
Free Access – Special Report

In previous years the Conservative Momentum Portfolio  began with a static basket of 14 ETFs.  The basket of 14 ETFs has been reduced to 10 ETFs. This change was made in order to further simplify the portfolio. The 10 ETFs are listed below:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EEM iShares MSCI Emerging Markets
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd


The ETFs are still ranked by 6 month total returns (weighted 40%), 3 month total returns (weighted 30%), and 3 month price volatility (weighted 30%). The top 3 are purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it will be replaced. Previously, the portfolio purchased the top 4 ETFs and only sold when a holding dropped out of the top 5. In addition, ETFs previously had to be ranked above the cash-like ETF (SHY) in order to be included in the portfolio. This requirement has been removed, so the top 3 ETFs will be held regardless of proximity to SHY.

Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  For 2015 the strategy now ranks ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover. Previously the strategy bought the top 4 ETFs each month – going forward the top 3 ETFs will be purchased. The portfolio and rankings are posted on the same spreadsheet as the 6/3/3 strategy.

The portfolio names dropped “” because the strategies can be tracked on multiple website. is still an excellent choice for tracking and backtesting the strategies detailed. However, a formidable free option for backtesting these strategies has emerged at Portfolio Visualizer.

The current top 3 ETFs are listed below for each strategy:

Conservative Momentum
VNQ Vanguard REIT ET
GLD SPDR Gold Shares ETF
TLT iShares Barclays 20 Year Treasury Bond Fund
Pure Momentum
GLD SPDR Gold Shares ETF
TLT iShares Barclays 20 Year Treasury Bond Fund


The current portfolios are below:

Conservative Momentum

Position Shares Purchase Price Purchase Date Percentage Gain/Loss Excluding Dividends
VNQ 52 83.8 3/31/2016 -0.13%
TLT 32 126.67 2/1/2016 3.17%
GLD 35 118.64 2/29/2016 -1.44%


Pure Momentum

Position Shares Purchase Price Purchase Date Percentage Gain/Loss Excluding Dividends
GLD 27 118.64 2/29/2016 -1.44%
TLT 25 126.67 2/1/2016 3.17%
VNQ 40 79.89 10/30/2015 4.76%


Current signals can be viewed on Scott’s Investments here.