MoneySense's Income 100 in hindsight

[takingprofits]

As many Canadians are doing this Victoria Day weekend, I am enjoying the holiday at the lake. While rifling through the various magazines laying around the cottage I found MoneySense's Summer 2008 issue with their Income 100 top picks - their recommendations of the best Canadian stocks and trusts for Investors looking for yield.

The prices and yields given are as of April 2008 and it was interesting to peruse the list with the benefit of hindsight - a good reminder to perhaps not take any investment advice at face value.

Of the 100 stocks and trusts on the list I can find only 5 that have a higher stock price now than they had a year ago. Most are still trading at one third to one half the value they were a year ago and many have cut their payouts.

The 5 "winners" are Barrick Gold, Kinross, Loblaws, George Weston, and Fairfax Financial.

Interesting to note that none of these rated in MoneySense's "A" group - in fact some of them rated "D" for dreadful - their words not mine.

Also interesting to note that Income Trusts seemed to have fared worse than stocks.

Personally, I find it hard to get excited about a 5% yield when the trust or stock drops 50 to 70%

[NormR]

April 30, 2008 to April 28, 2009 the performance of the Income 100 stock groups are ...

A: -15.1%
A&B: -20.4%

XDV: -22.1% (Dividend ETF)
XIC: -30.7% (S&P/TSX Composite ETF)
XIU: -29.4% (S&P/TSX 60 ETF)

So the A group bested the ETF indexes by 700 bp (dividend ETF) to 1560 bp (Composite).

[takingprofits]

The performance comparison to ETFs is really of no value and no reason to think that those who picked the list are shewder than those who manage ETFs.

Few if any would have bought all of the stocks in the "A" group to have experienced beating the dividend ETF. The point of such a list is to provide a list from which individual stocks can be picked.

No "A" group members made any money as I recall (I am back in the city so I no longer have the magazine). A couple of "D"'s did actually make money and were probably the best performers of all but because of the "dreadful" rating would have been overlooked - by me anyway.

[NormR]

The performance comparison to ETFs is really of no value and no reason to think that those who picked the list are shewder than those who manage ETFs.

Few if any would have bought all of the stocks in the "A" group to have experienced beating the dividend ETF. The point of such a list is to provide a list from which individual stocks can be picked.

No "A" group members made any money as I recall (I am back in the city so I no longer have the magazine). A couple of "D"'s did actually make money and were probably the best performers of all but because of the "dreadful" rating would have been overlooked - by me anyway.

The ETFs selected seem like common and reasonable benchmarks to use. Indeed, the article mentions XDV as the benchmark they use.

You've selected a different benchmark (positive returns). You're certainly welcome to do so. But it doesn't say very much after one of the worst bear markets in memory. It just points to the fact that cash would have been a good place to hide over the last year.

Indeed, a 15.6 percentage point outpeformance vs the market is really something of a triumph considering the circumstances.

I kindly suggest that one shouldn't expect that such a list will manage to pick all, and only all, of the best performers in any given year.

However, I do note that A graded stocks MRU.A and EMP.A fared quite well with 57% and 36% gains respectively. Also, you mentioned FFH and WN which got Bs. (I also note that FFH's recently bought-out subsidiary NB got a B.)

But, in my mind, projects such as the Income 100 should be approached with more modest expectations. Personally, I like them because they provide a great deal of data which can be used in any way I like. If I want to focus on high yield dividend growers then I can.

They also highlight a particular investment style and describe how the stocks are graded. That provides some nice insight into the method used and what might be important to consider when selecting stocks.

I'd estimate that the long-term performance advantage of a dividend growth strategy, similar to the one used in the Income 100, may amount to roughly 1 to 2 percentage points a year on average. But there will be large swings in any given year.

Also, one shouldn't expect any particular style of investing to outperform all of the time. For instance, in some years value will outperform growth. In others, growth will win over value. Over the last year, cash has handily beaten stocks (both value and growth) and has generally triumphed over most other asset classes.

[OntFA]

It's hardly relevant that a certain strategy lost money over a one year period. Really, how many of you made money IN STOCKS during 2008? C'mon, even millionaire Rickson lost 1/3rd last year. Buffett's BRK book value fell about 10% (and that's with lots of private companies). I think we have to give Norm kudos for picking out the equities that fared pretty well in a very difficult year.

[Retired at 31]

A year is an arbitrary measuring stick.... think long term. In fact, be happy that these previously low yielding things are on sale and are paying out a better yield today. Buy some more!

[Spidey]

I also agree that one year is not a fair timeline and if you are judging the Norm's selections then you have to make an "apples" to "apples" comparison. I don't think Norm is trying to say anything in particular about the market and which way it will go, he's simply identifying stocks that show good value relative to the market conditions at that time. I find Norm's analysis helpful. For example, I decided to buy a some HSE shortly after reading the article and yes, I got a little burnt (well maybe a lot burnt). But I also picked up more shares toward the bottom (@ around $28) for both my own and my wife's accounts and today the market value is looking pretty good compared to my average book value.

That's just one example, there are a couple of others and I think Norm's analysis gives a good starting point for stocks to research.

[takingprofits]

However, I do note that A graded stocks MRU.A and EMP.A fared quite well with 57% and 36% gains respectively.

You must be looking at a different list of stocks. MRU.A and EMP.A are not in the list of 100 stocks and trusts I was referring to in my original post.

You guys who are berating me because I referred to the results of recommendations after one year are really reading more into my post than was intended. I was just pointing out that taking recommendations at face value is probably not wise and many experts probably have no better record at investing than you or I... - second paragraph for those of you who piled on without bothering to read the initial post.

For the record - I also bought HSE last spring along with a few more on the list (previous to seeing the article).

I move that if anyone wants to continue this thread that it should be expanded to include all of the recommendations made on Market Call on BNN - especially those that tank within a week of being recommended

[NormR]

You must be looking at a different list of stocks. MRU.A and EMP.A are not in the list of 100 stocks and trusts I was referring to in my original post.

The complete list was provided online (for free and as mentioned in the original article) due to space constraints. (Income 100)

[takingprofits]

Ahh! I see the the problem.

The article in the magazine had 100 stocks in total - 50 trusts and 50 dividend paying stocks - not 100 of each.