# Tracking my non-dividend portfolio DIVZ



## james4beach (Nov 15, 2012)

I'll post regular updates here of my experimental portfolio. This method, which I'll call DIVZ, was born partly because my US tax status makes it impossible for me to hold Canadian index ETFs non-registered, much to my dismay. (To be clear: *if I could*, I would simply hold XIC or ZCN). *My goal is to achieve a total return equal or greater than XIC with a small number of stocks.*

High level theory

Since this forces me into the stock picking game, I figured I'll do something a bit novel and contrarian. I start by filtering the TSX Composite for stocks that pay zero dividends. Why? It's a contrarian play. Dividend stocks are extremely popular as a result of central bank ZIRP and QE. While everyone is desperately tripping over each other chasing the same dividend paying stocks and getting caught in misconceptions about yield, I'll be looking at non-dividend stocks. It's a less crowded space and in the investment world, there's usually a benefit in operating in less popular spaces.

A side effect of the non-dividend criteria is that it also eliminates the big Canadian banks, which is fine with me. I personally feel these are the most "over-owned" stocks in Canada. Everyone loves the Canadian banks, and I feel there's a bit of a mania about them; they are _too_ popular. And they are 30:1 leveraged institutions with trillions$ of derivative exposure, which I always disliked.

Methodology

I'm going to be a bit vague here to preserve my competitive advantage (in case I'm on to something). Every 6 months, I regenerate the portfolio. First I list all stocks in the TSX Composite that have zero dividends. From these, I use classical technical analysis to mark all the good looking charts, emphasizing trend line direction and new highs. There are no fundamentals considered. I create a list of "good looking stocks".

Now for each of those stocks, I identify the sector. I then trim the list and weight the stocks so that all sectors have *equal weighting*. This does not mean that all sectors are present, but whichever sectors are present will be equally weighted. My resulting portfolio does not have representative weights of the TSX Composite.

The effect of this procedure, re-done every 6 months, should be to eliminate the worst performers. I also gain from new additions to the TSX Composite, which can be _excellent_ performers. The resulting portfolio should contain stocks that all have good looking charts.

Risks and Warnings

This is experimental. I consider stock picking to be gambling, and I'm using "gambling money" on this. I have never put more than $10k on this. I suspect that my methodology will do well in the bullish years of the TSX Composite (i.e. beat the TSX in the bull market). In the bear market, I don't know. I suspect my portfolio might do worse than the TSX Composite in the bearish years, but hopefully not by too much.

Performance

I have been simulating this portfolio since 2013, and started using real money since 2014. These are total returns, but trading fees are not considered. There's an additional field, "Go?" which is a T/A indicator I look at for broad market strength. I ignore this right now but it will be interesting to see, over time, if it's an indicator I should look at and obey.


FromGo?To*DIVZ*XICOutperformance2013-06-03Go2013-12-2421.2%8.8%_+12.4%_2013-12-24Go2014-06-255.2%13.1%_−7.9%_2014-06-26Go2014-12-3112.3%0.2%_+12.1%_2014-12-31No-go2015-06-155.8%2.0%_+3.8%_

Total return from 2013-06-03 to 2015-06-15 is, reducing precision due to rounding errors

DIVZ: +51%
XIC: +26%


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## james4beach (Nov 15, 2012)

And here's the current period's portfolio. Remember, I'm ignoring Go/No-go. The end of the time frame can shift slightly as it really depends on when I find time to sit down with some wine and do the analysis.


FromGo?To*DIVZ*XICOutperformance2015-06-15No-go2015-12-15???


StockSectorWeightACindustrial0.2CLStech0.1DSGtech0.1IFPmaterials0.2GCconsumer0.1PSGconsumer0.1PLIhealth0.1VRXhealth0.1

So far, the portfolio is down around -4.5% and is doing worse than XIC. So I suppose if you really want to hop in and join, you can hop in now and you've avoided that -4.5%. NOTE: of course I take no responsibility and remind you this is very high risk.


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## james4beach (Nov 15, 2012)

By the way, I was going to call it ZDIV for "zero dividends" but, ironically, someone is starting up a dividend ETF by that name. Because, y'know, the world doesn't have enough dividend ETFs.

I have a question for the group. The index creators occasionally add/remove names from the TSX Composite, and I'm piggy backing on that. What dates do they do this? I should do my re-balancing _after_ they do theirs to take advantage of their additions and deletions.


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## humble_pie (Jun 7, 2009)

intriguing! best wishes with this, i'm sure many will look on with interest.

i'm reminded of Pembroke Asset Management. You may never have heard of them as they keep a low profile, serving institutions & many HNW client families who've stuck faithfully with this well-established firm for several generations. Pembroke's publicly offered funds have $100k minimums.

flagship of the small pembroke fleet is the GBC canadian growth fund. It was founded nearly 30 years ago, has always embraced a philosophy of small cap growth investing but in canada only (something that, as you know very well, is challenging to pull off in this country, since our market is so thin.) Yet this fund has grown many hundredfold since inception.

like yourself, pembroke strives to minimize current taxable income, aims instead, buffett-like, for internal growth & eventual capital gains.

http://private.pml.ca/

pembroke has only ever had 3 managers for this fund, i believe (blue chip staff & blue chip clients tend to be hyper-loyal at this firm). All 3 managers have specialized in entrepreneurial growth investing.

james you might want to have a look at GBC canadian growth's holdings to see if something inspires you. As i recall they have lucid discussions of some of their small cap picks in blogs & newsletters on their website.


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## james4beach (Nov 15, 2012)

Thanks! And thanks for the pointer to GBC canadian growth fund. It looks like they're in the same space (with some similar top holdings) but possibly a bit smaller cap than mine. My median market cap $1.6 billion and among their top holdings I see many that are considerably smaller.

Still, same idea: shoot for the companies with internal growth, de-emphasize current taxable income, aim for capital gains.

Do you have any info on the S&P's rebalancing of the TSX Composite? Am I doing my rebalancing too early to benefit from their updates?


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## janus10 (Nov 7, 2013)

Hey James, if it is not too much trouble, would you mind adding the company name as you make your picks going forward? I admit to being ignorant to most of the stock symbols you have selected.


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## Shekelstein (Jun 7, 2015)

sorry if my question sounds noobish, but why do you track stocks that are in the TSX composite and not the TSX60? Since you are only go hold a few stocks, wouldn't it make sense to hold stocks with a larger market cap?


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## RBull (Jan 20, 2013)

^I suspect because he is looking for non dividend payers, and more growth prospects requiring a broader index. 

james, this should be interesting to follow.


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## Oldroe (Sep 18, 2009)

So I'm going to waste my time following a fake portfolio from a bad investor. 

At the end no conclusion will be made because you can not predict the economics in the future.


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## james4beach (Nov 15, 2012)

janus10 said:


> would you mind adding the company name as you make your picks going forward?


Ok, I will try to remember to do that in the next updates. I will also re-post the historical performance table, including a row for total return to date.



Shekelstein said:


> why do you track stocks that are in the TSX composite and not the TSX60?


As RBull said, it's because I'm seeking non-dividend payers. The broad TSX Composite (nearly 300 stocks) offers much more to choose from, including many smaller up-and-coming companies with high growth rates.



Oldroe said:


> So I'm going to waste my time following a fake portfolio from a bad investor.


Not with that attitude you won't, Mr. Grumpy-Pants! I've had $10 K in this portfolio since 2014, by the way. The portfolio is real.


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## tkirk62 (Jul 1, 2015)

james4beach said:


> Do you have any info on the S&P's rebalancing of the TSX Composite? Am I doing my rebalancing too early to benefit from their updates?


"In Canada, additions and deletions to the S&P/TSX composite index are made quarterly, but changes to the S&P/TSX 60 are done on an as-needed basis. To be eligible for inclusion on an index, a security must satisfy several criteria, including a volume-weighted average price of at least $1 per share and a minimum weight of 0.05% of the index being considered."

http://business.financialpost.com/uncategorized/profit-from-index-rebalancing


That article, which admittedly is from 2012, says that they did a rebalancing on June 15. So I would guess the rebalancings are done on March 15, June 15, September 15, and December 15. But just a somewhat educated guess.


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## james4beach (Nov 15, 2012)

Thanks, that sounds about right! I searched and found this press release of a TSX Composite rebalancing effective on June 19, 2015

So maybe I should generate my portfolio late in June and December, like in the last week


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## humble_pie (Jun 7, 2009)

i'm just wondering here ... but isn't the point of a contrarian or value strategy the buying of overlooked securities that are thought to have growth prospects not generally recognized by the market ... then waiting patiently for the rest of the market to catch up?

in canada the problem has always been the institution-driven nature of thin canadian markets, so it's been common for emerging stocks to languish unnoticed while institutions ignore them. 

still, i'm not quite sure what re-structuring of this mini-portfolio twice a year might accomplish ...


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## fatcat (Nov 11, 2009)

i don't know why you haven't tried to equal weight all 10 sectors ?

also, i don't particularly like your methodology of stocks with "good looking" charts

why not use a more calculated/impartial selection method ? (like the top 2 non-dividend stocks in the tsx in the sector or something)

this is a small weird slice that you can compare ahgainst any index you want but i don't see that it makes a lot of sense

it may do better it may do worse but so what


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## james4beach (Nov 15, 2012)

I should start investigating some of these alternate methodologies...


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## fatcat (Nov 11, 2009)

i just did a screen at tdw and there just isn't much of a selection of stocks that pay absolute zero dividends
why not use less than 1% and a market cap of 500M or 1B or greater
that gives about 33 stocks in my screen
and there is a fair bit of sector diversification (though no financials at all which should make you giddy with joy )


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## james4beach (Nov 15, 2012)

That's not a bad idea. But yeah, either way there is limited choice in Canada.

For the purpose of this thread and some tracking I'll try to stick to my existing method (so that the thread at least tracks one methodology) but I'll start researching some alternate approaches. Thanks a lot for the ideas!


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## andrewf (Mar 1, 2010)

I'd be concerned that a 1% dividend screen would be selecting overvalued companies. Maybe look for high shareholder yield, but relatively small proportion coming from dividends.


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## supperfly17 (Apr 18, 2012)

Thanks for posting this. Really informative and useful. Will be following this thread.


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## londoncalling (Sep 17, 2011)

Interesting thread james. None of this matches my investing style but that is what makes the market. I did find it a good read and will definitely watch it with keen observation to see how it plays out.

Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> By the way, I was going to call it ZDIV for "zero dividends" but, ironically, someone is starting up a dividend ETF by that name. Because, y'know, the world doesn't have enough dividend ETFs.


You had a carefully selected name and then an ETF messed with it.
Oh well ...




james4beach said:


> I have a question for the group.
> 
> The index creators occasionally add/remove names from the TSX Composite, and I'm piggy backing on that.
> What dates do they do this?


The reviews seem to be quarterly but that does not mean the changes are so regimented.

For example, the June 30th change is a weighting change due to a secondary offering of shares. The July change is to remove Catamaran Corp which as received all the approvals (ex. regulatory, shareholder, exchange and court) for the buyout by UnitedHealth to go through, resulting in it being removed from the index.

There's another weighting change dated April 27th and the big one seems to be Mar 13th where four companies were added and six were dropped.
http://finance.yahoo.com/news/p-dow-jones-indices-announces-211500163.html?nf=1&bypass=true

If there's a good way to get the listing of changes off the web site, I'm not seeing it.
http://ca.spindices.com/regional-exposure/americas/canada


Not that it makes any difference but I did notice that wiki says there's no current ETF for this index.


Cheers


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## Eclectic12 (Oct 20, 2010)

tkirk62 said:


> ... That article, which admittedly is from 2012, says that they did a rebalancing on June 15.
> So I would guess the rebalancings are done on March 15, June 15, September 15, and December 15. But just a somewhat educated guess.


Don't forget there's actions taken that don't follow such a strict schedule.
I found a July 30th announcement of Catamaran Corp shares being removed as the buyout had received all the required approvals.

I'm not sure if the OP wants weighting changes but these also go at random times (ex. April 27th and July 30th).

The adds/deletes lined up as the one I found was for Mar 13th.



Cheers


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## james4beach (Nov 15, 2012)

Interesting, thanks again. I guess I will stick to my 6 month schedule for now. By the way, the DIVZ portfolio has done terribly since the June purchase.

As it compromises of smaller cap stocks you get that 'leverage' effect where they do great in bull phases, and worse-than-index in bear phases.


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## james4beach (Nov 15, 2012)

james4beach said:


> As it compromises of smaller cap stocks you get that 'leverage' effect where they do great in bull phases, and worse-than-index in bear phases.


And this is exactly what is happening now. My portfolio has been hit very hard in this downturn, as per my expectation. It will be interesting to see if it recovers at all by the end of the year.

Ouch.


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## james4beach (Nov 15, 2012)

Wow, now I really hope to see the market rally through the end of the year. This has been a horrible few months for DIVZ, as several positions have absolutely fallen apart and broken their momentum rallies:

VRX, IFP, PSG, PLI, GC -- they're still in my current portfolio and I'm still long, but it's unlikely that any of these will qualify for the next period. They no longer satisfy my T/A criteria for good looking stocks with uptrends in place.

Which makes me wonder how many TSX Composite stocks I'll still find that fit my criteria. There may not be many; we're undergoing a big change in market strength right now and many stocks have simply turned bearish. Since my methodology is to avoid bearish stocks, this makes it more difficult.


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## 1980z28 (Mar 4, 2010)

Can you leverage in the down times


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## james4beach (Nov 15, 2012)

I do not want to use leverage in the portfolio. It's already volatile enough (due to the small caps); there's no way you'd want to add more volatility than this.

Some potential turnaround in the portfolio. PLI has started rallying like mad, now up +75% from its recent bottom


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## lonewolf (Jun 12, 2012)

In the DJI when the dividend yield gets above or close to the PE ratio it has been a good time to buy for long term.

Most the baby boomers are looking for dividends for retirement income stream they are sure to be disappointed in the over crowded trade.


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## james4beach (Nov 15, 2012)

If anyone's following my portfolio, you'll need to be ready for volatility. PLI is now up 100% from its September low and just closed at a new all time high! Stay tuned for December when the portfolio is rebalanced, and I'll post performance figures then.


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## james4beach (Nov 15, 2012)

I completed the current 6 mo. period and re-generated the portfolio. I traded these stocks and maintain a real portfolio exactly as indicated. (Performance figures ignore fees).

This was the first negative period I encountered since starting. Unfortunately I did much worse than the TSX. I've now decided that going forward I will pay attention to my Go/No-go technical indicator as it did warn me at the start of this period. 


StartGo?End*DIVZ*XIC total_DIVZ relative_2013-06-03Go2013-12-2421.2%8.8%_+12.4%_2013-12-24Go2014-06-255.2%13.1%_-7.9%_2014-06-26Go2014-12-3112.3%0.2%_+12.1%_2014-12-31No-go2015-06-155.8%2.0%_+3.8%_2015-06-15No-go2015-12-09-18.5%-10.8%_-7.7%_2015-12-09No-go2016-06-09*ALL TIME**Total return**23.5%**12.1%**+11.4%*

Because the TSX has weakened dramatically (in a bear market I think), very few stocks pass my technical screening. Of the 51 non-dividend-paying stocks in the TSX, only 3 made it through my filtering process. This is too few to construct a diverse portfolio; I also got a "No-go" reading which is consistent, telling me the broad market is too weak to employ the strategy. I'm therefore padding the portfolio with cash.

Current portfolio is now (keeping only DSG and PLI from before, adding NG)


SymbolStockSectorWeightDSGDescartes Systems Grouptech0.167PLIProMetic Life Sciencespharma0.167NGNovaGold Resourcesmining0.167cash--0.500


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## Spudd (Oct 11, 2011)

If you're paying attention to your go/no-go indicator, why do you have any stocks at all in the portfolio?


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## james4beach (Nov 15, 2012)

Spudd said:


> If you're paying attention to your go/no-go indicator, why do you have any stocks at all in the portfolio?


Because I'm not sure my indicator works. But I agree ... if I had more confidence that my indicator was working, then yes I would just sit out this period and not hold any stocks for the current 6 months. It certainly would have been the right move to obey my indicator in the last 2 periods, though.

The June-December period that just ended returned -18.5% which had a very detrimental effect, on the multiplicative-total-return. Ouch.


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## james4beach (Nov 15, 2012)

Any thoughts from people about my new picks and current portfolio?

By the way, though my last 6 months' return of -18.5% was horrible, for a comparison point XCS (TSX small cap ETF) returned -18.2% in the same period. This might even be a more suitable benchmark based on market caps. PLI is a top holding in XCS too.


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## james4beach (Nov 15, 2012)

My current portfolio is handling this rough market quite well so far. Benchmark XIC is down -8.7% whereas my portfolio is -3.0% in this period


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## james4beach (Nov 15, 2012)

6 month update/rebalance. These are real positions, so performance reflects actual fill prices (but ignores fees).

It's been a good period with my portfolio returning 9.5% vs 7.0% total return on XIC in the last 6 months. Recall that the point of this is to achieve similar performance to XIC with stocks that pay no dividends.

Spudd made a good point above about my half-assed implementation of a go/no-go. It doesn't seem appropriate when my goal is stock exposure. I've scrapped that concept and will keep this at 100% stock exposure, so that it's fair to compare to TSX.


StartEnd*DIVZ*XIC total_DIVZ relative_2013-06-032013-12-2421.2%8.8%_+12.4%_2013-12-242014-06-255.2%13.1%_-7.9%_2014-06-262014-12-3112.3%0.2%_+12.1%_2014-12-312015-06-155.8%2.0%_+3.8%_2015-06-152015-12-09-18.5%-10.8%_-7.7%_*2015-12-09**2016-06-27**9.5%**7.0%**2.5%*2016-06-282016-12-28ALL TIMECumulative return35.3%20.0%+15.3%

As with last year, because the TSX is quite weak, only a few stocks pass my technical screening. Beware that my portfolio is not very diverse. My strategy is to stay in the top performers; this idea was also raised by ArianB in another thread.

From last period's portfolio, I kept NG (returned +43.6%) and liquidated DSG (-4.6%) and PLI (-11.5%). New purchases are GIB.A, KXS, DGC. Current portfolio is now:


SymbolStockSectorWeightGIB.ACGI Group Inctech0.25KXSKinaxis Inctech0.25DGCDetour Gold Corpmining0.25NGNovaGold Resourcesmining0.25


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## james4beach (Nov 15, 2012)

I also think there are a couple nice nice tax characteristics of my approach (non-registered).


 Capital gains are more tax efficient than dividends for high income earners
 You don't build up tax liability. Capital gains are generally realized within a year, maybe two
 Therefore your portfolio value is true to after-tax value... since future liability is very small
 This frees you from handicaps such as refusing to sell or switch shares or agonizing about planning


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## james4beach (Nov 15, 2012)

It's just early days into the new 6 month period, but I'm seeing some big gains. Since my last rebalance, TSX is up 3.5%, and my DIVZ portfolio is up 7.5%, all stocks positive.


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## londoncalling (Sep 17, 2011)

nice work James! Totally a mismatch to my Investor Policy Statement but a interesting thread for me to follow. Out of personal curiosity I have to ask "When do you plan to put more money into this experiment?"

Cheers!


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## james4beach (Nov 15, 2012)

londoncalling said:


> nice work James! Totally a mismatch to my Investor Policy Statement but a interesting thread for me to follow. Out of personal curiosity I have to ask "When do you plan to put more money into this experiment?"


My hesitation is that my method might work great during the strongest part of the bull run (those early dates with the huge returns in my table) but perhaps it's useless in weaker markets. Now that the TSX has been weak for a while I'm really curious to see what the 2016 returns are. Basically the longer I run this and see good performance, the more confident I will get.

I'll probably put more money into it if I see strong returns towards the end of 2016. For example if the return is great at the next rebalance in December, I could see myself adding money then.


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## humble_pie (Jun 7, 2009)

if one is only going for capital gain withink 6-month time frames, no dividends, why not sell puts instead of owning stock

cgi & detour gold have rich premiums


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## james4beach (Nov 15, 2012)

humble, that's interesting and I had not considered that. As I have limited options experience, for me it's more intuitive to do regular long stock positions instead of going short options. Additionally I use this non-reg account as a source of margin and emergency funds, so going long stocks works well for that.


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## james4beach (Nov 15, 2012)

I was doing some analysis of my methodology and the big problem is that since I'm picking from a rather small universe, and because I have stringent technical analysis requirements, I can end up with too few qualifying stocks. This only started happening in 2016. In the current period, there are only 4 stocks and 2 sectors. That's too non-diversified and frankly too dangerous. I can't bring myself to put more money into this portfolio with such poor diversification. Yes, I want my method to involve minimal trading and minimal stocks, but that is too few.

*I'm adding a new rule going forward: my portfolio must now contain a minimum of 8 stocks and 4 sectors. This may involve adding dividend-paying stocks.*

This will be done by constructing my portfolio according to my existing methodology. This usually satisfies those minimums anyway. When it doesn't meet the minimum, I will simply grab top holdings from ZLB to pad up to my requirement. I think ZLB is good for this purpose because it has nice diversification and its low beta stocks would nicely balance my high beta picks.


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## doctrine (Sep 30, 2011)

Not that I'm necessarily a fan of your strategy, but there are plenty of stocks on the TSX that pay minimal dividends and primarily reinvest their net earnings into the business, but do still pay some level of dividends. Including up to a 2% yield would exclude virtually all classic "dividend" stocks but expose you to a high quality universe of successful Canadian companies in a range of sectors, such as a CN rail, Canadian Tire, Loblaws, Brookfield Asset Management, Alimentation Couche-Tard, Dollarama, Restaurant Brands, Silver Wheaton, Franco-Nevada, etc etc, all stocks that have been doing very well in the last five years and that you can't really own for the dividends. Of course, ZLB does own most of these but you can easily identify them on your own.


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## james4beach (Nov 15, 2012)

I'm warming up to that idea. I still like the idea of focusing my search in the (nearly) zero-payers, but I now acknowledge that saying "strictly zero dividends" was unnecessarily restrictive.

This may simply be a matter of adjusting my initial screen from "divs = 0" to "divs < 2%", as you say. The strategy is morphing over time. I'll keep posting updated performance and portfolios; next iteration comes near Christmas.


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## james4beach (Nov 15, 2012)

OK, it appears that just screening for div yield < 1% immediately added many new stocks that qualify under my approach. For anyone who may be interested, here's a (very rough/unconfirmed!) list of qualifying stocks, sectors, and dividend yields. I'm not rebalancing my portfolio so this is just to see the effect of relaxing the dividend rule. Interestingly, the net result has some common new stocks with ZLB's top picks -- DOL & WCN.

This approach will be fine. When I next update the portfolio in December, I'll allow small positive dividend yields in the screening, to be able to meet the minimum of 8 stocks and 4 sectors.

AAV ; energy

AEM ; mining ; 0.75%
NG ; mining
DGC ; mining
GUY ; mining
MAG ; mining

BYD.UN ; industrial ; 0.57%
CCL.B ; industrial ; 0.80%
WCN ; industrial ; 0.75%

GIB.A ; tech
DSG ; tech
KXS ; tech

DOL ; consumer ; 0.40%

FSV ; financial ; 0.69%
OCX ; financial ; 0.34%

QBR.B ; telecomm ; 0.45%


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## james4beach (Nov 15, 2012)

My current portfolio (actually as implemented) is up 7.4% since the June iteration, vs 7.4% for XIC.

That's not bad, but had I used the "div yields < 1%" rule to fill out the sectors and stocks to my minimum # stocks & sectors, the resulting portfolio would have been up a whopping 12.5%. Oh well, shoulda woulda coulda, and something I'll look forward to trying in December. It's all theoretical until I actually do it.


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## Pluto (Sep 12, 2013)

james4beach said:


> I was doing some analysis of my methodology and the big problem is that since I'm picking from a rather small universe, and because I have stringent technical analysis requirements, I can end up with too few qualifying stocks. This only started happening in 2016.


Interesting. This is the same problem value strategists are having currently. Seems to be a message in there. 
Then changing the screen to include more stocks could be a trap. So why not do both, and have two strategies 1. the original one, and 2. the new amended one and see how they compare in the future. 
Then you will get an idea if changing the strategy to stay invested was worth it.


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## james4beach (Nov 15, 2012)

Pluto, I'm going to use the same technicals-based screening I always do, but just relax the maximum allowable dividend yield. I think conceptually there is no difference between a zero dividend stock and a near-zero dividend stock. My idea was to use stocks that are free from dividend-chasing hype, and that goal will be preserved with this.

If there's anything to my approach, I think it's in the screening algorithm and iteration rules. The dividend criteria is the first (coarse) screening pass, to reduce the TSX Composite down to a smaller set that I can analyze in depth (fine screening).


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## canew90 (Jul 13, 2016)

Since your playing, why not add the same number of quality Dividend Payers and do the same comparison?
TD
ENB
FTS
BCE
CNR


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## james4beach (Nov 15, 2012)

I'm not making ad hoc stock picks. I have a methodology I'm trying to stick to (which starts with very low/zero dividend stocks). The last portfolio update was in June, next one is in December.

The stocks that enter the portfolio are generated through a screening and criteria process; I don't just add random stocks into the mix.


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## canew90 (Jul 13, 2016)

james4beach said:


> The stocks that enter the portfolio are generated through a screening and criteria process; I don't just add random stocks into the mix.


That's a sound process for every investor and if followed will usually be successful.
The 5 I listed also meet specific criteria, they have a long history of paying and raising their dividend. Simple but specific.
Oh, I forgot to mention it's only 20% financial.


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## james4beach (Nov 15, 2012)

I wish I had realized earlier that my method was seriously lacking sector diversification. More recently I posted a sector diversified result in this post using my new method
http://canadianmoneyforum.com/showt...rtfolio-DIVZ?p=1252842&viewfull=1#post1252842

That portfolio is fine. But unfortunately the one I'm actually using (which was before I realized the diversification was lacking) is 50% exposed to mining stocks. Guess what happened  It's doing very badly right now. Oops. Totally foreseeable.

I am very encouraged however that the balanced sector version, as per the link above, is doing great. Going forward of course I will ensure diversified sectors and at least 4 sectors at all times. The fundamental steps in my method are still the same.


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## My Own Advisor (Sep 24, 2012)

4 sectors are good James. 50% mining ouch!

For my portfolio, other than my wife's holdings that I've unbundled XIU for me, I don't own any mining stocks. It's enough to own a few oil stocks - but I will continue to hold. Oil can't stay in the ground forever, right?


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## james4beach (Nov 15, 2012)

My portfolio construction doesn't inherently carry mining stocks but it just popped up recently. And I wasn't critical of it because of the early good result. When the high weight mining first popped up, it returned +44% in six months. That was the _successful_ part of the trend following approach. Of course now I'm seeing the flip side, down -25%.

Historically (since I started this in 2013) there have been enough sectors. 2016 was the first time there were only 2 or 3 sectors, so I had not encountered this problem before. These are the nice things about a live test with real money. Nothing drives a point home better than seeing real money evaporate.

DIVZ returns back to inception are still OK even with the current losses due to mining. XIC total return (not annual) since 2013-06-03 is 29%. DIVZ return is 33%, slightly higher, but just barely.


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## james4beach (Nov 15, 2012)

My Own Advisor said:


> 4 sectors are good James. 50% mining ouch!


Ouch is right. I've now modified my stock picking formula (basically it forces more total stocks & sectors) and I also back-tested the technique back to 2013. Results look good, so I'm going to stick to this new iteration. If I had used this during my summer rebalancing, the portfolio would have become

CCL.B
WPK
ONEX (was OCX)
DSG
KXS
SJ
DOL
BYD.UN
WCN

Performance since the 2016-06-28 rebalance would have been 9.47% with the above versus 5.88% for TSX Composite (XIC).

But, shoulda woulda coulda. At my next rebalance I'll continue showing performance with what I actually used. The next portfolio will be using the newer methodology and hopefully will show better results.


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