# Beating the TSX (David Stanley)



## balk (Dec 6, 2010)

I just read the "Me and My Money" article for this week in the Globe (link below) and the person who they focus on referenced David Stanley's Beating the TSX strategy. 

I look the strategy up and it was briefly explained as buying the 10 stocks with the highest yield on the TSX, not including income trusts. Is there anything more to this strategy? Like avoiding stocks with gigantic unsustainable yields? I am curious because the person in the Globe article spoke about investigating stocks that have too high a dividend yield and I was wondering if that was his own doing or part of the strategy?

Lastly, is there any difference between this and the Beating the Dow strategy or did he just rip it off?

http://www.theglobeandmail.com/glob...my-money/sticking-to-a-system/article2128210/


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## KaeJS (Sep 28, 2010)

balk said:


> I look the strategy up and it was briefly explained as buying the 10 stocks with the highest yield on the TSX, not including income trusts. Is there anything more to this strategy? Like avoiding stocks with gigantic unsustainable yields? I am curious because the person in the Globe article spoke about investigating stocks that have too high a dividend yield and I was wondering if that was his own doing or part of the strategy?


As mentioned in the article:

"This involves putting money into the 10 highest-yielding stocks on the TSX, excluding high-income companies that typically are converted trusts. *It’s not an entirely passive approach, notes Mr. Beaton – you do have to dig a little deeper. For instance, if a company is yielding 9 or 10 per cent, “That’s a red flag*.” 

He does his due diligence when picking dividend payers.

He probably shoots for companies ranging in the 4-6% divvy range.


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## HaroldCrump (Jun 10, 2009)

David Stanley is a regular columnist for the Money Saver magazine and I believe he runs an investment club in Guelph, Ontario.
His portfolio comprises of stable large cap high yielding Canadian dividend payers such as BCE, Bell Aliant, Trans Canada, Trans Alta, BMO, SLF etc.
His approach is available here (3 part PDF):

https://www.canadianmoneysaver.ca/r...esting In Canadian Dividend Stocks Part 1.pdf

https://www.canadianmoneysaver.ca/r...esting In Canadian Dividend Stocks Part 2.pdf

https://www.canadianmoneysaver.ca/r...esting In Canadian Dividend Stocks Part 3.pdf


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## Argonaut (Dec 7, 2010)

I have a similar strategy for my long term stockpicking, but would instead change it to 5 Canadian companies and 5 US companies, avoiding sector overlap by picking best of breed. TD is the best bank, and Telus the best telecom, etc. What I can't come to a conclusion on is who is the best utility: Fortis, Emera, or Canadian Utilities?


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## Eder (Feb 16, 2011)

If any of these guys really believed their system would beat the TSX they wouldn't publish their dogma but rather borrow every cent possible....put it into play...retire to Mexico to play shuffelboard with Carlos Slim.

Instead they are shluppling their writing to whichever media source needs to replace their Friendly Giant reruns with new material.


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## balk (Dec 6, 2010)

KaeJS said:


> As mentioned in the article:
> 
> "This involves putting money into the 10 highest-yielding stocks on the TSX, excluding high-income companies that typically are converted trusts. *It’s not an entirely passive approach, notes Mr. Beaton – you do have to dig a little deeper. For instance, if a company is yielding 9 or 10 per cent, “That’s a red flag*.”
> 
> ...


I did mention having taken note that he does research. Hence my question was whether that was part of the Stanley strat or his own deviation from it. 

Thanks for the replies everyone. 

Cheers,

Balk


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## Four Pillars (Apr 5, 2009)

I thought his method was a bit wishy-washy:



> How he picks equities
> 
> Mr. Beaton either uses exchange-traded funds, or follows Moneysaver columnist David Stanley’s “Beating the TSX” approach.


How can you have an "or" when the title of the article is "Sticking to a system"?

It's very possible that the ambiguity was introduced by the column writer or editor, but it would be nice to verify that.


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## PMREdmonton (Apr 6, 2009)

This is the old "Dogs of the Dow" approach with a Canadian spin. Before it came out, this approach routinely worked. Then it went through long periods of poor performance.

In general, stocks with good yields tend to offer better overall returns but you are better off avoiding unusually high yields (see YLO).

One other way to avoid buying high yielding stocks is to avoid those at high bankruptcy risk. There are a couple of screening tools out there - Altman score and Piotroski score.


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## gibor365 (Apr 1, 2011)

PMREdmonton said:


> One other way to avoid buying high yielding stocks is to avoid those at high bankruptcy risk. There are a couple of screening tools out there - Altman score and Piotroski score.


Do you know websites where I can check Altman score and Piotroski score for specific ticker?


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## Sherlock (Apr 18, 2010)

How is this approach different than simply putting all your money in XDV? Or does XDV contain too many companies that don't have sufficiently high yields?

And why avoid income trusts?


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## Sampson (Apr 3, 2009)

PMREdmonton said:


> This is the old "Dogs of the Dow" approach with a Canadian spin. Before it came out, this approach routinely worked. Then it went through long periods of poor performance.


It has been shown to be a classic example of data mining - and a method that does not consistently work.

I would avoid it.


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## PMREdmonton (Apr 6, 2009)

gibor said:


> Do you know websites where I can check Altman score and Piotroski score for specific ticker?


I don't know that these are readily available from any financial website.

I do know the method used to calculate them is well known and so it can be hand calculated. I don't know how to do Altman but you can certainly google Piotroski score to find the methodology.

The main purpose for Piotroski scores and Altman scores is to predict bankruptcy risk. This is important when looking at low P/B stocks to ensure you are not investing in companies that are likely to be insolvent.

I know there is a guy who runs a business called "old school value" where he sells a program which will calculate these scores for you as well as several other forms of fundamental analysis. I think it costs around $100 per year or so. The only thing is that it only works on American stocks so it wouldn't work for Canadian stocks solely listed on the TSE.

My understanding of Piotroski scores and low P/B stocks is that it typically gets you better returns on small-cap stocks. I don't think there is much benefit for mid-cap and large-cap stocks from this form of analysis.


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## PMREdmonton (Apr 6, 2009)

gibor said:


> Do you know websites where I can check Altman score and Piotroski score for specific ticker?


I actually found a place now that does it for free called Robotdough.com


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## avrex (Nov 14, 2010)

PMREdmonton said:


> I actually found a place now that does it for free called Robotdough.com


It looks like I'm forced to register. Any junk mail from these dudes?


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## PMREdmonton (Apr 6, 2009)

avrex said:


> It looks like I'm forced to register. Any junk mail from these dudes?


I only registered yesterday and did request that no mailings be sent to me. So far I only got the invitation email to the site.


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