Author: Mark Holder, Stone Fox Capital
Covestor model: Net Payout Yields
September was another decent month for the Net Payout Yields model with a return vs. benchmark of 3.46% – the portfolio was down 3.72% while the S&P 500 fell 7.18%. Naturally on an absolute basis the results are disappointing, but this model is not designed to time the markets. The goal remains to outperform on the way down and remain even on the way up, in the effort to produce superior returns over time.
For 2011, the model remains roughly 7.0% higher than the benchmark: As of the end of September, year to date the model was down 2.92% while the S&P 500 fell 10.04%.
The model was inactive for the second consecutive month during September, as the weak market increased the yields and hence the valuation attractiveness of most of the equities in the model. A few stocks, though, have recently reached new 52 weeks highs, causing the yields to decline. For example, Bristol-Myers Squibb (BMY) has seen the dividend yield drop to 4% (as of 10/10) and without a buyback the Net Payout Yield (NPY) has reached below normal yields in the model.
The best performing stocks in such a weak stock market were as expected the healthcare, consumer staples, and utility stocks. As mentioned, BMY hit 52 week highs during the month with a nice monthly gain. Other significant gainers included WellPoint (WLP), Entergy (ETR) , FirstEnergy (FE) , and Campbell Soup (CPB).
As expected in such a weak market, the bottom performers were stocks tied to global growth. The five worst performers had steep declines.