2012 Year-End Screens Review: Investors Caught in Political Cliffhanger
by Wayne A. Thorp, CFA
Politics played a key role in the markets this year. First, there was the presidential campaign and election. Then, political gridlock reigned on Capitol Hill, as the country faced a possible year-end fiscal cliff of expiring tax cuts and automatic budget cuts.
By the time you read this article, we will know whether Congress and the president were able to come to an agreement regarding taxes and spending cuts or if the Budget Control Act of 2011 will go into full effect. If the latter happens, taxes will go up for many Americans, while massive spending cuts in the federal budget will be automatically triggered by Congress’ sequestration rules. Serving as a backdrop to the political drama at home is a global economy that is still in the fragile stages of a recovery.
In this article
- The Rankings
- Impact of Dividends
- Top Performer of 2012
- Number of Holdings and Turnover
- Measuring Volatility
- What It Takes: The Investment Characteristics of the 2012 Winners
- Risk-Adjusted Returns
- Calculating Risk-Adjusted Return
- Behind the Scenes of the Top 2012 Strategy
- Conclusion
- The AAII Stock Screens
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If you didn’t know any better, you may think that this gloom and doom would have wreaked havoc on the markets and portfolios alike. However, the markets roared out of the gates to start the year, as the S&P 500 index gained almost 13% through April 2, 2012. The index subsequently gave up nearly 10% before finding a bottom on June 1, 2012, and rebounded 14.7% by September 14, 2012. The end of summer and the final stretch of the presidential campaign saw the S&P 500 lose nearly 8%. But once the dust settled and the market digested the election results, the index gained a modest 4.8% between November 15 and December 7, 2012. Year-to-date, through December 7, 2012, the S&P 500 is up 12.8% on a simple price-change basis, excluding dividends. For an election year, investors should be more than pleased with these results. According to Ned David Research Inc., the S&P 500 has averaged a 7.5% gain during an election year since 1900.
Overall, the AAII stock screens have fared reasonably well. Of the 64 we currently track at AAII.com, only 11 are currently down for the year. Conversely, 26 have outperformed the S&P 500 year-to-date. The median, or midpoint, price increase for all the screens is 10.0%. None of the screens is having a ‘best’ or ‘worst’ year since we started testing these strategies in 1998.
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Discussion
Printable as a PDF doesn't work when there's an embedded excel file that must be scrolled.
posted 2 months ago by R Dombrowski from New York
I've seen variations on the following several times in AAII pubs: "It is important to take your list of passing companies and, at a minimum, perform some cursory qualitative analysis to decide whether or not they are right for your stock portfolio."
Can you point to some more specific recommendations?
posted 2 months ago by Wm Schauweker from Massachusetts
R - the "Download Printable PDF" link brings up the Journal pages as laid out in the hard-copy print version that is sent in the mail, so the embedded excel files are not a factor. It's only the "printer-friendly" version that will not show the entire excel tables.
Wm - for guidance on analyzing a stock, see the Investor Classroom area of the website at www.aaii.com/classroom. Scroll down to "How to Choose a Stock" for a simple worksheet and "Digging for Gold: What the Financial Statements Reveal About a Firm" for an explanation of stock data and how to use it.
--Jean at AAII
posted 2 months ago by Jean Henrich from Illinois
Under "Winning Characteristics," there appears, "Low multiples (price-earnings, price-to-book value, etc.), on a relative rather than an absolute basis." My question is, Relative to what--the general market, a specific industry, historic multiples? Or doesn't it matter?
posted 2 months ago by Robert Koch from Missouri
I'm considering investing in this portfolio, but it might be best to wait until the rebalancing since the last year has been so good. That is, with a lot of gain there would normally be more potential for loss than right after a re-balancing. When is the next re-balance scheduled?
posted about 1 month ago by Everett Senter from Hawaii
Thanks for the good wook . Today is a buyes market.
posted about 1 month ago by Juan Ortega from Texas
"The month-to-month closing price is used to calculate the return, with equal investments in each stock at the beginning of each month assumed."
So does this mean a fixed investment amount (say $5000) in each passing stock OR is a fixed portfolio amount (say $50,000) divided equally among all passing stocks that month?
posted about 1 month ago by Eliza Westbrook from California
@Eliza, both scenarios are the same. In both instances, you are investing an equal amount of money in each of the passing companies. Wayne A. Thorp, CFA, Senior Financial Analyst, AAII
posted about 1 month ago by Wayne Thorp from Illinois
