Back in August I wrote about the Beating the TSX system of stock picking. The system works like this:
- Start with the list of all companies in the TSX60
- Discard any that do not have a long history of paying a consistent dividend (e.g. former income trusts)
- Select the ten stocks with the highest dividend
- Repeat annually
The originator, David Stanley, claims a 24 year record of consistently beating the TSX. His current list is as follows.
I am concerned by the volatility in my portfolio. Stocks like SuperValue (SVU) and BHP (BHP) have declined sharply. I believe that the Beating the TSX stocks will provide the same level of dividend yeild with less volatility.
I differ with David Stanley in one area. I think that the former income trusts provide good value (and very strong dividends). So I will modify his system to include two former income trusts, Enerplus (ERF.TO) and Canadian Oil Sands (COS.TO).
So I SELL the following stocks:
- TD Bank
- Kinder Morgan
This gave me the funds to BUY six of the Beating the TSX stocks:
- Bank of Montreal (BMO.TO)
- Sun Life (SLF.TO)
- Power Corp (POW.TO)
- Shaw (SJR-B.TO)
- TransAlta (TA.TO)
- TransCanada (TRP.TO)
I will pick up the remaining four stocks when I have cash to do so.
A month after these trades, on 7th November 2011, the results are as follows.
- Stocks that I sold are up 5.3%.
- Stocks that I bought are down 3.86%
That’s a 9% difference, which makes this a bad call in the short term (i.e., my timing was bad). This was a long term, or strategic, set of trades to move from a higher risk portfolio to a lower risk portfolio, so I am not too concerned.