Can I Beat the TSX?

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.

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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:

  • SuperValue
  • BHP
  • Intel
  • TD Bank
  • Manulife
  • 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.

POSTMORTEM

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.

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2 thoughts on “Can I Beat the TSX?

  1. Rob says:

    Man that’s sucky, I had the opposite problem, never got the full allotment of all my BTSX shares and varoom the market took off. MFC which I skipped is up almost 4 dollars, Pow which I got only half, and never got around to getting the other half, up over 4 dollars. then the one I did get PGF is down almost 30%. Which by the way shouldn’t have been on the list as it’s on the TSX but not the TSX60 my bad!

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