Triple Strategy - Oldie, But Goodie

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doberman's picture
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Over the weekend, I was cleaning out a drawer and came across a UIT flyer from 1997, describing the "Triple Strategy" from Equity Securities Trust. It described 3 strategies to "beat the DJIA". Based on the flyer's hypo, the combined strategies had beaten the DJIA 15 out of 22 years - (1975-1996), returning 23.65%/yr versus the DJIA's 15.88%/ yr. The 3 strategies, whose results are refreshed annually, are:
 
- (Top Ten) Top ten highest yielding stocks in the DJIA.
- (Focus Five) Five lowest priced of the ten highest yielding stocks in the DJIA.
- (Penultimate Pick) Second lowest priced stock of the Focus Five.
 
When I get some time, I'll come back with the numbers (1997-2007), just to see how it did.
 
DISCLAIMER: For those FA's possessing a low IQ, the abovementioned strategies are posted for fun. It is not mentioned for the purpose of recommending any investment strategy. So, if you do something stupid and recommend these strategies to your client and it blows-up, don't blame me. Blame yo' mama for drinkin' and smokin' crack when she was preggies wit you. Word...
 
 

Ashland's picture
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doberman wrote: Over the weekend, I was cleaning out a drawer and came across a UIT flyer from 1997, describing the "Triple Strategy" from Equity Securities Trust. It described 3 strategies to "beat the DJIA". Based on the flyer's hypo, the combined strategies had beaten the DJIA 15 out of 22 years - (1975-1996), returning 23.65%/yr versus the DJIA's 15.88%/ yr. The 3 strategies, whose results are refreshed annually, are:
 
- (Top Ten) Top ten highest yielding stocks in the DJIA.
- (Focus Five) Five lowest priced of the ten highest yielding stocks in the DJIA.
- (Penultimate Pick) Second lowest priced stock of the Focus Five.
 
When I get some time, I'll come back with the numbers (1997-2007), just to see how it did.
 
DISCLAIMER: For those FA's possessing a low IQ, the abovementioned strategies are posted for fun. It is not mentioned for the purpose of recommending any investment strategy. So, if you do something stupid and recommend these strategies to your client and it blows-up, don't blame me. Blame yo' mama for drinkin' and smokin' crack when she was preggies wit you. Word...
 
 

I used a similar strategy during that time. I was buying people Putnam funds.

Incredible Hulk's picture
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Joined: 2006-03-24

Now that is funny.

Jonesness's picture
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Joined: 2008-02-26

Oh, the putnam funds...blew up in my face!

frumhere's picture
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Joined: 2005-02-22

putnam funds are great tax loss ideas

troll's picture
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doberman's picture
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Joined: 2005-02-22

joedabrkr wrote:
The third strategy is so ridiculuous I didn't even bother to search for results.  Hard to even call it a 'strategy' when it relies on a single stock!
 
Agreed, but you have to look at this flyer in the context of the "go-go internet craze" era. Back then, any stock and/or strategy with a return of 20+%/ year wasn't good enough.
 
It's funny, that there's no way FINRA would approve this flyer, given today's regulatory climate. Just keeping it on my desk makes me nervous, as FINRA could pop-in anytime, consider it contraband, and have "Dano" book me. (For those old enough to remember or those awake at 2:00AM watching reruns, "Dano" refers to the tv series "Hawaii Five-0".)
 
I tried looking-up historical returns of the "Penultimate Pick", but couldn't find any references to it.

Dark Knight's picture
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Joined: 2008-01-30

Ok, just spend over an hour hashing this out.  Be aware I did a lot of cutting and pasting.  There is bound to be an error or ten.   The website I used is www.dogsofthedow.com   <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
These guys call the focus five Small Dogs of the Dow.  It appears the triple strategy did not in fact achieve it's goals over this time horizon.  Avg annual return 3.45  vs  7.85 on the Dow.  I didn't annualize it or total return it.  I'll leave that to anyone else who wishes to waste more time on it. 
 
Be aware this does not appear to include dividends.  Also says the prices were adjusted for splits during the year in question.  Therefore that may have caused an actual different Penultimate in certain years.  Not sure how to track that one down without going crazy on it.  I claim no accuracy to any of these number they were all taken from this website and sometimes even seemed to contradict on different pages.  It should give you an idea though.
 
Oh and the Penultimate was actually the Penworstofemall

1997
Dogs
17.3
Small Dogs
14.8
Penultimate
41.4
AVG
24.50
DJIA
22.6
Difference
1.90

1998
Dogs
7.8
Small Dogs
9.4
Penultimate
18.2
AVG
11.80
DJIA
16.1
Difference
-4.30

1999
Dogs
1.1
Small Dogs
-7.5
Penultimate
-44.4
AVG
-16.93
DJIA
25.2
Difference
-42.13

2000
Dogs
2.7
Small Dogs
7.1
Penultimate
0.5
AVG
3.43
DJIA
-6.2
Difference
9.63

2001
Dogs
-7.8
Small Dogs
-6.3
Penultimate
-1.1
AVG
-5.07
DJIA
-7.1
Difference
2.03

2002
Dogs
-12.2
Small Dogs
-14
Penultimate
-34
AVG
-20.07
DJIA
-14.8
Difference
-5.27

2003
Dogs
23.6
Small Dogs
18.7
Penultimate
46.15
AVG
29.48
DJIA
25.3
Difference
4.18

2004
Dogs
0.5
Small Dogs
8.4
Penultimate
-1.2
AVG
2.57
DJIA
3.1
Difference
-0.53

2005
Dogs
-8.9
Small Dogs
-4.3
Penultimate
-13.3
AVG
-8.83
DJIA
-0.6
Difference
-8.23

2006
Dogs
24.8
Small Dogs
35.2
Penultimate
11.1
AVG
23.70
DJIA
16.3
Difference
7.40

2007
Dogs
-1.4
Small Dogs
0.4
Penultimate
-19
AVG
-6.67
DJIA
6.4
Difference
-13.07

Avg Annual 
4.32

5.63

0.40

3.45

7.85

-4.40
  
 
Penultimates were according to adjusted prices

1997   AT&T   41.4%
1998  Phillip Morris  18.2%
1999  Goodyear  (44.4%)
2000  Caterpillar  .5%
2001   International paper (1.1%)
2002   JP Morgan (34.0%)
2003   Tie  Honeywell and JP Morgan 39.3% and 53%  Average 46.15%
(They tied for first and second, next was GE  27.2%)
2004  SBC  (1.2%)
2005  Pfizer  (13.3%)
2006  Pfizer    11.1
2007  GM     (19%)
 

Dark Knight's picture
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Joined: 2008-01-30

One follow up to note as I looked over the info after posting.  The strategy got Killed in 1999.  If you pull out that one year the avgs are very close, less than .5 off from each other. 
Goodyear was the biggest factor although all three sucked that year. 

anonymous's picture
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Joined: 2005-09-29

Question:
What if the exact same strategy was followed starting every year on February 1st instead of January 1st?
 
Answer:
The results could be very different.

Ashland's picture
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Joined: 2007-03-06

anonymous wrote: Question:
What if the exact same strategy was followed starting every year on February 1st instead of January 1st?
 
Answer:
The results could be very different.

Question: What if you travelled to work using the exact same route you take every day, but left 3 minutes later than normal?

Answer: ????????????????????

doberman's picture
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Joined: 2005-02-22

Wow, thanks for the effort Dark Knight!

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