as part of our
This Stone Fox Capital Net Payout Yields
was up 2.1% in September versus a 2.4% gain for the benchmark
S&P 500 Index (
). The model slightly under-performed the market in September,
which can happen in solidly positive months. For 2012, the model is
now up over 20% as of September 30th for the year.
As mentioned in the last several monthly reports, one goal of
this model is to slowly trim the amount of positions back closer to
20 after reaching 26 a few months back due to mergers and partial
positions. The position count remained at 24 at month end, but a
partial position in Vale S.A. (
) was increased in order to fill out the position.
The Gap (
) was sold, as the position became the largest one in the portfolio
after an incredible gain by the stock. After achieving a 100% gain
in 2012 as of September 30. for the year, the Net Payout Yields (
) declined to the point that Gap was no longer attractive for this
model. Read our Seeking Alpha article for more details.
With the cash from the Gap sell, we purchased Motorola Solutions
) to add to the technology sector in the model. Not to mention,
Motorola continuously ranks high in the top NPY list produced each
The model ended the month with about 3% in cash. As additional
positions are sold over the next few months, the cash will be
rotated into increasing existing position sizes.
With the model up 2% for the month, very few stocks had
meaningful negative returns for September. The weakest stocks were
CSX Corp. (CSX) and Lorillard, Inc (LO).
CSX lost nearly 9% as reduced demand for coal has impacted the
growth potential for railroad companies. Analysts continue to trim
earnings estimates for the current quarter putting pressure on the
stock. With only a 2.6% dividend yield, the stock doesn't have the
yield support to hold the stock up. Fortunately though, a decent
buyback program will allow management to buy shares cheaper.
Numerous stocks had a good month. The biggest gain though came
from Accenture (ACN), which jumped over 15% for the month. This
gain came after the company reported strong bookings for the end of
fiscal year 2012 providing support for a strong 2013.
The stock has surged to all time highs. I believe very few
non-investors realize that such gains are being made in the stock
market these days.
Other big gainers were Goldman Sachs (GS), Hartford Financial
(HIG) and Time Warner (TWX). All of these stocks continued rallies
from August and prior.
As October started, the market has become very comfortable with
the ability to avoid a major financial collapse in Europe. The
relentless headline risk that never comes to fruition has finally
been pushed aside. In my opinion, investors are slowly moving out
of bonds and cash into dividend stocks.
The main risk for domestic markets and stocks continues to be
the fiscal cliff and pending election. Stocks remain very
complacent with the looming danger and little progress towards
resolution. The most at risk stocks, in my opinion, will be those
of high dividend payers that have had an exceptional run. These
stocks might face the headwinds of higher tax rates that pushed
them down at the end of 2010.
Regardless of the markets, the average stock in this model
yields greater than 10% with the majority of yields coming from
buybacks. This provides huge support if the market drops due to
election woes or the fiscal cliff not being resolved as
Disclosure: Performance discussed is net of advisory fees.
The index comparisons herein are provided for informational
purposes only and should not be used as the basis for making an
investment decision. There are significant differences between
client accounts and the indices referenced including, but not
limited to, risk profile, liquidity, volatility and asset
composition. The S&P 500 is an index of 500 stocks chosen for
market size, liquidity and industry, among other factors.
The investments discussed are held in client accounts as of
September 30, 2012. These investments may or may not be currently
held in client accounts.The reader should not assume that any
investments identified were or will be profitable or that any
investment recommendations or that investment decisions we make
in the future will be profitable.
Certain of the information contained in this presentation is
based upon forward-looking statements, information and opinions,
including descriptions of anticipated market changes and
expectations of future activity.
believes that such statements, information, and opinions are
based upon reasonable estimates and assumptions. However,
forward-looking statements, information and opinions are
inherently uncertain and actual events or results may differ
materially from those reflected in the forward-looking
statements. Therefore, undue reliance should not be placed on
such forward-looking statements, information and opinions.
Covestor Ltd. is a registered investment advisor. Covestor
licenses investment strategies from its Model Managers to
establish investment models. The commentary here is provided as
general and impersonal information and should not be construed as
recommendations or advice. Information from Model Managers and
third-party sources deemed to be reliable but not guaranteed.
Past performance is no guarantee of future results. Transaction
histories for Covestor models available upon request. Additional
important disclosures available at
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