Dogs of the TSE

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DenisD
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Re: Dogs of the TSE

Post by DenisD »

nisser wrote: 20 Nov 2017 22:26That's super helpful. Does it include reits? Limited partnerships? Would you mind running a couple of other timeframes just to see what else you get?
Trusts, including REITs, should be excluded. Ex trusts are included. Not sure about partnerships. I didn't see any when I went through some of the picks.

Unfortunately, the $99 upgrade to my P123 membership only has a few days left. So I won't be able to do any more runs. Maybe next time.

One thing that I just noticed: when I limit the selection to 1 stock/sector, it's only getting 7 - 9 stocks.
NormR wrote: 20 Nov 2017 22:35 Do a run with yield based on ttm dividends. Enjoy.
Do you mean buy the companies with the highest total dividends paid? I did that with the same parameters as above and no sector limit and got 7.2% versus 5.5% for XIC. Current picks are:

Code: Select all

Ticker   Name                                   Last   MktCap DivPaidTTM
RY:CN    Royal Bank of Canada                 101.01  147,376      5,251
TD:CN    Toronto-Dominion Bank (The)           73.82  136,464      4,116
BNS:CN   Bank of Nova Scotia (The)             84.87  101,692      3,745
BCE:CN   BCE Inc.                              61.78   55,629      2,574
ENB:CN   Enbridge Inc                          45.95   75,955      2,278
SU:CN    Suncor Energy Inc.                    44.68   74,010      2,081
CM:CN    Canadian Imperial Bank of Commerce   115.09   50,186      2,068
BMO:CN   Bank of Montreal                      99.04   64,246      1,925
MFC:CN   Manulife Financial Corp               26.76   52,931      1,734
GWO:CN   Great-West Lifeco Inc                 35.32   34,952      1,557
There's not much turnover. :wink:
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Re: Dogs of the TSE

Post by NormR »

Yield(ttm) = Dividends per share over last 12 months / price
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Re: Dogs of the TSE

Post by nisser »

So I ended up signing up to p123 to test things for myself. Thanks to DenisD for helping with some functions as the learning curve on that website is steep!
I more or less had the same findings as him.

-Top 40 stocks by market cap outperforms top 60 every single time
-Top 30 stocks didn't seem to improve things and in some scenarios had poorer outcomes
-Passing on stocks with negative TTM earnings or less than 2% revenue growth over last 5 years did NOT improve results when looking among top 40 stocks
(*it did seem to improve return if you expanded to top60 but it still wasn't better than just sticking to top 40)
-Picking top 12 stocks by yield gave poorer results


Annualized returns (using top 40 by market cap, top 10 stocks)
1999-2017 (11.6)
2007-2017 (8.26)
2003-2013 (11.7)
2005-2015 (7.5)
1999-2007 (16)
2009-2017 (11)

The issue the website is that I still don't know how to cap the stocks chosen (i.e only 2 telcos) and I'm working on this. I've worked with various permutations from 1999-2017

1. Top 40 by market cap, no cap gives a total return of 620% (vs 114% for XIC, this excludes dividends so difference is less)
average makeup over those 18 years is 3.6 banks, 2. 4 insurance, 1.33 pipe, 1.5 telcom.
Banks are clearly over represented. In some years, you'd be holding 4-6 banks. It certainly worked out but will banks continue to perform so well in the future?

2. Top 40 by market cap, cap of 3 per sector. Keep in mind though that this will, depending on the year give you various permutations (3 banks or 3 insurers, 3 pipes or 3 oil producers, and various combinations). Because of this thomson reuters often was picked and is likely overrepresented as the "media" component.
This gave a return of 510%.
Average makeup over those 18 years is 1.94 bank, 1 insurance, 2.3 telcom, 1.88 pipe

3. Top 40 by market cap, cap of 3 per industry. This variation allowed me to cap picks at 3 insurers, 3 banks, 3 pipes, etc.
Average return of 590%.
Average makeup over those 18 years is 2.77 bank, 2.6 insurance, 1.5 pipe, 1.6 telcom

4. Top 40 by market cap, cap of 2 per industry. This would cap banks to 2 every time but you could get 3 telcoms or 3 insurers sneaking in because they had different "industry codes" in their program.
Average return of 550%.
Average makeup over those 18 years is 2.77 bank, 2.6 insurance, 1.5 pipe, 1.6 telcom
Average makup over those 18 years is 2 bank, 2.4 insurer, 2 telcom, 1.5

I'll try to figure out how to have the screener pick a set number of banks and other sectors to properly diversify. Option 2 seems to offer the best diversification but it also gives the poorest outcome.
Last edited by nisser on 26 Nov 2017 17:23, edited 1 time in total.
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Re: Dogs of the TSE

Post by ig17 »

nisser wrote: 18 Nov 2017 16:42 So I think I'll start this strategy with a little bit of money with a few adjustments (like everyone!)
nisser wrote: 26 Nov 2017 17:10 I'll try to figure out how to have the screener pick a set number of banks and other sectors to properly diversify. Option 2 seems to best diversify but it also gives the poorest outcome.
I don't understand your concern about being properly diversified, given that you plan to put just "a little bit of money" into this strategy.
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Re: Dogs of the TSE

Post by Shakespeare »

What is left of the DJ40 Canadian Titans is available at http://investdb.theglobeandmail.com/inv ... aram_1=240 . There are 35 companies left.
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Re: Dogs of the TSE

Post by DenisD »

nisser wrote: 26 Nov 2017 17:10Top 40 by market cap, no cap gives a total return of 620% (vs 114% for XIC, this excludes dividends so difference is less)
XIC benchmark includes dividends.
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Re: Dogs of the TSE

Post by gsp_ »

DenisD wrote: 26 Nov 2017 17:40
nisser wrote: 26 Nov 2017 17:10Top 40 by market cap, no cap gives a total return of 620% (vs 114% for XIC, this excludes dividends so difference is less)
XIC benchmark includes dividends.

Norm’s Portfolio Asset Mixer says the TSX composite was up 263% from 1999 to 2016 for a geometric average of 7.43%. XIC is up 7.69% YTD.
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Re: Dogs of the TSE

Post by bill »

I invested in a dogs of the TSX portfolio for the first time last year. I'm actually much more of an ETF person, but I'm also a US citizen, and last year I realized that I've been mis-reporting funds on my US tax return & if I ever got audited in the US it would be a disaster. So, I decided to use this approach in my non-tax-sheltered accts. I only wound up with 7 stocks with between 100-200 shares each, when I checked yesterday it's a bit more than a point ahead of XIC. I didn't include PPL in the calculation, since I've been holding it since 2002.
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Re: Dogs of the TSE

Post by nisser »

You are both right, the 114% is for the composite index without the dividends.
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Re: Dogs of the TSE

Post by DenisD »

I decided to see for myself whether or not the P123 XIC benchmark includes dividends.

I used a backtest that I ran and downloaded recently. It contains a value for the benchmark, starting at 100, for every trading day. It started in 2006. For each year, I calculated two returns. The first used the last trading day of the year and the previous year. The second used the first trading day of the next year and the year. I compared the results with MorningStar's numbers. Here are the results:

Code: Select all

   Year XIC (Price) XIC (NAV)     P123  LastDay    Value     P123 FirstDay    Value
   2006                                29/12/06 101.0915            2/1/07 101.5278
   2007        9.56      9.55     9.63 31/12/07 110.8215    10.02   2/1/08 111.7005
   2008      -33.34    -32.95   -33.86 31/12/08  73.2943   -33.21   2/1/09  74.6079
   2009       34.55     34.40    36.61 31/12/09 100.1241    35.00   4/1/10 100.7184
   2010       17.42     17.27    16.98 31/12/10 117.1205    17.82   4/1/11 118.6703
   2011       -8.79     -8.94    -9.85 30/12/11 105.5895    -9.02   3/1/12 107.9687
   2012        7.01      6.90     7.06 31/12/12 113.0454    10.25   2/1/13 119.0349
   2013       12.46     12.71    13.36 31/12/13 128.1429     6.70   2/1/14 127.0062
   2014       10.95     10.42    10.88 31/12/14 142.0823    12.02   2/1/15 142.2665
   2015       -8.62     -8.35    -7.97 31/12/15 130.7530    -9.34   4/1/16 128.9826
   2016       21.00     21.01    21.69 30/12/16 159.1083    22.85   3/1/17 158.4573
10 Year Rtn    4.51      4.52     4.64                       4.55
Either one is close enough for me.
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Re: Dogs of the TSE

Post by nisser »

So I purchased the stocks today. I had considered a lot of rules such as limiting sectors, requiring at least x number of stocks from each sector, avoiding PWF, requiring there to be positive earnings in TTM, increased revenue growth, etc. Testing didn't produce any meaningful benefits and I can think of potential negatives from any strategy.
So after a lot of deliberating, I decided that less rules is better.
The only rule that consistently produced better returns is limiting the pool to top 40 stocks and that's what I've done.

I purchased these today based on that:

Rank Name Dividend Yield
1 ENB Enbridge Inc 5.00%
2 BCE BCE Inc 4.60%
3 PWF Power Financial Corp 4.60%
4 PPL Pembina Pipeline Corp 4.50%
5 CM Canadian Imperial Bank of Commerce 4.30%
6 GWO Great-West Lifeco Inc 4.20%
7 T TELUS Corp 4.10%
8 TRP TransCanada Corp 3.90%
9 BNS Bank of Nova Scotia 3.80%
10 BMO Bank of Montreal 3.60%
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Re: Dogs of the TSE

Post by AltaRed »

So 5 financials and 5 interest (capital) intensive stocks.....
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Re: Dogs of the TSE

Post by gobsmack »

nisser wrote: 07 Dec 2017 12:49 ...
3 PWF Power Financial Corp 4.60%
...
6 GWO Great-West Lifeco Inc 4.20%
I think PWF owns a stake on GWO so you may end up overweight GWO if you buy both.
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Re: Dogs of the TSE

Post by AltaRed »

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Re: Dogs of the TSE

Post by OptsyEagle »

nisser wrote: 26 Nov 2017 17:10 So I ended up signing up to p123 to test things for myself. Thanks to DenisD for helping with some functions as the learning curve on that website is steep!
I more or less had the same findings as him.

-Top 40 stocks by market cap outperforms top 60 every single time
-Top 30 stocks didn't seem to improve things and in some scenarios had poorer outcomes
-Passing on stocks with negative TTM earnings or less than 2% revenue growth over last 5 years did NOT improve results when looking among top 40 stocks
(*it did seem to improve return if you expanded to top60 but it still wasn't better than just sticking to top 40)
-Picking top 12 stocks by yield gave poorer results


Annualized returns (using top 40 by market cap, top 10 stocks)
1999-2017 (11.6)
2007-2017 (8.26)
2003-2013 (11.7)
2005-2015 (7.5)
1999-2007 (16)
2009-2017 (11)

The issue the website is that I still don't know how to cap the stocks chosen (i.e only 2 telcos) and I'm working on this. I've worked with various permutations from 1999-2017

1. Top 40 by market cap, no cap gives a total return of 620% (vs 114% for XIC, this excludes dividends so difference is less)
average makeup over those 18 years is 3.6 banks, 2. 4 insurance, 1.33 pipe, 1.5 telcom.
Banks are clearly over represented. In some years, you'd be holding 4-6 banks. It certainly worked out but will banks continue to perform so well in the future?

2. Top 40 by market cap, cap of 3 per sector. Keep in mind though that this will, depending on the year give you various permutations (3 banks or 3 insurers, 3 pipes or 3 oil producers, and various combinations). Because of this thomson reuters often was picked and is likely overrepresented as the "media" component.
This gave a return of 510%.
Average makeup over those 18 years is 1.94 bank, 1 insurance, 2.3 telcom, 1.88 pipe

3. Top 40 by market cap, cap of 3 per industry. This variation allowed me to cap picks at 3 insurers, 3 banks, 3 pipes, etc.
Average return of 590%.
Average makeup over those 18 years is 2.77 bank, 2.6 insurance, 1.5 pipe, 1.6 telcom

4. Top 40 by market cap, cap of 2 per industry. This would cap banks to 2 every time but you could get 3 telcoms or 3 insurers sneaking in because they had different "industry codes" in their program.
Average return of 550%.
Average makeup over those 18 years is 2.77 bank, 2.6 insurance, 1.5 pipe, 1.6 telcom
Average makup over those 18 years is 2 bank, 2.4 insurer, 2 telcom, 1.5

I'll try to figure out how to have the screener pick a set number of banks and other sectors to properly diversify. Option 2 seems to offer the best diversification but it also gives the poorest outcome.
So you are saying that the 40 stocks that grew to be the largest over the last 10 years or so ended up with a higher return then the stocks that did not grow to be the largest, over that same time period. Who would have figured? lol

Anyway, joking aside. Be careful with this type of research. It is prone to datamining, where you will keep changing parameters until you find the one with the best PAST performance. If you keep at this, where you keep changing a parameter here and a parameter there, you will end up with nothing more than a historical fluke that will most likely never get repeated.

Although the dogs of the dow has had some pretty good staying power, many, many more of these backtested strategies have failed miserably going forward. It is because if you keep working at it long enough you will indeed find the historical flukes.
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Re: Dogs of the TSE

Post by DenisD »

OptsyEagle wrote: 07 Dec 2017 14:59So you are saying that the 40 stocks that grew to be the largest over the last 10 years or so ended up with a higher return then the stocks that did not grow to be the largest, over that same time period. Who would have figured? lol
That's not what he's saying.
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Re: Dogs of the TSE

Post by OptsyEagle »

I know that. It was a joke.
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Re: Dogs of the TSE

Post by nisser »

gobsmack wrote: 07 Dec 2017 14:25
nisser wrote: 07 Dec 2017 12:49 ...
3 PWF Power Financial Corp 4.60%
...
6 GWO Great-West Lifeco Inc 4.20%
I think PWF owns a stake on GWO so you may end up overweight GWO if you buy both.
I was aware and briefly discussed that. Excluding the entire family (POW, PWF, IGM, GWO) or picking 1 of them only, didn't seem to make any difference and there's no way to predict what will happen. It may be a double dud or the brothers in charge may have found the G&M article excruciatingly embarrassing and decide to change things and the stock doubles. Since I can't predict the outcome, I chose the simpler option.
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Re: Dogs of the TSE

Post by RPABVG »

Nisser, I didn't catch the website you used to do this back testing. Can you please provide again. Also, will you also use this site to create the benchmark to track your own portfolio performance against? Thanks!
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Re: Dogs of the TSE

Post by Peculiar_Investor »

Although I haven't used it, I believe that P123 refers to Portfolio123 - Stock screener, model portfolios, and strategy backtest.
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Re: Dogs of the TSE

Post by BRIAN5000 »

So after a lot of deliberating, I decided that less rules is better.
The only rule that consistently produced better returns is limiting the pool to top 40 stocks and that's what I've done.
So you picked a strategy and decided to follow it with no "buts". :thumbsup: So often you hear I'm following this strategy but I've changed this and that.

What do you mean top 40, by cap rate?
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Re: Dogs of the TSE

Post by nisser »

The website is www.portfolio123.com
It'll be fairly easy to track depending on if you're comparing to XIC/XIU, etc
It's top 40 by market cap
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Re: Dogs of the TSE

Post by RPABVG »

Nisser, which portfolio pricing option did you choose at Portfolio123?
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Re: Dogs of the TSE

Post by nisser »

You need the screener version to do backtests to 1999. I will keep the most basic version and only upgrade here and there for a month if I want to get more testing done.

Apparently there's a referral program so if anyone ends up signing up sign up with the following link so I get $$s!
Please and thank you :)

https://www.portfolio123.com/?sref=38566
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Re: Dogs of the TSE

Post by RPABVG »

I'm a bit unclear on something...If you are looking at the top 40 or Top 60 by market cap and then based on the P123 testing its determined that investing in the top 10 by market cap is superior, does top 40 or 60 even matter anymore? Aren't you just investing in the top 10 largest stocks by market cap on the TSX? In other words, who cares about the top 40 or top 60? Just buy the largest 10 stocks on the TSX (minus REITs and Income Trusts) and your done. Am I missing something?
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