Dogs of the TSE

Discuss your favourite picks, broker, and trading or investment style.
User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20761
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Dogs of the TSE

Post by Shakespeare » 12 Nov 2015 19:17

It was interesting to see Ten Canadian stocks for the conservative investor - The Globe and Mail (behind paywall) today. Of the 10 stocks listed, all except one (RY) are in my TFSA, and I have a large RY holding in my RRSP.

Those who do a "dogs" strategy for several years wind up with mainly the same list.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20761
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Dogs of the TSE

Post by Shakespeare » 13 Nov 2015 11:27

Some comments from David Stanley, reproduced with permission:
David Stanley, by e-mail wrote:My take is that hardly anyone will take it at face value, but try to put their own spin on it-adding, subtracting, multiplying, or dividing by some extraneous factor that they think is important. In my opinion, they all lose sight of the goal, which is to construct a long-term hold portfolio of Canadian blue-chip dividend stocks that were acquired at a reasonable cost, and instead focus on the methodology, trying to show that their approach is a point or two better than what someone else has come up with. I think they concentrate on the trees and ignore the forest. For me, I am much more
sympathetic to another thread on those boards that says, "I find myself less and less interested in the investing process". That kind of describes me now. Using the BTSX process I have, over the years, acquired a good portfolio of Canadian dividend payers that have met my needs and more. What more can anyone ask? Why keep tinkering with a process that has done its job? I think someone said, "If it ain't broke, don't break it".

Maybe I should have added a bit about how one builds up the portfolio of dividend stocks. As you point out, the turnover in the list of 10 stocks is low, but suppose one of them falls off the list. That usually occurs because either the price has risen or the dividend has been cut. If it is due to the former case then there seems no reason to sell the stock since it is doing what you had hoped it would, i. e., increase in price. So, rather than sell that stock you can keep it and put it into your permanent portfolio. I used DRIP plans so I could accumulate shares rather than take the dividends as cash. Thus, over the years you amass a group of Canadian dividend paying stocks that have been acquired at a low cost. At retirement (or whenever needed) the dividends can be taken as cash, providing a tax efficient way of supplementing other retirement funds.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

DenisD
Gold Ring
Gold Ring
Posts: 2478
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: Dogs of the TSE

Post by DenisD » 13 Nov 2015 19:14

David Stanley, by e-mail wrote:My take is that hardly anyone will take it at face value, but try to put their own spin on it
I'm one of those who has put their own spin on it. Or, should I say, an O'Shaughnessy spin on it. In my defence, I'm following O'Shaughnessy's rules as closely as possible more or less.
In my opinion, they all lose sight of the goal, which is to construct a long-term hold portfolio of Canadian blue-chip dividend stocks that were acquired at a reasonable cost
Yes, I think David has mentioned this in some of his Canadian MoneySaver articles. It sounds like a plausible approach. But I thought the main point of the articles was to show how well a Dogs approach could work over the long term. That was what I found interesting.

There is an annoying lack of detail on how one constructs the long-term hold portfolio. How many companies should you own? Which ones should you sell when you reach the limit? When would you sell a company? When it cuts its dividend? When the price goes down 50%? When it's dropped from the index? Us stock screeners want rules! Sounds like it could be more complicated than the Dogs.

It would have been useful if, when he started his series of articles, David tracked the returns of two portfolios: the Dogs and the long-term holds. As it is, we don't know whether the long-term holds beat the Dogs or even beat the index.

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20761
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Dogs of the TSE

Post by Shakespeare » 13 Nov 2015 19:17

It would have been useful if, when he started his series of articles, David tracked the returns of two portfolios: the Dogs and the long-term holds. As it is, we don't know whether the long-term holds beat the Dogs or even beat the index.
In real life, as opposed to on paper, it makes a big difference whether you are working in a taxable or registered account. The former encourages a more buy-and-hold approach because of cg taxes.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

DenisD
Gold Ring
Gold Ring
Posts: 2478
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: Dogs of the TSE

Post by DenisD » 13 Nov 2015 19:41

That's true. But at least the "on paper" results would give a starting point in the comparison.

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Dogs of the TSE

Post by Jungle » 09 Jun 2016 10:25

Anyone still following this strategy?

How were the results for 2015? There would have been some dividend cuts?
YTD it looks like this might be outperforming, mainly oil stocks if included.

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20761
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Dogs of the TSE

Post by Shakespeare » 26 Sep 2016 14:44

How a retired university professor outperforms the market - The Globe and Mail
David Stanley

Occupation

Retired university professor

The portfolio

Includes about 30 blue-chip, dividend stocks – the two largest positions being Enbridge Inc. and Toronto-Dominion Bank....

Mr. Stanley usually limits his holdings to Canadian TURF stocks (telecoms, utilities, REITs and financials). Some diversification is provided by U.S. dividend stocks and Vanguard ETFs that track foreign markets.
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Dogs of the TSE

Post by Jungle » 12 Dec 2016 03:26

Looks like 2016 was a good year for BTSX.
Anyone looking at BTSX for 2017?

EMA
BCE
T
SJR.B
CM
POW
NA
FTS
BNS
ENB

Seems like a pretty strong group for 2017 screen stays the same.

RPABVG
Newcomer
Newcomer
Posts: 9
Joined: 10 Aug 2017 23:24

Re: Dogs of the TSE

Post by RPABVG » 10 Aug 2017 23:37

Great thread guys but its been a while since anyone posted. Any updates on BTSX strategy, results? Is everyone who was using it, still using it? Has anyone abandoned it? Where's Like_to_Retire? Cheers!

nisser
Silver Ring
Silver Ring
Posts: 823
Joined: 11 Nov 2007 21:24

Re: Dogs of the TSE

Post by nisser » 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!)

-10 stocks
-max of 2 from each sector except for
1 in oil & gas and 1 in other resource
-positive earnings in last 12 months
-no stocks that would have made it a 3rd year in a row (unless compounded yearly total return is 10%+)

What I'm trying to avoid is getting stuck with transaltas that do nothing forever. But if they're returning 10+%, I'm happy to keep them because I feel that last caveat may drop some solid performers on a technicality.

Having said that, the list for this year comes out to:

Interpipeline
Enbridge
Emera
BCE
CIBC
Power corp of canada
Shaw
Crescent point energy
Bank of nova scotia
Arc resources
Sun life financial

It's hard to go back but are any of those breaking the last 3 year rule? Does anyone have a list of what it would have looked like in previous years.

EDIT:
I think Shaw has been on it for 3 years. It's return Jan 2014 to today is ~11% + dividends, so that sucker will have to go.
Is this Enbridges 3rd year? If so, I may need to cut it out as well as it essentially has a negative 3 year return

Is my 30% total return too ambitious? Is 3 years too short? Should I say 4 years and say ~5% yearly return.
It's also a bit difficult to calculate total return so I may just stick to stock price appreciation itself.
Since this is all speculative I'm open to hear to what everyone thinks and I'll report results each year :)

Taggart
Gold Ring
Gold Ring
Posts: 6223
Joined: 05 Dec 2005 07:34

Re: Dogs of the TSE

Post by Taggart » 18 Nov 2017 18:18

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!)

-10 stocks
-max of 2 from each sector
Just to point out, that the way I read it, you've already got four stocks on your list from the financial sector. Two life insurance companies and two banks.

CIBC
Power corp of canada
Bank of nova scotia
Sun life financial

User avatar
Quebec
Silver Ring
Silver Ring
Posts: 682
Joined: 24 Oct 2009 16:49
Location: Quebec City

Re: Dogs of the TSE

Post by Quebec » 18 Nov 2017 18:52

nisser wrote:
18 Nov 2017 16:42
-no stocks that would have made it a 3rd year in a row (unless compounded yearly total return is 10%+)
I'm not a expert by any means on this strategy, and I quit stock picking a few years ago. But it is clear that some companies go in and out out favor (e.g. banks), and indeed that's the whole point of the this strategy. A higher yield than usual can indicate that the company is currently out of favor, which means it may make the dogs list, and might stay there for a few years. Although this 'dog' status can be permanent, often it's not. So after 3 years on the list, the yield may be about to decrease (i.e. the price may be about to rise, perhaps because of improving earnings). And that would be the time to buy (or hold) this stock, not sell...

I would screen for decent 5 year earnings growth and decent 5 year dividend growth if you want to avoid the permanent dogs. But that just shows my bias towards my former stock picking strategy (dividend growth investing)...

Cheers,

-Qc
Imagefiniki, the Canadian financial wiki: a knowledge base of financial subjects written from a Canadian perspective

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20761
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Dogs of the TSE

Post by Shakespeare » 18 Nov 2017 19:25

Based on David Stanley's original "no former income trusts" criterion for the TSX 60, yesterday's close would give (from Stingy Investor )

Name Quotes Quintile Ranking Yield Rank
P/E P/B Yield
Inter Pipeline (IPL) GM 3 2 5 5
Enbridge (ENB) GM 2 4 5 5
Pembina Pipeline (PPL) GM 1 2 5 5
BCE Inc. (BCE) GM 3 1 5 5
Emera (EMA) GM 2 4 5 5
CIBC (CM) GM 5 4 5 5
Power Corp of Canada (POW) GM 5 5 5 5
Shaw (SJR.B) GM 4 2 5 5
TELUS (T) GM 2 1 5 5
TransCanada (TRP) GM 1 2 5 5
Bank of Nova Scotia (BNS) GM 4 3 4 4
National Bank (NA) GM 4 3 4 4
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

nisser
Silver Ring
Silver Ring
Posts: 823
Joined: 11 Nov 2007 21:24

Re: Dogs of the TSE

Post by nisser » 18 Nov 2017 22:59

Quebec wrote:
18 Nov 2017 18:52
nisser wrote:
18 Nov 2017 16:42
-no stocks that would have made it a 3rd year in a row (unless compounded yearly total return is 10%+)
I'm not a expert by any means on this strategy, and I quit stock picking a few years ago. But it is clear that some companies go in and out out favor (e.g. banks), and indeed that's the whole point of the this strategy. A higher yield than usual can indicate that the company is currently out of favor, which means it may make the dogs list, and might stay there for a few years. Although this 'dog' status can be permanent, often it's not. So after 3 years on the list, the yield may be about to decrease (i.e. the price may be about to rise, perhaps because of improving earnings). And that would be the time to buy (or hold) this stock, not sell...

I would screen for decent 5 year earnings growth and decent 5 year dividend growth if you want to avoid the permanent dogs. But that just shows my bias towards my former stock picking strategy (dividend growth investing)...

Cheers,

-Qc
So what's the best objective way to weed out potential future transaltas? I feel like earnings growth and dividend growth wouldn't work because if you're in a hole like transalta was, you aren't increasing dividends or earnings anyway.

I thought of using revenue growth as that would definetely shoo these dogs away but I just tried it and CIBC and Shaw were removed from the list even though I only used a 5 year revenue growth of 0.1%. I'm not sure if google finance is acting up because if I look up CM on morningstar, just by eyeballing its revenue growth is way more than 0.1%.
Shaw seemed to have been appropriately removed as it's revenue hasn't budged at all.

JaydoubleU
Gold Ring
Gold Ring
Posts: 2116
Joined: 13 Sep 2007 22:52

Re: Dogs of the TSE

Post by JaydoubleU » 19 Nov 2017 07:07

Based on David Stanley's original "no former income trusts" criterion for the TSX 60, yesterday's close would give (from Stingy Investor )

Name Quotes Quintile Ranking Yield Rank
P/E P/B Yield
Inter Pipeline (IPL) GM 3 2 5 5
Enbridge (ENB) GM 2 4 5 5
Pembina Pipeline (PPL) GM 1 2 5 5
BCE Inc. (BCE) GM 3 1 5 5
Emera (EMA) GM 2 4 5 5
CIBC (CM) GM 5 4 5 5
Power Corp of Canada (POW) GM 5 5 5 5
Shaw (SJR.B) GM 4 2 5 5
TELUS (T) GM 2 1 5 5
TransCanada (TRP) GM 1 2 5 5
Bank of Nova Scotia (BNS) GM 4 3 4 4
National Bank (NA) GM 4 3 4 4
I guess I have a real pack of dogs, cause I own 8 of those names, including Pembina

Taggart
Gold Ring
Gold Ring
Posts: 6223
Joined: 05 Dec 2005 07:34

Re: Dogs of the TSE

Post by Taggart » 19 Nov 2017 09:48

If you take a look at Rob Carrick's own list of Dogs from back in January 2005, you'll see that a number of these stocks have simply disappeared while others lived up to their name.

I count three equities out of the thirteen that may have been profitable to an investor who bought at that time.

Dogs can be investors' best friend

nile
Silver Ring
Silver Ring
Posts: 131
Joined: 07 Feb 2007 08:42

Re: Dogs of the TSE

Post by nile » 19 Nov 2017 13:35

I guess I must be the king of dogs as I own all 12
[url]http://avatars.jurko.net[/url][img]http://img1.jurko.net/avatar_10579.gif[/img]

pmj
Gold Ring
Gold Ring
Posts: 2411
Joined: 27 Feb 2005 18:15
Location: Ottawa

Re: Dogs of the TSE

Post by pmj » 19 Nov 2017 17:49

Taggart wrote:
19 Nov 2017 09:48
I count three equities out of the thirteen that may have been profitable to an investor who bought at that time.
On price alone, or on price + divs?
Peter

Patrick Hutber: Improvement means deterioration

User avatar
Quebec
Silver Ring
Silver Ring
Posts: 682
Joined: 24 Oct 2009 16:49
Location: Quebec City

Re: Dogs of the TSE

Post by Quebec » 19 Nov 2017 18:29

nisser wrote:
18 Nov 2017 22:59
So what's the best objective way to weed out potential future transaltas? I feel like earnings growth and dividend growth wouldn't work because if you're in a hole like transalta was, you aren't increasing dividends or earnings anyway.
I would screen out companies that don't increase their earnings and dividends.
Imagefiniki, the Canadian financial wiki: a knowledge base of financial subjects written from a Canadian perspective

Taggart
Gold Ring
Gold Ring
Posts: 6223
Joined: 05 Dec 2005 07:34

Re: Dogs of the TSE

Post by Taggart » 19 Nov 2017 18:50

pmj wrote:
19 Nov 2017 17:49
Taggart wrote:
19 Nov 2017 09:48
I count three equities out of the thirteen that may have been profitable to an investor who bought at that time.
On price alone, or on price + divs?
Price alone. I just compared the price back in Jan 05 with today's on the Yahoo charts. Most of these equities were so far down, I doubt even re-investing the dividends are going to save them....and of course there are some retirees who live off their dividends.

DenisD
Gold Ring
Gold Ring
Posts: 2478
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: Dogs of the TSE

Post by DenisD » 19 Nov 2017 19:39

Taggart wrote:
19 Nov 2017 09:48
If you take a look at Rob Carrick's own list of Dogs from back in January 2005, you'll see that a number of these stocks have simply disappeared while others lived up to their name.

I count three equities out of the thirteen that may have been profitable to an investor who bought at that time.

Dogs can be investors' best friend
2 points: those aren't the Dogs of the TSE, they're the Dogs of each sector. It's an entirely different strategy. And, even if you choose that strategy, you don't hold them until today, but only for one year.

DenisD
Gold Ring
Gold Ring
Posts: 2478
Joined: 19 Feb 2005 01:24
Location: Calgary

Re: Dogs of the TSE

Post by DenisD » 19 Nov 2017 20:28

Just for fun, I ran a few backtests. All runs selected the 10 highest yielding stocks from the top 40 or 60 stocks by market cap in the TSX Composite and held them for 52 weeks. There are runs with no sector limit, 1 stock/sector and 2 stocks/sector. Slippage was 0.25% and all runs started on January 16, 2006.

As usual, you can pick numbers to support any conclusion you want. And starting the backtests on a different date could yield entirely different results. :D

Code: Select all

         Sector    Total   Annual      Max                                                  
Universe  Limit   Return   Return Drawdown   Sharpe  Sortino   StdDev   Correl R-Squared     Beta    Alpha
XIC                89.1%     5.5%   -48.3%     0.38     0.48    13.7%
Top40             152.7%     8.1%   -48.2%     0.57     0.74    13.8%     0.77      0.59     0.78     3.9%
Top40         1   128.2%     7.2%   -44.2%     0.53     0.69    12.7%     0.82      0.67     0.76     2.8%
Top40         2   119.3%     6.9%   -40.5%     0.55     0.71    11.9%     0.82      0.67     0.72     2.9%
Top60             114.4%     6.7%   -44.9%     0.44     0.58    14.9%     0.77       0.6     0.84     2.2%
Top60         1   155.2%     8.2%   -35.7%     0.63     0.82    12.5%      0.8      0.64     0.73     4.1%
Top60         2    86.1%     5.4%   -42.8%     0.41     0.53    12.5%     0.79      0.62     0.72     1.4%

Chuck
Gold Ring
Gold Ring
Posts: 1317
Joined: 21 Feb 2005 11:48
Location: Manitoba

Re: Dogs of the TSE

Post by Chuck » 20 Nov 2017 16:22

It seems to me limiting stocks to one or two a sector might go against the underlying theory of the dogs strategy.

I'm thinking if you believe the dogs approach works, you pick the dogs of the TSE35/60 because you want large cap (by Canadian standards) stocks that have been beaten down by macro economic conditions. You are hoping the dogs approach leads you to buy low and hope the stocks recover when the economic conditions (and accompanying investor disfavor) that drove them down turns around, and while you wait, you collect a reasonable dividend.

If you limit yourself to 1 or 2 stocks per sector, I would think you run the risk of buying a 'dog' not because of an unfavorable economic/investor sentiment environment but because bad management might have made that one company you select a dog.

For example, if all 5 big banks pop up in the top 10 dogs, it's probably due to a rough economic climate for banking. You buy and hope for better days ahead. However, if only one of the big 5 shows up as a dog (and it might not even be a top 10 dog, it might just be the top financial sector dog), it may indicate a problem specific to that bank, which may or may not turn around. Your sector limit will probably drive you into that stock. So you, in fact, increase your chances of picking a lemon with sector limitations.

I recall one of the variants of the dogs, was to avoid the worst dog, and double up on the second worst. This was an attempt to avoid picking a true lemon. I can't recall if back testing showed it to outperform to a significant degree. But you can see the theory behind it. Picking the worst dog of various sectors would be doing pretty much the opposite of this.

nisser
Silver Ring
Silver Ring
Posts: 823
Joined: 11 Nov 2007 21:24

Re: Dogs of the TSE

Post by nisser » 20 Nov 2017 22:26

DenisD wrote:
19 Nov 2017 20:28
Just for fun, I ran a few backtests. All runs selected the 10 highest yielding stocks from the top 40 or 60 stocks by market cap in the TSX Composite and held them for 52 weeks. There are runs with no sector limit, 1 stock/sector and 2 stocks/sector. Slippage was 0.25% and all runs started on January 16, 2006.

As usual, you can pick numbers to support any conclusion you want. And starting the backtests on a different date could yield entirely different results. :D

Code: Select all

         Sector    Total   Annual      Max                                                  
Universe  Limit   Return   Return Drawdown   Sharpe  Sortino   StdDev   Correl R-Squared     Beta    Alpha
XIC                89.1%     5.5%   -48.3%     0.38     0.48    13.7%
Top40             152.7%     8.1%   -48.2%     0.57     0.74    13.8%     0.77      0.59     0.78     3.9%
Top40         1   128.2%     7.2%   -44.2%     0.53     0.69    12.7%     0.82      0.67     0.76     2.8%
Top40         2   119.3%     6.9%   -40.5%     0.55     0.71    11.9%     0.82      0.67     0.72     2.9%
Top60             114.4%     6.7%   -44.9%     0.44     0.58    14.9%     0.77       0.6     0.84     2.2%
Top60         1   155.2%     8.2%   -35.7%     0.63     0.82    12.5%      0.8      0.64     0.73     4.1%
Top60         2    86.1%     5.4%   -42.8%     0.41     0.53    12.5%     0.79      0.62     0.72     1.4%
That'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?

I'm thinking 2009 to today and maybe 2000-2010. I was set on 2 per sector and top 60 but that's looking discouraging!

User avatar
NormR
Gold Ring
Gold Ring
Posts: 4005
Joined: 18 Feb 2005 11:19
Contact:

Re: Dogs of the TSE

Post by NormR » 20 Nov 2017 22:35

Do a run with yield based on ttm dividends. Enjoy.

Post Reply