The portfolio, which has become known affectionately as “The Lucky 13,” was designed to emphasize sectors of the market that while perhaps were currently out of favor, nonetheless offered exemplary fundamentals and attractive dividend yields. Thirteen stocks were also sufficient to establish the foundation for a portfolio while leaving room for expansion when opportunities become available throughout the year.
In short, The Lucky 13 has been extremely successful and not surprisingly, quite popular. While not every stock in each Lucky 13 portfolio has been a winner, there have been sufficient winners in each group to produce seventeen years of positive total returns, fourteen of which have exceeded 10%. Through 2019, the arithmetic average annual return for the portfolio is 13.26%. The compound annual growth rate (CAGR) is 12.35%. For comparison purposes over the same time period, the arithmetic average annual return for the S&P 500 is 7.66% and a CAGR of 6.02%.
Investment Quality Trends provides stock data and information to subscribers with varying degrees of investment expertise and experience in portfolio construction. Accordingly, unlike some newsletter services, we do not suggest or maintain model portfolios. Because we follow such a wide variety of companies that are dynamically moving in price, along with a steady influx of new subscribers, such an approach would be impractical for our particular application.
For tracking purposes, however, the Hulbert Financial Digest has maintained a portfolio for Investment Quality Trends since 1986. This portfolio consists of all the companies in the Undervalued and Rising Trend categories, which at any given time, could total well over one hundred companies; clearly too many companies to follow on a practical basis.
Additionally, many studies have shown that the optimum number of stocks for an individual portfolio is twenty-five. That number is appropriate for diversification while not allowing the portfolio to become unwieldy. Accordingly, investors must be selective and fashion a diversified portfolio of Undervalued and Rising Trend stocks based on personal preferences, investment objectives, financial conditions and tolerance for risk.
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