1052.36 – that’s the new all-time closing high for the 2 for 1 Index®. January 24th also saw a new intraday high for the index (1,053.68), and a new all-time high for the 2 for 1® newsletter portfolio. The 2 for 1 Index not only keeps up with the market, it is beating the market handily with a 12.18% annualized overall return over the last 20 1/2 years.
Author Archives: Neil
Investors have had the opportunity to increase their stock portfolios eightfold over the last twenty years by exploiting the Stock Split Advantage. Following the 2 for 1® strategy, Neil Macneale has grown his IRA account from $50,000 to $410,509 since he started writing about it in 1996 (as of 12/31/16). One might ask, why isn’t this front page news? This is a 10.9% annualized overall return, far better than all the broad market index funds (think the Vanguard 500 Fund – +8.2% annualized) over the same period.
And then there is the 2 for 1 Index®, now checking in at a 12.13% annualized overall return over 20+ years. The Stock Split Index Fund (TOFR) follows this index and just racked up a 15.23% NAV overall return for 2016.
Here are a few comments I’ve heard over the years regarding 2 for 1.
“Investing in stock splits is just a gimmick – a split adds no value to a company or its stock price.” Technically, this is a true statement. However, it completely misses the point. The mechanics of a stock split are not important. It’s the signal the stock split announcement gives that is the key. This is an insight into the collective thinking of a board of directors. You buy on the assumption that the board is correct in their signaling, with a stock split, that the company is on a roll. It’s nothing short of legal insider trading.
“There is no way to beat the market over the long haul.” This is also a true statement, almost. There are a few exceptions to the efficient market theory and the Stock Split Advantage is one such anomaly. It has been proved by academic study and the twenty-plus year track record of the 2 for 1 Index, that a well diversified portfolio of 30 companies, all acquired within six months of a split announcement, will outperform the market for approximately a two to three year period.
“How is it possible a retired construction superintendent can come up with such a winning strategy when all the best minds on Wall Street have been trying to do this for decades?” Good ideas do come along once in while. Jack Bogle’s idea regarding index fund investing, mercilessly ridiculed by market “professionals” at the time, has turned into Vanguard, the world’s largest mutual fund sponsor and custodian of trillions of dollars of investor funds.
“If trading on stock splits was such a winning strategy, why doesn’t the 2 for 1 newsletter have tens of thousands of subscribers or, why doesn’t the TOFR ETF have a valuation in the $billions?” That is my question. What am I missing? If anyone has an explanation not already covered above, I hope they will leave a comment or get in touch.
An excerpt from the September issue of 2 for 1.
“The major stock market indices, the 2 for 1 Index®, and the 2 for 1 newsletter portfolio have all hit all-time highs repeatedly over the last few months. Every time this happens we congratulate ourselves on how smart we are to be invested in the stock market. I, like everyone else, get a warm fuzzy feeling when the number at the bottom of the column grows to a new, higher level. However, I am also careful to remind myself that our 10.7% annualized growth has not been in a straight line. The dot-com bust and the 2008 financial crisis are sobering examples of the downside of stock market investing. The current bull market is one of the longest in history, and I’m writing today to say with some certainty, something bad is going to happen and the bull market will eventually come to an end.”
“I would be foolish to predict the timing of the onset of the next bear market and, because of the fully invested nature of the 2 for 1 strategy, I’m not planning any changes in 2 for 1’s monthly buy/sell routine. However, I would be remiss, as your newsletter editor, if I didn’t remind my readers that 2 for 1 only concerns the equity portion your portfolio. Everyone’s financial situation differs and asset allocations will vary accordingly but, with emotions and market uncertainty being pumped up by the coming election, I recommend a review of your overall financial situation. This review should be bracketed by the assumption that your stocks may be taking a hit over the coming months.
2 for 1 is up 4.75% for the YTD vs. 3.84% for the S&P 500 Total Return Index. Results since inception (7/31/1996) look even more impressive.
The month of May has produced an El Nino of stock split announcements to break the recent prolonged drought. For the first four months of 2016 there had been only three 2 for 1 split announcements. The last time there were five or more in one month was May of 2015. After analysis and ranking, one of these five will be added to the 2 for 1 Index® and purchased for the 2 for 1® model portfolio.
Company Symbol Ratio Payable Announced
Brown-Forman Corp BFA & BFB 2 for 1 08/08/16 05/26/16
Core-Mark Holding Co. CORE 2 for 1 06/27/16 05/26/16
SS&C Tech Holdings SSNC 2 for 1 06/24/16 05/25/16
Ebix Inc. EBIX 3 for 1 07/15/16 05/23/16
VSE Corp. VSEC 2 for 1 08/08/16 05/04/16