The most common question about 2 for 1 is “What are your results?“ Since inception and as of 1/31/2017, the 2 for 1 portfolio has returned over 10.88% annualized, far exceeding the overall return of the Vanguard 500 Index Fund (8.30%) over the same period. This is a real portfolio of real stocks in the editor’s own IRA account. The monthly newsletter describes, in detail, how the 2 for 1 strategy works, so you can duplicate these results with only a few minutes of effort each month. Subscribe now.
Other frequently asked questions include:
- What’s so special about stocks that have split?
- What is “laddering”?
- Why not 3 for 2 splits?
- Have you really beaten the market for fourteen of the last twenty years?
- What’s the relationship between the 2 for 1 Index® and 2 for 1®, the newsletter?
- If you’re so smart how come you’re not rich?
- What qualifies Neil Macneale to give investment advice?
- The 2 for 1 procedure is kind of boring!
- How can I use the 2 for 1 procedure if I’m just getting started?
- Is 2 for 1 guaranteed?
The original idea for the 2 for 1 portfolio and newsletter came from an article by Mark Hulbert entitled “A Strong Signal” that appeared in the April 22, 1996 of Forbes magazine. This piece discusses a study undertaken at Rice University where the performance of stocks split 2 for 1 is measured in relation to performance of the market as a whole. The final results of the study are published in the Journal of Financial and Quantitative Analysis and would indicate that there is a measurable difference in the performance, for up to three years, of stocks that have split 2 for 1 as opposed to those that have not.
Laddering is the technique of regularly buying and selling securities in a portfolio so as to always maintain a constant number of securities as the portfolio moves through time. The theory, for 2 for 1, is that our stocks statistically do better than the market for 2 to 3 years, based on a Rice University study. The “stock split advantage” dissipates after three years. I keep 30 stocks in the portfolio (30 months = 2 1/2 years). Each month I sell the oldest “at the top of the ladder” and buy a new stock to put “at the bottom of the ladder.” This procedure eliminates the problems associated with trying to time the market and agonizing over when to sell a stock.
The question is, “Why don’t I include stocks that have split 3 for 2 or by some other formula?” I include 2 for 1 and higher splits (such as 3 for 1), but not 3 for 2 or lower. The procedure is based on one basic consideration.
The entire 2 for 1 strategy and procedure relies on David Ikenbery’s Rice University original study and follow-up study on stock splits. The studies show that the group of stocks that had announced splits had a better overall performance, over two to three years, than a group of similar stocks that had not split.
For the purposes of the 2 for 1 strategy, the number of stocks splitting 2 for 1 or higher is usually more than enough to provide several good companies to choose from each month. Remember, you only need one! Doing the research and sifting through the sometimes more than a dozen stocks that split 2 for 1 or 3 for 1 each month is time consuming enough. Why would one want to make the list any longer? To this some might say, “but what if the most promising stock splits 3 for 2 instead of 2 for 1?” You can only know this after the fact, and one need only look at the many very successful stocks that I have passed up to realize that the odds would not have improved by simply making the pool I picked from larger. The success of your portfolio does not depend so much on the selection of individual winners as it does on assembling a diversified portfolio of stocks that has a slightly better than even chance of beating the market.
The 2 for 1 stock picking procedure is based on a proprietary formula tested on stocks that declared 2 for 1 splits starting in January, 1990. The portfolio was built on paper, one stock from each month, through July of 1992. At that point, there were 30 stocks in the portfolio (still all on paper) and this portfolio was tracked through July of 1996, taking the oldest stock off and adding the newest from each month’s list of 2 for 1 splits. All of this work was done during June and July of 1996. At the end of July ’96, the paper portfolio was converted into a real portfolio, using $50,000 from Neil Macneale’s IRA account. The 30 stocks making up the real portfolio were bought in the same proportion that they existed in the paper portfolio on that day, 7/31/96. The graph that appears each month on the back page of the 2 for 1 newsletter represents the real 2 for 1 portfolio vs. the Vanguard 500 Index Fund, with the 2 for 1 portfolio adjusted to equal the Vanguard 500 Fund on July 31, 1996. The following table gives the actual year-end numbers represented by that graph.
Index vs. portfolio 12 month change
Dec. 31 VG 500 2 for 1 VG 500 2 for 1
1996 52.38 54417 —— —— 1997 69.76 72871 33.2% 33.9% 1998 89.73 81587 28.6% 12.0% 1999 108.64 80668 21.1% -1.1% 2000 98.81 85953 -9.0% 6.6% 2001 86.92 87555 -12.0% 1.9% 2002 67.65 70989 -22.2% -18.9% 2003 86.93 104696 28.5% 47.5% 2004 96.26 140001 10.7% 33.7% 2005 100.86 154295 4.8% 10.2% 2006 116.63 165187 15.6% 7.1% 2007 122.92 200674 5.4% 21.5% 2008 77.41 114024 -37.0% -43.2% 2009 97.94 167852 26.5% 47.2% 2010 112.55 208039 14.9% 23.9% 2011 114.75 212545 2.0% 2.2% 2012 131.37 242706 15.0% 14.1% 2013 170.36 323308 29.7% 33.2% 2014 189.89 354678 12.9% 9.7% 2015 188.48 358957 -1.23% 1.21% 2016 206.57 410510 9.60% 14.36%
The 2 for 1 numbers include all dividends and commissions. The Vanguard 500 numbers reflect reinvested dividends and mutual fund management fees. Neither makes any allowance for taxes or inflation, so the comparison is as close to apples vs. apples as one can get.
The 2 for 1 Index is a list of 30 stocks updated and rebalanced to equal weight once a month. The value of the 2 for 1 Index is calculated every 15 seconds during the trading day, and is published by the New York Stock Exchange under contract with Neil Macneale Inc. Started at an arbitrary value of 100 on July 31, 1996, the Index has now grown to near 1000. The 2 for 1 newsletter’s portfolio is based on the 2 for 1 Index, but is a real portfolio. It is rebalanced from time to time, but not as regularly as the index. In addition, the real portfolio has trading costs that are not a factor for the Index. Therefore, the growth of the index and the newsletter portfolio over the last 20 years are very similar but not precisely correlated.
The value of the 2 for 1 Index ® (the “Index”) is calculated by NYSE Euronext or its affiliates (“NYSE Euronext”). The Stock Split Index Fund, which is based on the Index, is not issued, sponsored, endorsed, sold or promoted by NYSE Euronext, and NYSE Euronext makes no representation regarding the advisability of investing in such product.
NYSE EURONEXT MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE 2 FOR 1 INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL NYSE EURONEXT HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
I’m trying, I’m trying!. If my 2 for 1 portfolio had been started 40 years ago, I probably would be rich. The real question is, “Why are you trying to sell me a newsletter about this system instead of using it to make money for yourself?” The answer is that I am using the 2 for 1 system for my own IRA account and the results are printed in every issue of the newsletter. I sell the newsletter to help pay for the cost of the Internet connections, research reports, and time and effort invested in the newsletter and, at $20.00 per month, no one has ever accused me of trying to gouge my subscribers.
I have qualified as a Registered Investment Advisor in the State of California and with the SEC. I was registered with the SEC and California but, in 1997, the SEC no longer required registration for Investment Advisors if they did not actually handle their clients’ funds. Because I only write a newsletter and don’t manage client accounts, I chose to let my registration lapse. The 2 for 1 Index® is recognized and followed by the New York Stock Exchange and is tracked by the Stock Split Index Fund. (see disclosures above in item #5) But more important than formal training or certification, I am simply sharing an investment procedure that works for me. It is not for everyone. If subscribers like what they read and follow the 2 for 1 recommendations, they should expect to do no better or no worse than I am doing with my own account. The results are what count, not the degrees, certificates, or plaques on the wall. And the results are open for all to see.
You’re absolutely right! 2 for 1 is not written for day traders, market timers, or speculators. If a reader wants to “play” the market, I recommend they take a sum they can afford to lose and get their excitement trading with that money. However, for their IRA or kids’ college fund, I recommend a proven long-term strategy that’s about as exciting as watching paint dry. But truthfully, there are actually people who find a 47% return on their money just a little exciting. (see results for 2003 and 2009 above)
I do not recommend investing in individual stocks until your account is at a minimum of $10,000. Up until that time, accumulating funds in an indexed mutual fund with a low cost broker such as Vanguard is a more prudent course. Another alternative would be an account holding only Standard & Poors Depository Receipts (SPDRs) which mirror the performance of the S&P 500. After you have over $10,000, then you can slowly begin purchasing individual stocks recommended by 2 for 1, perhaps every two or three months. Finally, when your account is at $30,000 or more, you should own all thirty stocks in the 2 for 1 portfolio. The short answer is that you should never spend less than $1000 on a stock position. Below that level, the commission costs are too large a percentage of each trade. ($20 on a $1000 trade = 2% commission) If you are in the “under $10,000” category, be patient, keep up the automatic payroll deductions to your investment account, follow 2 for 1 on this website, and then subscribe when the time is right.
Yes! 2 for 1 guarantees that the stock market will go up and it will go down. I guarantee that some other newsletter or mutual fund will do better than 2 for 1 over any given time period. I guarantee that there are no guarantees in this life. (Except one) I also guarantee your ability to cancel your subscription at any time, for any reason, no questions asked.