Author Archives: Neil

Another Quarter, Another All-Time High

The third quarter closed out with new highs, or close to new highs, in all the broad market indexes, including the 2 for 1 Index®. The 2 for 1 portfolio stands at +16.23% overall return for the trailing 12 months and a 12.85% annualized overall return over the last 5 years. Stock split announcements have been few and far between but the recent announcements, say over the last year, have still provided enough additions to the portfolio to keep it refreshed and thriving.

2nd Quarter ends at all-time high

The 2 for 1® newsletter portfolio, a real IRA account, finished the 2nd quarter at its all-time closing high, up 14.3% over the trailing twelve months and 13.2% annualized over the last five years. This real portfolio is based on the 2 for 1 Index®, also near its all-time high and up a 12.1% annualized total return over the last 21 years. The Stock Split Advantage is a real thing and provides an easily understood and easily executed strategy for beating the market over the long-term.

Thoughts on the Current Market

I usually don’t spend much time or energy trying to understand the market, but I did throw out a brief analysis in the May issue of 2 for 1. Quoting from the article of May 12th:

“In 2 for 1’s twenty year run there have been several times when it seemed our strategy was failing us. Early on for example, for an extended period in 1998 and 1999, 2 for 1 fell behind the market for months at a stretch and, by the end of 1999, was over 20% behind the S&P 500 for the year. This was the dot-com bubble and our “under the radar”, value investing style was definitely not in sync with the market. Similarly, this style seems to be out of sync with the market now and we are suffering, but for somewhat different reasons.

Compare year-to-date numbers for the Russell 3000, a total market index, up 6.6%, with the Russell 2000, a small cap index, up 2.7%. This is telling us there is a tilt toward the large cap end of the spectrum, particularly the bluest of the blue chips. My guess is this is a search for stability in a very unstable political and economic environment resulting in the overvaluation of the “popular” stocks and inflation of the major indexes. I believe reversion to the mean will eventually bring rational pricing back to the majority of the market and the stock split advantage will propel our portfolio ahead of the crowd as it has in the past.”

More New All-Time Highs

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.

What am I missing?

 

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 21 years.

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 didn’t the Stock Split Index Fund ever take off?” 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.

Neil Macneale

2-for-1.com

Splits Index hits 1000

Over 1000

From 100 to 1000 in 20 years, 5 months. That’s a 12.00% annualized return. The 2 for 1 Index was established on 7/31/1996 at a value of 100. On 11/25/16 it crossed over the 1000 level for the first time, proving the power of the Stock Split Advantage.