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. Keeping 30 stocks in the index (30 months = 2 1/2 years) provides the ability to capture all or most of the Stock Split Advantage. Each month the oldest stock “at the top of the ladder” is deleted and a new stock to put “at the bottom of the ladder” is added. This procedure eliminates the problems associated with trying to time the market and moves the Index smoothly through time.

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.

The number of companies announcing stock splits has diminished over the years since the 2 for 1 Index was initiated. On occasion, when there are no recent qualifying splits, a stock that has many of the characteristics of the successful companies already in the portfolio is added to the list. In general, however, the portfolio is dominated by companies that have recently announced a split. 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 index was built on paper, one stock from each month, through July of 1992. At that point, there were 30 stocks in the index (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 index was used to establish 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 index on that day, 7/31/96. Since then, the real IRA account has been maintained with no additional funds added and no funds withdrawn, thus providing a live check on the progress of the 2 for 1 Index over time. The history of the Index is available at FactSet.com.

The 2 for 1 Index is a list of 30 stocks updated and rebalanced to equal weight once a month. 2 for 1, the monthly newsletter, until March of 2020, reported on the progress of the editor’s personal IRA account. The newsletter published all the buys and sells and rebalancings for that account for over 23 years, and watched it grow from $50K to over $600K in that time, with no money ever added or withdrawn. In March 2020, the focus of the newsletter moved from the 2 for 1 model portfolio to the Index which had been the foundation for the account over all those years.

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 manage an Index and write a newsletter, and don’t manage client accounts, I chose to let my registration lapse. 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 procedures, 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 an 11+% return on their money just a little exciting.

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. 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.

Yes! 2 for 1 guarantees that the stock market will go up and it will go down. I guarantee that some other index 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.