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  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    WCI: Thanks for commenting and for bringing up a good point. However, since this analysis included only the CURRENT holdings of VDIGX (i.e., the reported holdings as of Sept 30, 2014), then it was a completely fair apples-to-apples comparison as the VDIGX fund manager could have certainly purchased AAPL at any time prior to the Sept 2014 date if he chose to (the NN50 portfolio was announced on October 15, so there is only a two week difference in the public listing of the holdings). Thus for this analysis, the VDIGX fund manager had just as much hindsight as did the NN50 panelists.

    Also, because AAPL had a relatively low weighting in the weighted portfolio (1.89% vs the equal-weighted 2.04%), I decided not to remove it from the analysis (especially since the surviorship bias issue had been normalized between the two portfolios, making it a fair comparison).

    Finally, in my previous article using only an equal-weighted NN50 portfolio, I did remove AAPL from the analysis (as well as several other stocks) in order to determine the "break even" point for NN50 where it would tie with VFIAX or VDIGX. As stated in my previous article:

    "Indeed, AAPL's performance does have a substantial impact on total-return performance, but subtracting out AAPL from the analysis still results in an averaged New Nifty Fifty total-return performance of an impressive 191%. To get to the break-even point where VFIAX or VDIGX have the same total-return performance of the New Nifty Fifty, one would have to remove the top 27 performing stocks to equal VFIAX's performance and subtract out the top 13 performing stocks to equal VDIGX's performance."
    Source: http://seekingalpha.co...

    I do appreciate your kind comments on the analysis and I hope my response here clarifies the AAPL and survivorship bias issues you raised. Also, this analysis was not meant to prove that the NN50 portfolio is better than VDIGX, but only to compare how these two CURRENT portfolios of stocks performed against one another of the past 10 years. Going forward with these portfolios is a whole different ball game, and I'll let Mike Nadell share his real-time, real-money forward results on SA for that interesting endeavor.

    Thanks again for reading and commenting.
    Dec 16, 2014. 01:09 PM | 2 Likes Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    I've BEEN There 2: Thanks very much for commenting - I appreciate it.

    I also own VDIGX as well. It has been a great performer for me and have no qualms with it. Although as I pointed out in my previous article on the NN50, investors who buy VDIGX should know what they are buying as this fund is not meant to be provide a growing income stream. The fund manager has a different strategy that uses a value approach combined with balancing traditional blue-chip stocks with stocks that have only more recently begun increasing their annual dividend payouts.

    Also, as pointed out in my previous article, both the NN50 stocks and VDIGX did well during the 2007-2009 bear market as compared to VFIAX (VG S&P 500 Index Fund). All three (NN50, VDIGX and VFIAX) have performed relatively equally over the past year, which is not surprising giving the strong 2013 run up.

    The link to my prior article on the NN50 is here: http://seekingalpha.co...
    Dec 16, 2014. 10:36 AM | Likes Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    Thanks, TF. I was sort of generalizing in that bullet point across several different commenters. I agree that it may have come off as a little too strongly stated.

    Thanks again for your comments and insight.
    Dec 16, 2014. 10:02 AM | Likes Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    Mike,

    Thanks very much for the excellent commentary and words of wisdom.

    I did find this work over these two articles to be very illuminating indeed, and I think there is a lot of good info presented that adds to the excellent series of articles from you and the NN50 panelists.

    As mentioned to my comment above to TF17, one interesting aspect of this article's results was the superior performance of the weighted vs equal weighted total returns for the NN50. I think there is a lesson in there for those that want to dig deeper, and believe it may have to do with the weighted version having a larger weighting in the defensive and consumer staple oriented stocks, which may have helped pull this portfolio up (and to suffer fewer losses) during the 2007-2009 bear market.

    Thanks again for your articles, which inspired mine, and I look very forward to your forward-testing of the NN50 (no more backtesting articles from me!).
    Dec 16, 2014. 08:58 AM | 1 Like Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    Thanks, TF.

    For the record, I did not state in the article that you said survivorshop bias accounted for the better returns. I just mentioned that some previous commenters had stated that (and they did). When I mentioned you and Illumanti Investments in the article above, it was in reference to the comments that both of you made indicating that a more fair comparison would be between the current VDIGX holdings and the NN50.

    From the article:

    "Thus the purpose of this article is to address the survivorship bias issue by directly comparing the total return performance of the consensus NN50 stocks (as a group) to the current holdings of VDIGX. This approach, as suggested by SA commenters TF17 and Illuminati Investments, is a more fair comparison as it represents the current top picks of both portfolios."

    I don't want you to think that I was twisting your words.

    Regarding the weighted return advantage of the NN50 over the unweighted, I agree that is an interesting result. My best guess for this is that the higher weighted stocks in the NN50 (top 20 or so) appear to have more consumer staples in the lineup, and perhaps that helped the portfolio through a greater extent during the 2007-2009 bear market.

    Thanks for your comments and for the suggestion to do this analysis.
    Dec 16, 2014. 08:50 AM | 2 Likes Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    Thanks very much, riverside. You can do a lot of neat stuff with Excel!
    Dec 16, 2014. 08:40 AM | 1 Like Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    coby: Thanks very much for the comment. I appreciate it.

    I have not really looked into Church & Dwight, but interesting pick. I did a quick screen and see that it is on David Fish's list as a Dividend Contender, having increased its dividend for 18 consecutive years. However, at current price levels it appears a bit overvalued for a new position (current price is 75.93 and Morningstar fair value estimate is at 60).

    My main worry on this stock (given a very quick overview) is that it does not appear to have any sort of economic moat and faces tough competition in its laundry detergent segment from PG. I'm long PG and think they are on the right track for growth. So from my perspective, I'd take PG over CHD.

    Thanks again for commenting.
    Dec 16, 2014. 08:39 AM | 1 Like Like |Link to Comment
  • The New Nifty Fifty: A Comparative Performance Analysis [View article]
    iMgeov: The purpose of the article was simply to look at how the group of NN50 stocks performed over the time periods tested. I was more interested in seeing how the panelist-selected NN50 stocks had performed than drawing conclusive win/lose comparisons against VFIAX and VDIGX.

    "It is astounding that the panel of stock-pickers could not produce better performing stocks with 20:20 hindsight."

    You don't understand the purpose of the NN50 articles. They panelists did not pick the stocks based on past performance; rather, they picked a group of stocks that they thought would make good investment choices going forward. The decision to look at past performance was mine, and the decision to compare with VDIGX is 1) due to the Dale Roberts series of articles claiming that VDIGX had performed better than the NN50 stocks, and 2) because I personally own VDIGX and many of the NN50 stocks and wanted to see the past performance comparison of those stocks.

    As TF17 noted, in a second article published on SA yesterday, I specifically addressed the survivorship bias issue by comparing the current VDIGX holdings against the NN50 holdings. Here's the link:
    http://seekingalpha.co...

    I did not due three-year total return for NN50, but YCharts returned the following total return percentages for SPY and VDIGX from Jan 1, 2011 to Dec. 15, 2014 of:

    SPY = 68.65%
    VDIGX = 71.04
    Dec 16, 2014. 08:30 AM | 2 Likes Like |Link to Comment
  • Backtesting The New Nifty Fifty Using Weighted, Equal-Weight, And Random-Assignment Designs [View article]
    Izzkube: Thanks very much! Both of the articles I wrote on NN50 have been very interesting and rewarding to research and write up.
    Dec 15, 2014. 03:42 PM | Likes Like |Link to Comment
  • Dividend Growth Investors Focused On Income Earn Higher Total Returns [View article]
    Martin:

    Or you could backtest the New Nifty 50 stock portfolio against the current holdings in VDIGX. That eliminates or equalizes the survivorship bias issue.

    That is what I did in an article that was just now published on SA here:
    http://bit.ly/1wBiXci
    Dec 15, 2014. 03:23 PM | 2 Likes Like |Link to Comment
  • The New Nifty Fifty: A Comparative Performance Analysis [View article]
    All right...my new article to address survivorship bias was just published on SA here: http://seekingalpha.co...
    Dec 15, 2014. 03:18 PM | Likes Like |Link to Comment
  • Heads roll at American Realty Capital; shares -10% [View news story]
    "This housecleaning IS a clear indication that the preliminary audit isn't going so well."

    No it isn't. You nor anyone else on the outside has any idea on the cause of today's announcement. It could have been a board decision without any connection to the audit at all.

    My "conclusion" is not a conclusion at all. It is just speculation based on the facts and information before me. No more or less valid than anyone else's speculation at this point.
    Dec 15, 2014. 01:27 PM | 1 Like Like |Link to Comment
  • Heads roll at American Realty Capital; shares -10% [View news story]
    Nevermind. There were two ARCP press releases today. It is mentioned in the second here: http://bit.ly/1wAhbbg
    Dec 15, 2014. 11:16 AM | Likes Like |Link to Comment
  • Heads roll at American Realty Capital; shares -10% [View news story]
    PD329: That's a good point. The ARCP press release says nothing about Kay stepping down or of Stanley assuming interim CEO role. Did they mention it in the teleconference?

    Here's the ARCP press release:
    http://bit.ly/13qEgnh
    Dec 15, 2014. 11:13 AM | Likes Like |Link to Comment
  • Heads roll at American Realty Capital; shares -10% [View news story]
    It's not a matter of whether I believe Schorsch or not. It is a matter of the fact that he his stepping down from ARCP, while at the same time it was announced by AR Capital that he will retain his position there.

    See AR Capital Press Release from this morning:
    http://prn.to/13qmsZE

    My point is that if there were pending criminal charges against Schorsch, then AR Capital would not have released this.
    Dec 15, 2014. 09:36 AM | Likes Like |Link to Comment
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