Published by Taylor Financial Group
As we continue to monitor our investment strategies, one strategy we have recently been discussing with clients is the Day Hagan Tactical Dividend Strategy. Day Hagen is a popular strategy among clients due to its risk sensitivity, strong historic performance, and long-term track record. However, so far this year, Day Hagan Tactical Dividend Strategy has lagged. As of June 28th, the strategy has returned 1.61% net of fees year to date where the Russell 1000 Value Index has returned 3.86%. Comparatively, the S&P 500 has returned 10.11% including dividends during the same time period.
It’s important to note that Day Hagan’s performance is less about the strategy’s manager, and more about current market sentiment as a whole. Value and dividend paying stocks have fallen out of favor with investors this year and, therefore, have not performed well. When looking at steady dividend paying companies within the S&P 500, those companies have only returned 0.86% year to date through May 31st. As investors move away from value stocks in favor of growth and technology stocks, strategies such as Day Hagan Tactical Dividend are negatively affected.
However, Day Hagen believes that this trend is simply a part of the ebb and flow of the market and that, if you look at historical returns, dividend paying stocks have provided strong returns. A recent article by Barron’s also took a look at value stocks and how they are potentially poised for a strong comeback. The article pointed out growth stocks have outperformed value stocks for the past 12 years and that the last time a 12-year period of outperformance by growth stocks happened was right before the 2000 dot com bubble crash. Although there is no definitive way to predict the future trend of the market, the Barron’s article highlights that value stocks are still cheap based on fundamentals. The price to book value ratio of value stocks as compared to growth stocks is at its largest spread in six decades with the one exception of the 2000 dot com bubble crash. This leads Barron’s to believe that the poor performance trend of value stocks could turn around soon. Indeed, looking at performance over the past week between June 22nd to June 28th when the NASDAQ struggled and returned 0.01%, Day Hagan has done exceptionally well with a return of 0.88%.
The Day Hagan team continues to stay true to their goal of minimizing risk, investing in strong fundamental value companies, and disciplined investing. Even though the performance has been weak year to date their strategy has proven to be right in-line with the performance of the S&P 500 with less risk over time. From inception through May 31st, 2017, Day Hagan has had an annualized return of 8.43% as compared to the S&P 500’s 7.25%. Furthermore, during the 2008 bear market, Day Hagan was down only -17.91% while the S&P 500 was down -37.00%.
Our goal is to have a discussion with clients about their portfolios and what role a more risk sensitive investment can play in their overall investment strategy. More important, we want to make sure our clients know that we are doing our due diligence by constantly monitoring investments and trying to create portfolios that make sense for them.
As always, if you have any questions or would like to make an appointment to discuss your investments, please give us a call today.
Day Hagen, June 2017
Barron’s, Value Investing Is Ready to Stage a Comeback, June 28, 2017
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.
No strategy assures success or protects against loss. Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal.
Indices are unmanaged and cannot be invested into directly.
Russell 1000 Value index is a broadly diversified index predominantly made up of value stocks of large U.S. companies.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Cetera Advisor Networks LLC is under separate ownership from any other named entity.