Author: Mark Holder, Stone Fox Capital
Covestor model: Net Payout Yields
Disclosure: Long MICC, LO, WLP, GILD, WFC at time of writing
April was a decent month for the Net Payout Yields model as it outperformed the S&P500 by a slight margin. This model is designed to slightly exceed the market in good months like April and more comfortably outperform in down markets, for example during March of this year.
Trades
April was a more typical trading month, with only one trade. Yum! Brands (NYSE: YUM) was sold as its net payout yield (the combination of dividend and stock buyback yields) had been reduced over the last several months to below acceptable levels. This was partly because the stock had run to new highs.
Top Performers
April was a very volatile month, with the Top 5 gainers all up substantially. Being a more conservative model requiring market caps of $10B, it’s very unusual to see three stocks up this strongly. Millicom International Cellular (NASDAQ: MICC) and Lorillard (NYSE: LO) had big gains, as did WellPoint (NYSE: WLP). The general themes of these gainers were under-followed sectors like insurance or cigarette companies that gained investor attention during the month.
Bottom Performers
As with the top performers, the bottom performers included two stocks that lost significant value during the month. That’s highly unusual for a month with the S&P 500 up nearly 3%. Gilead Sciences (NASDAQ: GILD) fell hard due to disappointing earnings. Wells Fargo (NYSE: WFC) also declined significantly due to the sudden departure of the CFO and disappointing earnings.
Conclusion
The model continues to perform well during 2011 after a rough start back in November of last year when it almost immediately underperformed by over 2% before being fully loaded. Since then, it has shown consistent and stable outperformance.
