Quality Data for Investing Strategies
4:53pm Eastern – We’re back! No data was lost. Speed might be a little choppy for the next few hours as we tune the new servers up.
4:25pm Eastern – FT Cloud’s servers are having a hiccup. We’re rolling over to our back ups and should be back online soon.
All over the web we see economic indicators reaching new highs and lows, but investors often confuse economic information with investment information. There is a major disconnect between the economy and the stock market and its easy to see with FastTrack charts.
Ignorance has no bounds . . . the story in 5-years will be the same with the economy up or down
Check out the FastTrack charts below and see that despite the negative economic news, the investment environment over the last 5-years far rosier than the numbers suggest.
In this post we’ll use an article in today’s WSJ as a baseline “economic report” and break it down sector by sector. June 25, 2014 article for THE Wall Street Journal by Jonathan House.
Looking at healthcare, the article notes “…consumer spending growth was lowered to 1% from 3.1% previously, largely because health-care spending was weaker than previously estimated.”
The green line is VGHCX, the Vanguard Health Fund and the red line is the S&P 500. “Weaker healthcare spending” surely didn’t equate to lower health care returns. VGHCX posted a 8.85% return in the first quarter of 2014. We saw a pull back after the first quarter GDP figures were released, but the March drop didn’t come close to wiping out the overall first quarter gains.
For the last 25-years while the economy has been on a roller coaster, VGHCX has risen even faster than the broad US Market (SPY S&P-500 exchange traded fund is the red line in the chart above), and the ride is not over.
From the article, “We see a 6.5% fall in housing starts and a 4.2% fall in spending.” This is in tune with FSHOX, the Fidelity Select Construction and Housing fund (shown in green). FSHOX foundered in the second quarter… but more importantly, why worry about it when there are so many other bright segments of the economy (like Health above).
“It does not sound like the economy has reached escape velocity no matter how you try to spin it,” said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi. “It’s going to take some big numbers the rest of 2014 for the economy to hit 2% growth.”
Reading just the article, it sounds like everything has been crummy since 2009. Yet, this is a period in which the red SPY (broad market) has risen 24% annually. I am not sure how to measure the cited “escape velocity”, but this looks good to me..
The article mentions 3% growth so we put in a 3% green line(annualized return). What is clear is that GDP growth has little to do with the ability of US companies to change, belt-tighten, and grow profits despite the economy. If you had money in a mayonnaise jar buried in the backyard, you missed one of the greatest rallies in history.
The article cites “five years into the recovery . . . Corporate profits after tax, without inventory valuation and capital consumption adjustments, rose [a paltry] 0.1%
In 2009 (upper chart), the 500 biggest companies in the US held by the SPY fund paid out 2.44% in dividends (a share of the profits). This was at the pit of the recession discussed in the article. Note in 2013-2014, these same companies paid out 2.30% in dividends, of course, this is misleading. Since the SPY fund has gained 139% over the five year span of 2009-2014, the actual cash paid in 2014 was more than twice the amount paid in 2009.
If you’re investing, the right information is critical. There’s tons of noise on the web, but simple charts and quality data are a great way to get organized and understand the real market story.
FastTrack training and daily charts have all the information an investors needs to become wealthy. The economy performed poorly over the last 5-years, but news reports of older employees having to postpone their retirement is only true of those who were unaware of the stock market reality.
Ignorance has no bounds . . . the story in 5-years will be the same with the economy up or down.
Get the full story. Call 866-295-0166 for a free trial of FT4Web for individual investors and FTCloud for professional investors.
FastTrack has been the premier provider of quality dividend adjusted ETF, fund, and stock data for many years. Serious investors know why dividends are critical. But, here’s a quick crash course in a few charts.
The 10 year chart below demonstrates the difference between dividend adjusted return vs non dividend adjusted return for VUSTX (Vanguard INV:Long-Term US Treasury).
This fund is one of the top five US funds in total assets (thus very popular and not picked to exaggerate the example)
The blue line represents VUSTX with no dividend adjustment and the gold line represents VUSTX with dividend adjustments. The blue line shows a return of 23.98%, when in reality the fund
returned 130.74%. That’s a whopping 106.76% difference in return!
Without accurate dividends, it is impossible to build the long-term, low volatility, low trading strategies that FastTrack is known for.
Another example is FMAGX (Fidelity Magellan), a very famous aggressive equity fund, since 9/1/1988 (the first date in the FastTrack database).
Again, we can see that dividends are essential to analyzing mutual funds accurately. Over the 23 year period, FMAGX appears to have posted a 38.45% gain without dividends, while accounting for dividends shows an accurate 550.92% gain over the period. Any analysis that does not account for distributions is not portraying the funds real total return. Dividend adjustment is essential for long term analysis.
In summary, FastTrack realizes the importance dividends make when assessing true total return
in investing strategies and in developing long-term trading systems. For the past 25 years the company’s mission has been to provide prompt, accurate, and comprehensive dividend adjustments. Getting an accurate view of a fund’s performance is essential to fund and ETF analysis.