The beat the TSX portfolio. Can it do it again?

The beat the TSX portfolio (hypothetical ticker BTSX) has a wonderful longer term habit of beating the market. The strategy is dead simple. BTSX will simply hold the top ten yielding stocks from the TSX 60. It will change the constituents (holdings) for the first trading day of each year, and it will continue to hold those ten stocks throughout the year. The beat the TSX portfolio underperformed in the pandemic year of 2020 as value was certainly out of favour. But it is charging back. Can we put the beat back in the BTSX?

Here is the dedicated site for the beat the TXS portfolio – dividendstrategy.ca.

And here are the current holdings.

On this site you find this article on the beat the TXS BTXS portfolio. That post offered the portfolio for 2019 and the 2020 BTSX portfolio. You’ll see there is not a lot of turnover, there are only two replacements for 2021 from 2020. There was only one replacement in 2020 from 2019.

For the record if I was holding or following the BTXS approach, I would keep the past holdings and simply add any new holdings each year.

Also, I am happy to see Canadian energy producer CNQ make it into the portfolio. In October I had suggested that readers take a look at the value in Canadian energy stocks. That suggestion was about 80% ago, ha.

The record of BTXS outperformance.

We see significant and consistent outperformance over the 10-year, 20-year and 30-year time frames. It is not difficult to build a successful stock portfolio. If you approach an advisor or planner and they suggest that you should sell all of your successful Canadian big dividend payers – run away. Those Canadian dividend stocks can be incorporated into a sensible balanced portfolio.

In 2020 the BTSX portfolio underperformed considerably. That underperformance trend was duly noted when we checked in on the Canadian dividend ETFs in 2020. Value stocks were out of favour during the pandemic. Though we’ve seen a reversal towards value at the end of 2020 and into 2021. Earning and dividends are back. Year to date a high dividend approach such as Vanguard’s VDY has almost doubled up on the returns of the market.

The 2021 returns for BTSX.

Yes, the beat is back. For 2021 to end of April.

• BTSX 16.65%
• TSX Composite 10.72%

And let’s have a look at the individual holdings.

Seven of the holdings kept the beat.

When I wrote on the Beat The TSX portfolio in December of 2020, I had suggested that there was greater value in the high dividend strategy from that point in time.

From that Cut The Crap Investing post …

The BTSX portfolio is down by 10% in 2020 while the TSX 60 is up by 6.8% to the end of last week. That is a significant underperformance. This is when patience will/may pay off for those that embrace the BTSX approach. If history repeats, there is even more value today in that high yield mix; so says that drastic underperformance in 2020.

Why does it work?

The BTSX finds successful and profitable companies that pay out large dividends. The TSX 60 screen adds a “bluer chip” layer. And certainly do not discount the value of the generous and mostly growing dividends. That is more than important. And the strategy of selecting the TSX constituents with the greatest dividends is a classic value play. It finds some of the most beat up companies in the index. As the stock prices go down, up goes the current dividend yield. You are often buying much greater current earnings (compared to the market) to go along with the greater dividends.

The approach also finds solid sectors with wide moats – financials, telcos, utilities and pipelines at the core.

We can’t argue with success.

It’s a viable investment idea that you might use or build around. For more Canadian growth you might bolt on the Canadian tech sector. You might layer in other types of stocks such as the Canadian retail stocks.

And of course always consider the total portfolio mix and risk level. Geographic diversification is important. Know the tax considerations. And ensure the investment portfolio and approach is part of a greater life and financial plan.

The self-directed investor can check in with a fee for service planner. You’ll find the planning basics and checklist in that post. And this might also be a good time to read my personal finance book. Ok it’s a blog post. I only needed 1000 words.

My MoneySense weekly.

As you may know I write a weekly column for MoneySense where I make sense of the markets. This week’s post offers the most interesting stock markets stories of the week, including what happens to stock markets after rate increases? I also look at the bitcoin collapse and more.

Thanks for Lance Roberts (no relation) and Real Investment Advice for this incredible table.

And in the previous week we discovered that a rising rate environment does not always show up in a period of robust inflation. Many think that there are incredible parallels between that period (post WW II) and the economic and inflation developments of 2021.

Thanks to Mike Philbrick of ReSolve Asset Management for the insights in that post.

And here’s an interesting Tweet and development. Don’t forget to follow me on Twitter.

As I suggested several days ago, Canada would quickly pass the US for 'first dose' percentage. But much less of the Canadian population been offered 'natural exposure'. Will case levels drop as low as in the U.S. in quick order? @FiPhysician pic.twitter.com/7HshKVhesS

— CutTheCrapInvesting (@67Dodge) May 22, 2021

Thanks for reading. We’ll see you in the comment section. Do you have some of that beat the TSX portfolio?

Have a great long weekend. We’ll chat tomorrow with the Sunday Reads.

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