The beat the TSX portfolio. It skips a beat in 2023 and 2024.

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) on 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 charged back. The BTSX portfolio was back to its winning ways in 2021 and 2022. The Beat The TSX Portfolio skipped a beat in 2023, and it is underperforming again to the end of August in 2024. Big dividend payers have been out of favour in a higher rate environment.

Why does it beat the TSX?

The BTSX finds successful and profitable companies that pay out large dividends. The TSX 60 screen adds a “bluer chip” layer. 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.

Here is the dedicated site for the beat the TSX portfolio – dividendstrategy.ca. The simple strategy has a long-term history of outperforming the market, to a very meaningful degree. Just earning about double the index returns over the last 30 years, ha 🙂 That said, there are underperforming years and periods; patience is required.

Let’s start with 2022 performance, and then we’ll move on to 2023 and then the first half of 2024. You’ll then see 2021 near the bottom of this post.

In the name of greater diversification, I’d suggest you hold more than the 10 stocks from BTSX. You might keep the discarded constituents from previous years. You can also look to the market-beating Canadian Wider Moat Portfolio for more stock ideas.

And stock picking is not for everyone. If that ‘s the case for you, consider the TSX 60 (XIU.TO) or the hard to beat BMO Low Volatlity ETF – ticker ZLB.TO.

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And don’t forget to say goodbye to your Canadian home bias. Greater international diversification is crucial.

We’ll look at the portfolios and returns starting in 2022 and then move on to 2023 and 2024.

The Beat The TSX Portfolio for 2022

With 5 energy companies in the mix, the portfolio is (obviously) well positioned in 2022 due to the ongoing strength in oil and natural gas prices. Pipelines are also taking advantage of the energy trends.

BTSX update for total 2022

November and December were not kind to stock markets. The Beat The TSX Portfolio declined modestly and gave up its positive gains for the year. That said, BTSX still greatly ouperformed the TSX Composite and the S&P 500.

• BTSX down 1.85%
• TSX down 5.82%
• S&P 500 down 18.16%

Here’s the performance of the 10 stocks for 2022. The energy exposure was not enough to float the portfolio in 2022.

2023 Beat The TSX Portfolio

There is only one change. We remove Suncor and add struggling CIBC.

The BTSX portfolio slipped in the second half of 2023. It underperformed the TSX Composite by 4%.

And here’s the Beat The TSX Portfolio asset performance for 2023.

We can see that the insurance heavy Manulife and Power Corp plus CIBC saved the portfolio in 2023. Pipelines offered modest returns while the Telco’s had a rough year. Algonquin offered a surprise with a flat year, given that it cut its dividend in 2023.

Here’s the Beat the TSX Portfolio for 2024

Manulife gets the boot, while Emera powers its way into the index. Once again, I’d suggest that you keep the previous BTSX constituents in the portfolio. That will increase diversification, reduce risk and it may increase returns at times. As you’ll discover the Manulife for Emera was a terrible trade and the reason for the under performance.

Here’s the returns comparison to the TSX Composite in 2024, to the end of December. BTSX attempted a comeback, but offered another year of underperformance.

The numbers. We have lesser returns and greater volatility (Stdev).

Here’s the performance of the Canadian BTSX’ers for 2024. It mostly was a year of hit or miss. Only Emera had a year of ‘modest returns’.

Just as is the case in the Canadian Wide Moat Portfolio, we see the telcos struggling. That is the risk of a concentrated portfolio – a few names can bring the ship down. Manulife has delivered 59.32% in 2024. If BTSX had not made that trade, it would have matched the TSX Composite.

Here’s the sector breakdown …

• Financials 34.0%
• Pipelines 36.9%
• Utilities -2.4%
• Telcos – 18.4%

The sectors are batting .500

The telco sector has been beat up due to regulatory harassment and the increased borrowing costs created by the higher rate environment. The failure of utilities for the BTSX comes down to company risk. Algonquin management failed investors.

The next 10 for the TSX 60 yields – 2024

I would personally have no problem holding that Beat The TSX 20 as a personal and permanent Canadian portfolio. Not advice, that’s just me.

As I suspected, the Next Ten outperformed the BTSX in 2024, 1%. Though it also underperformed the TSX.

The Beat the TSX Portfolio for 2025

Given that the BTSX Portfolio has a habit of finding troubled stocks, it can’t quit Bell, Telus and Algonquin. Will those dogs continue to be dogs? And speaking of dogs, my troubled TD has entered the mix thanks to massive fines in the U.S. for enabling money laundering. Regulators have put restrictions on TD’s U.S. expansion plans. TD’s stock fell 6% in 2024.

It looks like another trying year for the BTSX Portfolio, but only time will tell.

Looking further back – BTSX in 2021

Here are the holdings. This also includes the starting yield for 2021.

On this link you find this article on the beat the TXS BTSX 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 BTSX approach, I would keep the past holdings and simply add any new holdings each year.

Also, I was happy to see Canadian energy producer Canadian Natural Resources (CNQ) make it into the portfolio. In October of 2020 I had suggested that readers take a look at the value in Canadian energy stocks. That suggestion was about 380% ago, ha.

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.

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.

My instincts / guess proved correct.

The 2021 returns for BTSX

Here’s the returns for the individual assets.

• Pembina 36.1%
• Enbridge 30.0%
• TC Energy 20.3% 
• Bell 27.9%
• Power Corp 49.9%
• CNQ 82.6%
• CIBC 41.5%
• Shaw 78.4%
• Scotiabank 38.0%
• Emera 22.3%

Average of 42.7% 

• For 2021 the TSX 60 delivered 27.9%.
• The TSX Composite returned 25.1%

Outperformance for BTSX of 14.8% of the TSX 60.

We continue to see that the TSX 60 is superior to the TSX Composite. For couch potato portfolios I suggest the TSX 60 (XIU) on the Canadian ETF portfolio page.

Longer term outperformance

And even more impressive, here’s what happens when you outperform over time. An average of 2% to 2.5% annual outperformance can ‘add up’ to a tremendous advantage in portfolio value. Of course, that’s life changing.

As always, past performance does not guarantee future market crushing. 🙂

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.

Thanks for reading. We’ll see you in the comment section. You got the beat?

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