Today is Monday, 1st January 2024 and I created two new Value Dividend Portfolios. One portfolio representing undervalued stocks with no dividend payment and the second portfolio undervalued stocks with significantly high dividend payments.
If you want to learn more on how I discovered this strategy and how the portfolios were created, you can read my book online or order a copy from amazon.com.
2024 Portfolios
Both portfolios focus solely on the U.S. market and have the following in common:
Piotroski F-score of ≥ 6.00
Altman Z-score of ≥ 3.00
Equity Ratio of ≥ 50.00%
The first portfolio paying no dividends focuses on stocks with:
P/E ratio of ≤ 10
Dividend yield of 0%
The second portfolio paying significant dividends focuses on stocks with:
P/E ratio of ≤ 7
Dividend yield ≥ 2.9%
1. 2024 No Dividend Portfolio
»The Value Dividend Strategy« portfolio paying no dividends consists in total of 7 stocks:
Gulfport Energy Corp GPOR with a current price of $133.20
SurgePays Inc. SURG with a current price of $6.45
MasterCraft Boat Holdings Inc. MCFT with a current price of $22.64
Arcturus Therapeutics Holdings Inc. ARCT with a current price of $31.53
Atkore Inc. ATKR with a current price of $160.00
Profire Energy Inc. PFIE with a current price of $1.81
Livent Corp LTHM with a current price of $17.98
2. 2024 High Dividend Portfolio
»The Value Dividend Strategy« portfolio paying significantly high dividends consists in total of 12 stocks:
ClearOne Inc. CLRO with a current price of $1.08
Chesapeake Energy Corp CHK with a current price of $76.94
Adams Natural Resources Fund Inc. PEO with a current price of $20.63
PhenixFIN Corp PFX with a current price of $42.25
Alliance Resource Partners L.P. ARLP with a current price of $21.18
Cal-Maine Foods Inc. CALM with a current price of $57.39
Stifel Financial Corp 5. SFB with a current price of $20.55
PHX Minerals Inc. PHX with a current price of $3.22
HF Sinclair Corp DINO with a current price of $55.57
Medifast Inc. MED with a current price of $67.22
BlackRock Enhanced Capital and Income Fund Inc. CII with a current price of $19.00
Mesa Royalty Trust MTR with a current price of $13.20
Outlook
Both portfolios have been created solely by stock screening. As shown in »The Value Dividend Strategy«, these portfolios have performed exceptionally fine historically. I highlighted the most promising companies in bold.
This time I’ll look into each company in detail. I will perform a proper due diligence and valuation of each stock to create a third »The Value Dividend Strategy« portfolio with the aim of identifying winners while excluding any company raising a red flag. I might also write deep dives on the most promising stocks.
Subscribe to this newsletter if you wish to receive this portfolio and any deep dives I might write!
If you want to learn more on how I discovered this strategy and how the portfolios were created, you can read my book online or order a copy from amazon.com.
Legal Disclaimer
The content provided in this newsletter is for informational purposes only. The information, analysis, and opinions expressed herein are solely those of Marius Schober and do not represent, reflect or express the views of any other person or entity.
This newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the newsletter’s content as such. Marius Schober does not recommend that any securities, transactions, or investment strategies mentioned in this newsletter are suitable for any specific person.
The information provided in this newsletter is obtained from sources believed to be reliable, but Marius Schober does not guarantee its completeness or accuracy, or warrant its completeness or accuracy. Readers are urged to consult with their own independent financial advisors with respect to any investment.
All information and content in this newsletter are subject to change without notice. Prices, quotes, and other financial information may be out of date or inaccurate. Past performance is not indicative of future results. Investing in securities involves risks, including the potential loss of all amounts invested.
Marius Schober does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of reading any of our publications. You acknowledge that you use the information we provide at your own risk.
By subscribing to this newsletter, you acknowledge and agree to the terms of this disclaimer.
In my book The Value Dividend Strategy, which was published at the end of November 2002, I provided readers with two portfolios that at the time met the criteria of Value Dividend stocks. This article analyzes the performance of these portfolios after one year.
Background
On October 21, 2022, I screened the U.S. stock market against the criteria of The Value Dividend Strategy. As a result, I created two portfolios: one focused on value stocks that paid significantly high dividends, and one focused on value stocks that paid no dividends at all.
In this performance review, we will evaluate the one-year performance of the two portfolios I created as of October 2022. Due to the publication date of my book, this performance review looks at the 1-year performance from October 21, 2022 through October 20, 2023. In the future, I will track and publish performance updates on an annual basis from January 1 through December 31. Therefore, as a subscriber, you can expect updated Value & Dividend portfolios on January 1st, 2024.
At the time of creation, all stocks in the Value & Dividend portfolios had a low price-to-earnings ratio, high or no dividend payments, an Altman Z-score of >2.99, a Piotroski F-score of >6, and an equity-to-asset ratio of <0.5.
Incidentally, in my book I emphasized that the value dividend strategy is particularly effective and yields the best returns when implemented toward the end of a recession. Keep in mind that this was not the case on October 21, 2022.
The Dividend Portfolio
The high dividend Value Dividend Strategy portfolio consisted of 14 stocks.
The 1-year performance since inception of the portfolio is 17.31% excluding dividends paid.
The average dividend yield of this portfolio at inception was 4.2%.
The average performance was 17% with a standard deviation of 21%.
The average dividend yield was approximately 4.19% with a standard deviation of 1.84%. This indicates a wide range of dividend yields among the companies, with a maximum yield of 8.98%.
Hypothetically, if we’d only invested in the five best performing stocks, we could have returned 38% on undervalued value stocks.
The question I’ll be answering in this publication through selected deep dives is how we can identify these winners early. If you haven’t already, please consider subscribing.
The Non-Dividend Portfolio
The non-dividend paying Value Dividend portfolio consisted of 21 stocks.
The total 1-year performance since the portfolio’s inception is 15.04%.
The Value Dividend portfolio, which pays no dividends, had an average performance of 15% with a standard deviation of 36%. This standard deviation is quite high as some stocks performed exceptionally well (100.70%) while others had large losses (-60.06%).
Hypothetically, investing in the 5 best performing stocks would have resulted in a 64% gain – on low P/B value stocks!
With non-dividend paying value stocks, the challenge is to weed out the bad performers while focusing on the high performers. That is what I will be focusing on in this newsletter. If you haven’t already, please consider subscribing.
Distributions
The Dividend Portfolio shows a more or less normally distributed performance curve, with most stocks clustered around moderate returns. This distribution suggests a relatively stable and less volatile investment landscape where gains are modest but more consistent.
On the other hand, the non-dividend portfolio has an intriguingly skewed performance distribution, with returns spread over a wider range, including some significant outliers. This implies a higher risk/reward profile, with both significant upside potential and downside risk.
Interestingly, the data shows that this higher volatility is positively correlated with lower price-to-book ratios, suggesting that undervaluation may be a catalyst for these extreme performances.
Outpacing the Indices
Let’s put those performances into perspective. Over the same period, the S&P 500 gained a respectable 10.75% and the Vanguard Value Index Fund ETF (VTV) lagged with a modest gain of 1.44%.
In stark contrast, both Value Dividend Strategy portfolios delivered returns that significantly outperformed these benchmarks.
The Dividend Portfolio outperformed the S&P 500 by 61% and the VTV Index by 1.100%.
The non-dividend portfolio outperformed the S&P 500 by 40% and the VTV Index by 942%.
This serves as a powerful assertion that the Value Dividend Strategy may be more than just a theoretical construct – it may be a roadmap for achieving superior returns with undervalued stocks.
As a result, I will be constructing Value Dividend Strategy portfolios on January 1 of each year, including an annual performance review. If you haven’t already, please consider subscribing.
If you want to learn more on how I discovered this strategy and how the portfolios were created, you can read my book online or order a copy from amazon.com.
Legal Disclaimer
The content provided in this newsletter is for informational purposes only. The information, analysis, and opinions expressed herein are solely those of Marius Schober and do not represent, reflect or express the views of any other person or entity.
This newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the newsletter’s content as such. Marius Schober does not recommend that any securities, transactions, or investment strategies mentioned in this newsletter are suitable for any specific person.
The information provided in this newsletter is obtained from sources believed to be reliable, but Marius Schober does not guarantee its completeness or accuracy, or warrant its completeness or accuracy. Readers are urged to consult with their own independent financial advisors with respect to any investment.
All information and content in this newsletter are subject to change without notice. Prices, quotes, and other financial information may be out of date or inaccurate. Past performance is not indicative of future results. Investing in securities involves risks, including the potential loss of all amounts invested.
Marius Schober does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of reading any of our publications. You acknowledge that you use the information we provide at your own risk.
By subscribing to this newsletter, you acknowledge and agree to the terms of this disclaimer.
In my book “The Value Dividend Strategy”, which was published in late November 2022, I provided readers with two portfolios which, at that time, fulfilled the criteria of what I named The Value Dividend Strategy.
The book is based on extensive research I did as part of my bachelor thesis. In my research process, I stumbled upon value stocks which outperformed not only the market but nearly as often also the general value portfolio they were part of.
These stocks were in particular undervalued stocks which either pay a significantly high dividend or no dividend at all. For investors, these stocks are raising suspicion as outliers. An extremely high dividend seems too good to be true, while the lack of dividends is equally unusual for value stocks. As it turns out, these stocks historically performed phenomenally good, especially towards the end and coming out of a market recession.
After I published my book and sold the first hundreds of copies over the recent months, a handful of investors asked me to please regularly update the Value Dividend portfolios and to extend my research. With this newsletter, I will create and update the Value Dividend portfolios every quarter and transparently publish performance reviews of how each portfolio performed in the past. Furthermore, I will identify the winning stocks of each portfolio, which were raising the performance, and write deep dive analyses on these selected stocks. Another part I deem extremely important as an investor is an understanding of the macroeconomic environment – not to time the market, but to identify opportunities where others cannot yet see them. In this newsletter, Value & Dividends, I will also write research newsletter on undervalued sectors and macroeconomic opportunities and risks.
Q4 2022 Value Dividend Portfolios
On 21st of October 2022, I screened the U.S. stock market according to The Value Dividend Strategy criteria. As a result, I created two portfolios: one focused on value stocks which paid a significantly high dividend and one focused on value stocks which paid no dividends at all.
In my book, I emphasized that The Value Dividend Strategy is particularly effective and yields the best returns when implemented towards the end of a recession. Nevertheless, in this performance review, we will assess the performance of the two portfolios I established in October 2022.
I never expected that I’d expand or delve into the portfolios again. For this reason, I will focus for simplicity on the performance of the portfolios from the date of the creation of the portfolio (21/10/2022) to today (13/07/2023). Thereby we’re looking at the performance after approximately 8.8 month or 38 weeks.
However, moving forward, I will track and publish performance updates on a quarterly, half-yearly, and yearly basis.
At the time of creation, all stocks within the Value Dividend portfolios displayed a low P/B ratio, high or no dividend payments, an Altman Z score of > 2.99, a Piotroski F-Score of >6, and an Equity-to-asset ratio of <0.5.
Performance of the Dividend Portfolio
The Value Dividend portfolio with high dividends consisted of 14 stocks.
As I am writing this, the overall performance since creation of the portfolio is 26.48% excluding paid-out dividends.
The average dividend yield of this portfolio was 4.2% at the date of creation.
The average performance of 26% comes with a standard deviation of 31%. The highest performance showed InterDigital Inc. (IDCC) with 104% while Valero Energy Corp (VLO) performed worse with -8% – simultaneously VLO was the only stock in this portfolio with a negative performance.
The average dividend yield is approximately 4.19%, with a standard deviation of 1.84%. This indicates a wide range of dividend yields among the companies, with a maximum yield of 8.98%.
When we look at the distribution of stock performance, we can see that most of the stocks have gained between 0% and 40% with two notable exceptions exhibiting a much higher performance.
When we look at the correlation between performance and dividend yield, we can see a moderate positive correlation. This suggests that higher-performing stocks also tended to have higher dividend yields, which proves the point of The Value Dividend Strategy.
Top 5 Performers of the Value Dividend High Dividend Portfolio:
InterDigital Inc IDCC with a gain of 104%
Patrick Industries Inc PATK with a gain of 91%
LCI Industries Inc LCII with a gain of 35%
Ingredion Inc INGR with a gain of 34%
Celanese Corp CE with a gain of 32%
Hypothetically, by investing in these five stocks, one could’ve achieved a return of 59% with – important to note – value stocks.
Bottom 5 Performers of the Value Dividend High Dividend Portfolio:
Valero Energy Corp VLO with a loss of 7.6%
Exxon Mobil Corp XOM with a gain of 2%
Phillips 66 PSX with a gain of 4%
Global Partners LP GLP with a gain of 8%
Huntsman Corp HUN with a gain of 9%
As we can see, particularly VLO has been a bad pick. The question is not why VLO had been a bad pick, but how we can avoid picking losers in the future altogether. I want to answer this question in this continuous newsletter by through deep dives, not only in promising Value Dividend stocks but also into suspicious ones and perform a due diligence, valuation, and margin-of-safety calculations. If you haven’t already, I welcome you to subscribe!
Performance of the Non-Dividend Portfolio
The Value Dividend portfolio which paid no dividends consisted of 21 stocks.
As I am writing this, the overall performance since creation of the portfolio is 26.06%.
In the Value Dividend portfolio which pays no dividends, the average performance was 26% with a standard deviation of 47%. This standard deviation is quite high, as some stocks performed exceptionally well (155.79%) while others showed high losses (-46.18%).
Looking at the distribution of returns, we see that most of the stocks in the Non-Dividend portfolio show returns of 0 to 60% with a few notable exceptions exhibiting much higher or lower performance.
This was to be expected, as I observed similar high standard deviations during my study of Value Dividend stocks. Yet, as we can see, with a performance of 26% of the overall portfolio we still achieved higher returns than the S&P 500, which gained 13.23% over the same period of time.
When we look at correlations, it may be worth noting that there is a moderate negative correlation between performance and P/B ratios. Stocks with a higher performance had lower P/B ratios which may be because they were undervalued.
Top 5 Performers of the Value Dividend Non-Dividend Portfolio:
Builders FirstSource Inc BLDR with a gain of 156%
AutoNation Inc AN with a gain of 86%
Asbury Automative Group Inc ABG with a gain of 78%
GMS Inc GMS with a gain of 70%
US Goods Holding Corp USFD with a gain of 62%
Hypothetically, investing in these 5 Value Dividend stocks would’ve resulted in a 90% gain with low P/B stocks.
With non-dividend paying value stocks, the challenge is to weed out the bad performers, while focussing on the high performers.
Bottom 5 Performers of the Value Dividend Non-Dividend Portfolio:
United Natural Foods Inc UNFI with a loss of 46%
Ascent Industries Co ACNT with a loss of 37%
Stride Inc LRN with a loss of 20%
TrueBlue Inc TBI with a loss of 18%
DLH Holdings Corp DLHC with a loss of 17%
By looking at the bottom performers, it becomes clear how risky this strategy can be, if focussed on the wrong stocks and if one avoids diversification. With diversification, the overall portfolio nevertheless gained 26% – despite having several double-digit loss stocks in the portfolio.
As part of this ongoing Value & Dividends newsletter, I will dive deep into individual non-dividend paying stocks, to learn how we can promptly avoid investing in these losers stocks.
To set these performances in perspective: Over the same period of time, from October 21, 2022, to today, the S&P 500 gained 13.23% and the Vanguard Value Index Fund ETF (VTV) gained 8.88%. Thereby, both Value Dividend portfolios outperformed the index and the overall value index.
If you want to learn more on how I discovered this strategy and how the portfolios were created, you can read my book online or order a copy from amazon.com.
Résumé
Since publishing my book The Value Dividend Strategy, we can see that Value Dividend portfolios still outperform the index and large diversified value portfolio. With this newsletter and blog, I will continuously update, refine, and expand The Value Dividend Strategy. I will dive deep into selected promising or suspect Value Dividend stocks to find clear winners and loser within the small range of Value Dividend stocks.
Furthermore, I’ve been majorly invested in Palantir PLTR which does not fulfill Value Dividend criteria per se, but which was a stock clearly undervalued in 2022 and gained in 100% since October 21st 2022. As soon I detect other unique undervalued growth stocks, they will also have their place in Value & Dividends.
In combination with critical macroeconomic analysis, I aim to provide real value and real dividends to readers of this newsletter.
If you haven’t already – I invite you to join the Value & Dividends community and I appreciate your subscription to this publication.
The content provided in this newsletter is for informational purposes only. The information, analysis, and opinions expressed herein are solely those of Marius Schober and do not represent, reflect or express the views of any other person or entity.
This newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the newsletter’s content as such. Marius Schober does not recommend that any securities, transactions, or investment strategies mentioned in this newsletter are suitable for any specific person.
The information provided in this newsletter is obtained from sources believed to be reliable, but Marius Schober does not guarantee its completeness or accuracy, or warrant its completeness or accuracy. Readers are urged to consult with their own independent financial advisors with respect to any investment.
All information and content in this newsletter are subject to change without notice. Prices, quotes, and other financial information may be out of date or inaccurate. Past performance is not indicative of future results. Investing in securities involves risks, including the potential loss of all amounts invested.
Marius Schober does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of reading any of our publications. You acknowledge that you use the information we provide at your own risk.
By subscribing to this newsletter, you acknowledge and agree to the terms of this disclaimer.
My name is Marius Schober and I welcome you to my new Substack newsletter. In Value & Dividends, I’m covering undervalued growth and dividend stocks. They fall into the value category, but exhibit characteristics of growth or dividend stocks. But before we dive into the topic, I’d like to talk about value.
Ultimately, value is what we seek in life. Not only do we seek value as investors, but we seek value in everything we do: how and with whom we spend our time, the books we read, the stocks we invest in, and the values we aspire to.
Measuring Value
When we spend our time, we want to spend every minute of it wisely. In a way that it is useful or fulfilling. Useful means we use our time in a way that we receive a return for it. Whether we are learning and acquiring a new skill, working out to maintain our health, or investing money to receive a monetary return. Ideally, the time that we spent useful also fulfills us. The good thing: If not, the time we spent useful is nevertheless valuable because we receive a return on our time. Whether it is a new skill, health, or money. Time spent useful is measurable, for example by taking a test, measuring the BMI or the weight you can bench press, how fast you can run a mile, and simply how much money is in your bank account. However, the most valuable and precious time is not measurable. We cannot measure the perceived value from love, joy, and happiness. Still, it is what we long for the most.
Defining and living according to our values – meaning how we align our actions and decisions with a set of personal or moral principles – can guide us towards personal satisfaction, fulfillment, and a sense of purpose.
What is most valuable to us – which is the sum of love, joy, happiness, fulfillment, and purpose – is the result of activities we cannot measure.
Only when we understand and respect the unmeasurable can we understand the true value of something.
Let’s make the transition to investing. Finding an undervalued stock is mostly about the unmeasurable. By looking only at facts presented to us in financial reports and AI-powered stock screeners, we locate undervalued businesses in seconds, but we will miss the whole picture.
We cannot properly value a stock without understanding the unmeasurable first. A stock may look attractive at first, but after understanding the unmeasurable, it becomes unappealing. Just as a stock may look unappealing at first, but after understanding the unmeasurable, it becomes attractive.
The Unmeasurable Value
In business and investing, most value is hidden to most entrepreneurs and investors. The greatest entrepreneurs and investors see and understand something most others don’t. They grasp and understand the unmeasurable.
The measurable includes financial data and tangible assets, such as cash, property, inventory.
The unmeasurable is more difficult to grasp and quantify. It may include a visionary CEO, brand reputation, intellectual property, company culture, and a monopolistic product serving a yet invisible future market.
What most value investors managed to master is determining an intrinsic value of a stock based on tangible criteria such as financial data and metrics. When it comes to discovering unmeasurable value – for example competitive advantages and monopolistic product offerings – the wheat gets separated from the chaff. To understand and then assess the unmeasurable value of a business one must not only understand the macro outlook of an entire industry but also understand how exponential technologies will shape our future. So, is the skill to discover and then assess the value of the unmeasurable is reserved to a selected few visionary value investors?
Predicting the Future
Cathie Woods is one prominent investor among many visionary growth investors who have a great understanding and vision of how our future will be formed by exponential technologies. As a result, these visionary growth investors are betting on certain companies which – they think – will shape the future. Cathie Woods’ investment company Ark Invest and a some other investors arguably do a superb job in understanding exponential technologies and spotting industries which are going to change forever due to disruptive innovation. Unluckily, they do so seemingly unimpressed by measurable financial valuations and – until today – a zero-interest economy where many investors got blinded by the excitement for a drastically advanced future.
Cathie Woods and many like-minded investors, entrepreneurs, and venture capitalists in Silicon Valley and Shenzhen have quite a good understanding of exponential technologies and how they will definitely impact our future. By following and learning from these individuals, it is not too difficult to understand what the future will look like.
Tapping into the Unmeasurable
Most investors make the mistake and put value investing and growth investing in two distinctively different categories. It is either or. To some extent, which means before the hype arrived, value investing and growth investing can work hand-in-hand. But to identify this invisible and unmeasurable value, we need new approaches to identify and evaluate these “value-growth stocks”. The reward for investors who can spot and invest in the right “value-growth-stocks” at the right time will be significant. These companies are undervalued according to value investing principles and – due to a lack of dividends or an extraordinary high dividend – are often omitted by value investors as they deem them too risky. What value investors miss – however – is that the management of these companies know something that the majority of investors miss.
Value Dividend Stocks
In a 2017 study, I looked at value stocks which either pay an extremely high or no dividend at all. The unpopular outsiders few value investors want to touch. As it turned out, both categories – undervalued stocks which pay a significantly high dividend and undervalued stocks which pay no dividend at all – outperformed on average not only the market significantly but also their respective value portfolio.
Taken from my 2017 study “Dividends for the Value Investor: Nice to Have or a Necessity” – available as a book version on Amazon.com
From the research findings, which I summarized in my short book “The Value Dividend Strategy”, we can intelligibly see that the management of these companies is aware of their undervaluation. The management understands something the average investors does not. Despite an undervaluation, these companies refuse to pay dividends, for example to use dividend cuts as a cheap source of capital to invest in profitable future projects and indicate investors that they have profitable investment and growth opportunities at hand. Companies who pay a significantly high dividend have – in the best case – already gone through multiple steps to use their free cash flow in a shareholder-friendly way, which includes reinvestment into the future growth, acquisitions, share repurchases and debt reduction.
both caries – undervalued companies which pay a significant dividend and companies who pay none – investors can find value-growth-stock gems. These are companies inherently undervalued despite having or working on a competitive advantage which guarantees them a fruitful future. I call these stocks value dividend stocks.
The Value & Dividends Briefing
In this newsletter, I am (un)covering value dividend stocks. If you are interested in specific investment ideas based on the value-dividend strategy, analysis of macro risks and chances, deep dives into very promising value dividend stocks and monthly stock picks, then I’m happy to welcome you as a free or paying subscriber.
Click here if you would like to learn more about this newsletter and the differences between the paid and free version of it.
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