Investment Quality Trends provides stock data and information to subscribers with varying degrees of investment expertise and experience in portfolio construction. Accordingly, unlike some newsletter services, we do not suggest or maintain model portfolios. Because we follow such a wide variety of companies that are dynamically moving in price, along with a steady influx of new subscribers, such an approach would be impractical for our particular application.

For tracking purposes, however, The Hulbert Financial Digest has maintained a portfolio for Investment Quality Trends since 1986. This portfolio consists of all the companies in the Undervalued and Rising Trend categories, which, at any given time, could total well over one hundred companies; clearly too many companies to follow on a practical basis.

Additionally, many studies have shown that the optimum number of stocks for an individual portfolio is twenty five. That number is appropriate for diversification while not allowing the portfolio to become unwieldy. Accordingly, investors must be selective and fashion a diversified portfolio of Undervalued and Rising Trend stocks based on personal preferences, investment objectives, financial conditions and tolerance for risk.

To assist subscribers in this endeavor (and at popular urging), we decided in January of 2000 that instead of engaging in the traditional (albeit generally futile) attempt to forecast the year ahead, to construct a portfolio of stocks that offered historically good value for your investment consideration. 

The portfolio, which has become known affectionately as “The Lucky 13,” was designed to emphasize sectors of the market that while perhaps were currently out of favor, nonetheless offered exemplary fundamentals and attractive dividend yields. Thirteen stocks were also sufficient to establish the foundation for a portfolio while leaving room for expansion when opportunities become available throughout the year.

In short, The Lucky 13 has been extremely successful and not surprisingly, quite popular. While not every stock in each Lucky 13 portfolio has been a winner, there have been sufficient winners in each group to produce ten years of positive total returns, nine of which have exceeded 10%. Through 2011, the arithmetic average annual return for the portfolio is 12.07%. The compound annual growth rate (CAGR) is 11.08%. For comparison purposes, the arithmetic average annual return for the S&P 500 is 2.37% and a CAGR of 0.46%.