The Model Portfolio for performance tracking purposes (per the Hulbert Financial Digest) holds every stock in the Undervalued and Rising Trend categories, which can equal as many as one hundred fifty stocks or more at any given time; clearly too large a number 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, 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 twelve years of positive total returns, eleven of which have exceeded 10%.
While we obviously welcome a positive performance in any single calendar year, we do not believe that the return for any single calendar year period is reflective of a long-term body of work. With that context as the backdrop, since its inception in January, 2000, the arithmetic average annual total return for the portfolio is 13.79%. The compound average growth rate (CAGR) is 12.81%. When compared to the arithmetic average annual return of 5.49% and CAGR of 3.52% for the S&P 500 over the same time period, the long-term benefit of limiting portfolio considerations to only high-quality companies that offer good value are clear to see.
For the benefit of new subscribers the historic annual total returns for the Lucky 13 are as follows: