Investment Quality Trends provides information targeted towards subscribers with varying levels of investment experience and portfolio construction. Unlike many other newsletter services we do not construct and 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 as many as one hundred companies or more; clearly too large a number to be practical.

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 extraordinary 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 the portfolio each year has been a winner, there have been sufficient winners in each group to produce eight years of positive returns, seven of which have been in double digits. Through 2009, the average annual return for the portfolio has been 12.19%.