UDC Q1 Performance Meets Objectives....Again

The Utility Dividend Capture (UDC) portfolio (description here) strives to generate an absolute return in excess of 2% per quarter in quarters when the market is up and not lose money in down markets.  The fund accomplishes this objective by swing trading between utility stocks capturing multiple dividends per quarter.

The UDC portfolio returned 3.56% in the first quarter of 2012.   These results represent the 10th of 11 quarters where the fund has achieved its objective.   As planned, the fund once again generated significant dividend income (4.6%) while losing a small amount in capital gains (-.9%).  11 of the 14 trades made this quarter were winners (79%).  This is consistent with the longer term win percentage of 76%.  Volatility remains low.

Performance results for the last 11 quarters are shown in the tables below.

Of course the S&P 500,  had much better gains than the UDC portfolio in q1.  However, as stated above the objective of this fund is not to track the undulations of the S&P500, but instead yield more consistent absolute returns.   A more representative benchmark for this fund is the utility industry as best represented by the SPDR Utilities Select Sector (XLU).  This etf lost 1.7% in q1.  Hence UDC significantly over performed this fund.

Looking ahead, it will be interesting to see how this portfolio performs.  The dividend yields on the target stocks have been declining and it is getting a little harder to find  candidates. Further, there would seem to be some real risk that utility stocks can not to be challenged if/when interest rates begin to rise.  So it is possible we will might better test how well this portfolio meets its objectives in a down market.

 

RETURNS	UDC DIV.	UDC CG	UDC TOTAL	XLU	S&P500 (DSPIX)
2009 q3	7.73%	-2.86%	4.87%	6.26%	11.43%
2009 q4	8.22%	-4.29%	3.93%	7.02%	6.02%
2010 q1	8.10%	-5.93%	2.17%	-4.38%	5.36%
2010 q2	7.98%	-7.89%	0.09%	-3.68%	-11.39%
2010 q3	5.53%	1.08%	6.61%	12.16%	11.24%
2010 q4	5.62%	-3.25%	2.37%	1.05%	14.80%
2011 q1	5.95%	-3.34%	2.61%	2.69%	5.90%
2011 q2	5.96%	-0.39%	5.57%	6.10%	-2.10%
2011 q3	6.85%	-8.89%	-2.04%	1.44%	-13.89%
2011 q4	4.78%	0.96%	5.74%	8.17%	11.20%
2012 q1	4.46%	-0.91%	3.56%	-1.70%	12.00%
Compound Return			41.40%	39.60%	56.60%
Standard Dev			4.0	4.9	9.0
TRADE STATS	Trades	Wins	Loses	Win %
2012 q1	14	11	3	78.6%
Total	194	147	47	76.0%
Correlations between these three funds are shown below.
udc/xlu	0.72
udc/spy	0.70
xlu/spy	0.35

UDC Portfolio Q4 Results

The Utility Dividend Capture portfolio  (description here) made 5.7% in the fourth quarter, and 12.2% for the year.     The fund once again, as planned,  generated significant dividend income (4.8%).  The portfolio was also able to piggyback on the rising tide of utility stocks in the stock market to post a small capital gain (.9%).

Of course the S&P 500, and more specifically the utility sector ETF (XLU) had much better gains than the portfolio.  That is not surprising as this portfolio's objective is more oriented towards an absolute return and better weathering downdrafts.  This is illustrated by the continually falling volatility of this portfolio.  Over the 10 quarters of existence its SD is now less than half the S&P 500 and 20% less volatile than even the much more docile utility ETF.  Performance results for the past 10 quarters are shown below.

Looking ahead, it will be interesting to see how this fund performs.  The rise in prices of utility stocks has understandable been driving the dividend yields on these stocks down.  Hence it is getting a little harder to find perfect candidates. Further there would seem to be some real risk that utility stocks can not continue to ride.  So it is possible we will be able to see how well this portfolio meets its objectives in a down market

RETURNS	UDC DIV.	UDC CG	UDC TOTAL	XLU	S&P500 (DSPIX)
2009 q3	7.73%	-2.86%	4.87%	6.26%	11.43%
2009 q4	8.22%	-4.29%	3.93%	7.02%	6.02%
2010 q1	8.10%	-5.93%	2.17%	-4.38%	5.36%
2010 q2	7.98%	-7.89%	0.09%	-3.68%	-11.39%
2010 q3	5.53%	1.08%	6.61%	12.16%	11.24%
2010 q4	5.62%	-3.25%	2.37%	1.05%	14.80%
2011 q1	5.95%	-3.34%	2.61%	2.69%	5.90%
2011 q2	5.96%	-0.39%	5.57%	6.10%	-2.10%
2011 q3	6.85%	-8.89%	-2.04%	1.44%	-13.89%
2011 q4	4.78%	+0.96%	5.74%	8.17%	11.2%
Compound Return			36.5%	42.0%	39.9%
Standard Dev			4.2	5.0	9.1

Correlations between these three funds are shown below.

• udc/xlu .77
• udc/spy .71
• xlu/spy .46

TRADE STATS	Trades	Wins	Loses	Win %
2011 q4	15	14	1	93.00%
Total	180	136	44	76.00%

UDC Portfolio Q3 Results

At the end of this turbulent third quarter, CCI must report that the Utility Dividend Capture fund (description here) lost 2.0% this quarter. This is the first loosing quarter in the funds 9 quarters of existence, and hence the first time the fund has failed to meet its absolute return objective of 0% per quarter in down markets and 3% in up markets. 

The fund once again generated significant dividend income (6.85%), as planned. Unfortunately, this is the first quarter that the anticipated capital loses were not able to be kept less than the dividend income (-8.89%).

Of course the S&P 500 was down about 13.9% (fter dividends) over the same period, so the draw down was much less than that traditional benchmark. However, the utility sector ETF (XLU) still managed to eek out a 1.4% gain this quarter. Hence that would have been a better, simpler way to go this quarter.

While the fund failed to meet its idealistic, arbitrary quarterly objective (maybe I should change the objective to -2% in down quarters, ...lol) it still obviously avoided a big down draft which is perhaps the most critical element to achieving good long-term performance. Additionally, UDC is the least volatile of these three funds. (as measured by SD).

CCI plans to continue with this approach both for its return profile and to illustrate how disciplined approach might work. Below is a lot of performance data so the reader can judge for themselves the merit of this approach.

RETURNS	UDC DIV.	UDC CG	UDC TOTAL	XLU	S&P500 (DSPIX)
2009 q3	7.73%	-2.86%	4.87%	6.26%	11.43%
2009 q4	8.22%	-4.29%	3.93%	7.02%	6.02%
2010 q1	8.10%	-5.93%	2.17%	-4.38%	5.36%
2010 q2	7.98%	-7.89%	0.09%	-3.68%	-11.39%
2010 q3	5.53%	1.08%	6.61%	12.16%	11.24%
2010 q4	5.62%	-3.25%	2.37%	1.05%	14.80%
2011 q1	5.95%	-3.34%	2.61%	2.69%	5.90%
2011 q2	5.96%	-0.39%	5.57%	6.10%	-2.10%
2011 q3	6.85%	-8.89%	-2.04%	1.44%	-13.89%
Compound Return			29.09%	31.24%	25.74%
Standard Dev			4.4%	4.9	9.1

Correlations between these three funds are shown below.

• udc/xlu .74
• udc/spy .67
• xlu/spy .43

TRADE STATS	Trades	Wins	Loses	Win %
2011 q3	20	13	7	65.00%
Total	165	122	43	74.00%

Utility Dividend Capture Portfolio Achieves 8th Straight Quarter of Growth

The Utility Dividend Capture Portfolio just completed it 8th quarter of operation.
Detailed information on the objective, approach, and returns of this portfolio  can be found at
http://ccentsinvesting.blogspot.com/p/udc-prospectus.html

In summary, the objectives of this portfolio are
- absolute quarterly returns of 2+% in quarters when the stock market is up and 0% when the stock market is down.
- to be less volatile than the stock market.

This objective is to be accomplished via trading in and out of 15-20 utility stocks around their dividend x-date to capture about a 1% return from the dividend and relying on market inefficiency to be able to loose less than that amount via capital gains.


For the eigth quarter in a row this fund achieved its objective!!

• The fund returned 5.5% in total this quarter
  
• The return was comprised of 5.9% in dividends and a loss of .4% in capital gains
• 18 trades were made.  15 of them were winning trades. An 83% win percentage.
• daily standard deviation of the fund was .49, which was about 25% less than volatility of the XLU etf.

Over 8 quarters of operation, the fund has consistently met its objectives

• Never had a loosing quarter!  This type of absolute return is the key goal of this portfolio.
• Averaged 3.9% in  returns each quarter
• Had 109 of 145 winning trades for over a 75% win rate.
  
• Low daily volatility. A SD of .60% which is nearly 1/3 less volatile than the XLU etf.
• Low quarterly volatility. A SD of 3.97% which is nearly 1/2 less volatile than the S&P.

This portfolio continues to meet and exceed expectations.  This begs the question "how long can this last". IMO the most likely thing to adversely impact the performance of this fund would be higher interest rates. As an extreme example if one-year risk free interest rates went to 4+%, the additional risk of this portfolio would not seem justified.  However, it seems like short-term interest rates will remain low for awhile, so CCI will continue pursuing this portfolio into its ninth quarter of operations.

Portfolio UDC - 2011 Q1 Performance

The Utility Dividend Capture Fund just completed it 7th quarter of operation.

Detailed information on the objective, approach, and returns of this fund can be found at
http://ccentsinvesting.blogspot.com/p/udc-prospectus.html

In summary, the objectives of this fund are
- absolute quarterly returns of 2+% in quarters when the stock market is up and 0% when the stock market is down.
- to be less volatile than the stock market.

This objective is to be accomplished via trading in and out of 15-20 utility stocks around their dividend x-date to capture about a 1% return from the dividend and relying on market ineffeciency to be able to loose less than that amount via capital gains.


For the seventh quarter in a row this fund achieved its objective.

• The fund returned 2.6% in total this quarter
  
• The return was comprised of 5.9% in dividends and a loss of 3.3% in capital gains
• 17 trades were made. 13 or 76.5% of them were winning trades
• daily standard deviation of the fund was .44, which was about 25% less than the XLU etf.

Over 7 quarters of operation, the fund has consistently met its objectives

• Averaged 3.5% in returns
• Never had a loosing quarter!
• Had 94 of 127 winning trades for a 74% win rate.
  
• Low daily volatility. A SD of .61% which is 33% less volatile than the XLU etf.
• Low quarterly volatility. A SD of 4.21% which is 47% less volatile than the S&P.