The second annual Peridot Capital Select List, ten stock selections published at the beginning of year, beat out the S&P 500′s 6% gain by 130 basis points during the first six months of the year. Troubles at Amgen limited the gains, which without the biotechnology leader would have outperformed the benchmark by more than 50 percent.
Just like last year, a Mid-Year Update has been released this week containing updated views on the ten selections. The report is available for $14.95 to new readers, or $9.95 if you purchased a copy of the 2007 Select List already and would like the follow-up report. To order the report via PayPal, simply visit the Peridot Capital research web site.
Enjoy this post? Subscribe to the blog and never miss another one:
Subscribe in a reader | Subscribe by email | Subscribe with Kindle
| 
On a total return basis the S&P 500 returned 6.96% YTD. Including dividends in the comparison benchmark gives a more complete picture of what a passive owner could have earned (roughly) by holding an alternative amount in an indexed mutual fund or ETF. Despite the fact that companies in the Select List may or may not pay dividends, dividends are paid out of earnings and should therefore be included to get to an honest to God apples-to-apples comparison.
This is true. For the sake of comparing apples to apples, I don’t add dividends to the calculations for either group. Main reason being, the list’s number one goal is capital gains, not income.
Despite the primary goal of capital gains, income has a real effect on performance, especially for the S&P. I would like to see dividends added to both groups. Not including them distorts results if the SL has a payout ratio smaller than 33% (roughly that of the S&P 500). In this case, its results could be boosted by the simple fact that the SL companies retain more of their earnings.
I’ll likely keep it the way it is, since I did that last year as well. Investors wanting growth stocks usually don’t look for dividends. If they are, they won’t find much value in the SL. I guess I could use a growth index as the benchmark instead of the S&P 500 since the focus of the list is capital appreciation. That would solve the issue since it would yield less than the S&P 500.
If people want to calculate it with dividends they can go ahead and do so. When we are talking about a fraction of a percentage point, I don’t think it’s really all that important to the average person. All of the data is available so people can calculate it anyway they want.
The bottom line is, the SL did extremely well in 2006 and was pretty much in-line with the market for the first 6 months of 2007. That’s the big picture.
chad-
good job on your pics, 7% given a market that has had its share of volatility, and that you are a longer term investor is good performance in my book. I’m interested to hear your thoughts on SHLD today… Do you add to SHLD here, or does your approach merit holding off to see if a further downtrend in price movement follows todays sharp down gap. I know you’re not one for charts… but from your vantage point, has the longer term outlook for shield’s fundies changed after today’s profit warning?
Thanks, Adam. The picks did okay, not great, but as you mentioned, they are long term ideas, and I would expect long term performance to be a lot better.
As for SHLD, I will be posting about them later this week, so stay tuned. They are struggling along with WMT, HD and the rest of the low end and home markets right now.
Whether or not you hold really depends on why you own the stock. If it is for the retail side, that won’t improve for a while. If it is for other reasons, then the story hasn’t changed. That said, I’ll have some comments on SHLD in the next couple days.
It is not such a big deal in this case, but over longer time periods it can make a big difference and distort comparisons. For instance, the published performance on your firm homepage, shows comparable S&P 500 1,3, and 5-year numbers of 13.6%, 8.5%, and 5.7% (which are price change numbers), but the true (dividends included) numbers are 15.8%, 10.4%, and 6.2%, respectively for those periods.
You have a tremendous track record and I am not in the least downplaying that, just looking for a fair comparison for the average person who might not know the reasoning behind the performance calculations.
Keep up the good work!
I understand that, it’s no problem. So many people know about and use the S&P 500 that is has become the standard benchmark, even though if many cases it might not be the best. Even within my client base, a 25 year old and a 65 year old are going to invest in different types of companies, but I use the S&P as the benchmark. There is probably a better way to do that, using growth indexes and value indexes, etc.
I tend to go for simplicity but its likely not always the best choice. Of course, if you use several benchmarks for different people/strategies, then you open yourself up to being seen as inconsistent.
I agree with anonymous. I think that failing to compare the SL to the S&P TR performance places you under a cloud of impropriety. While you have easily outperformed the S&P on a TR and price change basis, failing to compare the list to the TR performance makes it look like you are trying to overstate your returns in comparison to the benchmark. Nevertheless, I think your blog is excellent, and I look forward to your SHLD post in the next few days.
Point taken. I will consider adding dividends to the SL and SPX returns in the future. Thanks for the input.