Three years ago, I embarked on an exercise of fun — and potential learning!
The Leaside Stock Index was born in February 2014 as the result of an innocent drive past the Canadian headquarters of Lincoln Electric on Wicksteed Avenue in the Leaside Business Park. At the time, I wondered what the company did and when I found out, I recommended to my readers at Investopedia.com that they buy its stock.
Well, it hasn’t turned out so great for anyone who might have listened to my recommendation: Lincoln Electric’s annualized total return including dividends is up just 3.8% through the end of December, almost six percentage points worse than the SPDR S&P 500 ETF Trust, an exchange-traded fund tracking the performance of 500 of America’s largest companies.
But the drive itself did serve as the inspiration for me to create a 20-stock model portfolio that held the stocks of companies benefiting from the patronage of Leasiders such as yourselves. Ten were listed on the Toronto Stock Exchange while the other 10 were listed on either the New York Stock Exchange or Nasdaq. Together, they were meant to reflect the business of Leaside.
Fortunately, while the U.S. portion of the portfolio experienced mediocre performance over the past three years, the 10 Canadian stocks did exceptionally well, delivering an annualized total return of 13.8%, almost six percentage points better than the iShares S&P/TSX 60 Index Fund, an exchange-traded fund tracking the performance of 60 of Canada’s largest companies.
Overall, once you include the currency changes over the past three years, the Leaside Stock Index managed an annualized total return of 15.2%, almost two percentage points better than the performance of the two exchange-traded funds tracking the equity indexes.
I call this Everyday Investing because all 20 of the businesses are or might be part of your everyday lives, but you can just as easily refer to it as passively active investment management because while this is meant to be a buy-and-hold-forever type of portfolio, the original selection of stocks and any possible replacements in the future are meant to be active.
Case in point: PetSmart was originally part of the Leaside Stock Index, but it was taken private in March 2015 when it was acquired for US$8.2 billion. I replaced it with Whole Foods, which had already signed a lease and is currently preparing to open a store at Bayview Ave. and Broadway Ave., sometime in 2017.
We plan to put the portfolio on the Leaside Life website with real-time returns so Leasiders can follow the Leaside Stock Index’s future performance.
In the meantime, here’s to the Leaside Stock Index and three successful years on the markets!