We’ll have to see if the overall environment changes, but the combination of plunging interest...
Here's a Split to Bank On
05/24/2019 5:00 am EST
There is no question in my mind that my crystal ball is getting more cloudy by the day. Portfolio performance this year so far is looking great, and I’m not complaining, but it does make me nervous, cautions Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
I’ve been assuming there would be a bear market or even a recession for quite a while now, and we did have a bit of a correction at the end of 2018 but, at the moment, we’re back to all-time highs for the market and the 2 for 1 portfolio.
Our portfolio is up about 17% for the year to date, a little ahead of the market, and up over 13% for the trailing 12 months, about 5% ahead of the market. On May 3rd, the long-term overall return for the 2 for 1 portfolio went over 1000% for the first time in the 22+ years since its inception.
All this good news comes with a caveat. These levels are not sustainable over the long term. After twenty-two years of trying, I’m pretty well convinced the 11% overall annualized return for the 2 for 1 portfolio is about as good as it gets. Beating the market by a few percentage points, the goal expressed in the very first issue of 2 for 1, has been achieved.
I attribute some of this outperformance to 2 for 1’s portfolio management procedures, but most is due to the Stock Split Advantage. So, whether 2 for 1 is temporarily behind or ahead of the market, we’ll just keep humming along, not fixing what’s “not broke.”
There have been three 2 for 1 split announcements since the last issue of 2 for 1. Computer Services, Inc. (CSVI) failed our screening process right away because it is not traded on any of the major exchanges.
The other two, Fastenal (FAST) and First Financial Bankshares (FFIN) provided a real choice. I was initially drawn to FAST because it is, literally, a nuts and bolts company, the kind I like, making and selling stuff that we actually need.
It’s a well-run company with a lot going for it but, in my opinion, it’s in a business that will suffer if and when the economy goes into a tailspin. The recent upward momentum in its stock price will probably be hard to maintain.
First Financial Bankshares, Inc., therefore, is my choice. Its score in our ranking procedure was better than that of Fastenal. First Financial is a bank holding company with 73 locations doing business all across Texas. With a strong balance sheet and a diversified loan portfolio,
FFIN is well positioned to remain profitable no matter the ups and downs of the market. Like local and regional banks in days gone by, customer deposits remain its primary source of funding.
The numbers that have to do with good governance and stability, such as debt and profitability, are strong for First Financial.
I would think this bodes well for the future and, of course the clincher — the two to three year “stock split advantage” is just getting started for FFIN. After the drought since before the beginning of the year, it was a relief to have several splits to choose from.
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