Day Hagan Research Update




General commentary regarding the financial markets and an update regarding the Day Hagan Tactical Dividend Strategy


August 2, 2016


The Day Hagan Tactical Dividend Strategy (DHTD) returned +2.16% gross, +2.13% net of fees, in the month of July, leaving it at +10.51% gross, +10.16% net, for the year to date.  This compares favorably to the S&P 500 total return at +7.66% and the Russell 1000 Value Index total return +9.38% for the year.  The Day Hagan Tactical Dividend strategy’s out-performance comes despite taking a defensive stance with its cash position, highlighting the strategy’s focus on appropriate upside and downside capture in the name of capital preservation.

During the early part of July, we sold out of our Restaurant industry names without replacement, further raising cash levels in the portfolio.  Fund data provider Lipper suggests that currently less than 4% of U.S. equity funds have more than 10% in cash.  However, our proprietary, objective and disciplined valuation methodology suggests an elevated cash holding is the prudent course of action at present.  While we view the upside in the industries we do hold to be substantial, based on our rigorous process there currently are not enough attractively-rated industries and underlying names available that would allow us to be fully invested.  In the case of restaurants, the sale was precipitated by Bob Evans (BOBE) hitting our multi-faceted stop-loss trigger.  As there was not a suitable replacement within eligible restaurant names (and our fundamental overlay work turned up sales and traffic concerns), the resulting lack of diversification forced an industry sale.  Consistent with what the strategy has seen historically, despite the stop-loss on BOBE, we successfully owned the industry over roughly the last three years, with other names all showing meaningfully positive performance and an annualized performance (including BOBE) for the industry exceeding +30%.

During the month of July, our Asset Management industry grouping led performance and all other industries were positive except for Oil & Gas, which was down slightly.  For the year to date, Oil & Gas has provided the highest portfolio returns with Asset Management a close second despite (or because of) being purchased in early February at what we viewed as a trough valuation.  Invesco (IVZ) was our top portfolio name contributor to relative return in July versus the S&P 500 and the Russell 1000 Value.  We note this with interest because in the flurry of post-Brexit research, IVZ was regularly pilloried.  We believed then, as we continue to believe now, that the underlying value remained compelling as we measure it.

If you have any questions or would like further details, please feel free to contact us.


  • Donald L. Hagan, CFA
  • Robert Herman          
  • Jeffrey Palmer
  • Arthur S. Day

Note: The S&P 500 Index is based on the market capitalizations of 500 large U.S. companies having common stock listed on the NYSE or NASDAQ. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Indexes are unmanaged, fully invested, and cannot be invested in directly.

Disclosure: The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Day Hagan Asset Management (DHAM), any of its affiliates or employees, or any third party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM, accounts that DHAM or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. DHAM uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior DHAM recommendations or DHAM performance rankings, one should also consider that DHAM may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse effect of transactions costs or management fees or reflect actual investment results, that some model results do not reflect actual historical recommendations, and that investment models are necessarily constructed with the benefit of hindsight. For this and for many other reasons, the performance of DHAM’s past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.

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