The Day Hagan Logix Tactical Dividend strategy moved further into positive performance territory during the month of November, now showing +2.38%* performance year to date, ahead of its benchmark Russell 1000 Value at +1.48%. Performance numbers are total return, gross of fees. Reviewing our performance relative to peers, we are meaningfully outperforming the Fidelity Value Fund (-7.96% for the year to date) and the AIG Focused Dividend Strategy (-4.42% over the same time frame). Over the last twelve months, Day Hagan Logix is +5.61%* versus the Russell 1000 Value at +2.96%.  Day Hagan Logix has produced positive alpha versus its benchmark over the YTD, 1, 3, 5, 10, and 15-year periods as well as since 2002 inception.

While the Russell 1000 Value index outperformed its growth counterpart during November, over the last several years and for 2018 year to date, growth remains meaningfully ahead of value performance. For example, the Russell 1000 Growth is +6.71% for the eleven months through November, nearly 600 basis points ahead of the Russell 1000 Value. In 2017, growth outperformed value by 14.6%. Collectively, despite the more recent reversal, growth is poised for the best two-year performance relative to value since the late 1990s. Market history, including that of the late 90s Internet boom, gives us plenty of cautionary tales around a belief that growth vs. value outperformance is sustainable over the long term. Broadly speaking, with cracks already emerging around domestic growth stock valuations, we believe the deep value characteristics of our portfolio to be very timely moving forward. That being said, we take a differentiated, objective approach to valuation. As our long performance history shows, regardless of whether growth or value lead, we continuously seek attractive absolute returns with modest risk.

Year to date, our retail holdings have led performance across all industry groupings in our invested portfolio. Based on our objective valuation methodology, we trimmed position sizes in three retail names during the month of November, including the TJX Companies (TJX), Tractor Supply (TSCO) and Monro (MNRO). TJX and TSCO were among our largest position sizes in the portfolio prior to their reduction. Their total return over just more than a year-long holding period was approximately +52% (TJX) and +60% (TSCO). MNRO, a less liquid stock, never approached the position size of either of those two but, with a total return of about +35% going into its reduction, was also a strong performer.  We continue to maintain exposure to these three holdings, albeit at more modest levels, as we move closer to their measures of fair market value.  While retail has been and undoubtedly continues to be in a transformative stage, the names we have owned in the industry are somewhat differentiated in terms of demand drivers. Companies like Tractor Supply (serving the rural lifestyle), TJX (including TJ Maxx, Marshalls and Home Goods) and Monro (larger player in the fragmented auto repair and tire sales/service niche) were in the past lumped in with more traditional brick and mortar retailers, and as a result we found highly attractive purchase points.

During the month of November, we further added to our asset management industry grouping (originally purchased in October; see our Trade Notifications on the Day Hagan Logix website for additional detail), increasing position sizing of two names, T. Rowe Price (TROW) and Invesco (IVZ) based on our valuation process. Overall weighting for our asset managers in the portfolio after the increase is still a relatively modest 8%. While market volatility can have a negative impact on asset managers, the volatility also has the potential to be constructive as it can make it easier for active managers to outperform their relevant benchmark indices. Regardless of the overall macro market backdrop, the asset management equities we hold have unique and somewhat compelling business characteristics. These are strong fundamental names, and, just as with our previous purchase and sale of asset managers, we view our entry points and the companies’ corresponding valuations as highly attractive. We last purchased the asset management industry in February 2016, selling out of it completely (with purchases and sales along the way) in January 2018 for a more than +60%* return. Before their recent repurchase, we sold both TROW and IVZ in January of this year, garnering attractive total return for the portfolio (IVZ ~+33%, TROW ~+75%). Our recent purchase price of these two stocks was meaningfully below the January sale price; in the case of TROW, it was nearly 20% below the sale price, and for IVZ, it was over 44% below. This is a good illustration of how our valuation process is effective, with both an ability to buy and sell at appropriate points in time. 

Finally, at the end of November, we continue to prudently hold defensive cash levels in the portfolio. Although the cash percentage has come down a fair amount from recent history, we see a dearth of attractively valued industries and underlying equities, preventing us from being fully invested. However, our current equity holdings show significant upside potential, with average price targets at around 45% higher than current levels, based on our valuation methodology.  As we’ve written about often in the past, we will not force stocks into the portfolio if they do not objectively meet our stringent criteria.  Historically, our cash positions have helped maintain modest downside capture of about 53% versus our benchmark, although 1) equity-only performance for Day Hagan Logix Tactical Dividend still shows meaningful outperformance in difficult markets (e.g. 2008:  Day Hagan Logix -16.87%* (including cash), Day Hagan Logix equity-only (assuming no cash) -21.39%* versus the Russell 1000 Value -36.85% and the S&P 500 ‑37.00%) and 2) putting cash to work in a timely fashion is critical to maintaining strong upside capture.  Case in point, in 2009, Day Hagan Logix returned +26.70%*, ahead of the Russell at +19.69% and in line with the S&P 500.

Wishing you and yours a happy and safe holiday season. We welcome your comments and questions any time.


  • Robert Herman, MBA

  • Donald L. Hagan, CFA

  • Jeffrey Palmer, CIPM

  • Arthur S. Day

  • Steve Zimmerman, MBA

  • Regan Teague

Print Copy of Article: Day Hagan Logix Tactical Dividend Strategy Update December 2018 (PDF)

Day Hagan Logix is registered as an investment adviser with the United States Securities and Exchange Commission. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Day Hagan Logix claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Day Hagan Logix has been independently verified for the periods April 30, 2002 through December 31, 2016. A copy of the verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. 2 Calculation Methodology: Pure gross of fees returns are calculated gross of management, custodial fees and transaction costs and are shown as supplemental information. Net of fees returns are calculated net of actual management fees, transaction costs and gross of custodian (trust) fees. Net of fees returns for wrap accounts are calculated net of management fees, transaction costs and all administrative fees charged directly to the client by the broker-dealer. Net return for the strategy year to date through 11/30/2018 is +1.81%; last twelve months net return is +5.02%.

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. The S&P 500® Index is a broad-based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general.

Alpha is a statistical measure that calculates an active manager’s return in excess of a benchmark index or a “risk-free” investment.

Disclosure: *Note that individuals’ percentage gains relative to those mentioned in this report may differ slightly due to portfolio size and other factors. The data and analysis contained herein are provided "as is" and without warranty of any kind, either express or implied. Day Hagan Logix (DH Logix), 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 DH Logix 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. DH Logix, accounts that DH Logix 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. DH Logix uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. The performance of DH Logix’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.

There is no guarantee that any investment strategy will achieve its objectives, generate dividends or avoid losses.