Sometimes, investing requires patience. A lot of patience. After churning it out for ten months, the Investor Uprising Index of 25 companies with favorable investment metrics rallied to a new high of 1002 yesterday. The IU25, as we call it, is showing a positive return for the past 10 months, and is now up 12% year-to-date (YTD). If you add back dividends, an investment in the index would have returned in excess of 5% since its launch in April 2011.
This is no easy matter, because we had the unfortunate luck of launching our Website -- and the IU25 -- just as the major markets were peaking last year. That means we had to wait out a painful 20% sell-off into the miserable summer of 2011, when the financial markets grappled with a downgrade of US Treasury debt, as well as the ongoing saga of European debt crisis, before we got to see the IU25 rally back into the green.
When markets rallied this fall, our index caught up fast, as we expected. That's because it's stacked with profitable companies with favorable metrics on a Growth at a Reasonable Price (GARP) basis -- in general, all of them have price/earnings ratios below their growth rate, or at least they did when they were selected.
So far, the IU25 Index's performance of up 11.4% compares favorably to the S&P 500 index, which is up only 7% YTD. This makes sense, as with the growth mix, the IU25 will tend to outperform in rallies and underperform in bear markets. However, keep in mind that the index is young and we still don't have lots of data -- it's only been 10 months. We believe our system works, but the track record is still short.
The IU25 Index under-counts its actual performance, because our performance numbers don't include cash dividends or share distributions. One of the companies in the index, Marathon Oil Corp. (NYSE: MRO), spun off its petroleum refining division Marathon Petroleum (NYSE: MPC) in July. On paper, it looks as if the Marathon Oil shares are off $20, but investors got the equivalent of a $20.70-per-share dividend as the stock was split off. (See: Marathon Investors Gain as Share Price Falls.) If you count that dividend back into the mix, the index is up a lot higher, nearly 5%.
There have been other happy events in the IU25 Index since its inception. In May 2011, shortly after the index was launched, Teva Pharmaceuticals (Nasdaq: TEVA) bought Cephalon, one of the companies in the index, chalking up our first acquisition call -- and giving investors an instant 39% premium to where the stock had been trading one month prior. (See: IU25 Index Gets First Deal as Teva Buys Cephalon.)
Several of the higher profile companies in the index that we have highlighted periodically have performed admirably, many up in excess of 30% for the last year. Look no further than Apple Inc. (Nasdaq: AAPL), the anchor to our index, which is up 37% from when our launch. Apple has helped power the index to a new high.
Other big winners include biotech giant Gilead Sciences Inc. (Nasdaq: GILD), which we have called out as a cheap stock numerous times. Gilead is up 37% since it launched in the index. Celgene Corp. (Nasdaq: CELG), another one of our value biotechnology picks, is up 30%. Clearly, our blue-chip biotechs have been the place to be in the index. We've been covering the entire bull market in biotech since last year. (See: Is There Balm in Gilead? and Guide to Biotech Investing.)
Even though the mining sector has generally trailed the outperformance of the precious metals, gold, and silver, our holding Newmont Mining Corp. (NYSE: NEM; TSX: NMC) is up 10%.
So, great news. But what about the losers? Well, look no further than the solar industry, which has been pummeled. Probably the biggest lose in the index is First Solar Inc. (Nasdaq: FSLR), which was down more than 60% from last April. If we -- or any investor -- had just avoided that one company, the performance of the IU25 would have been much stronger. Another company with solar exposure, Veeco Instruments Inc. (Nasdaq: VECO), is down 40% from last April.
As the IU25 Index approaches its one-year anniversary, we'll be running some scans on the numbers and deciding whether any changes need to be made. To find out more about our methodology, check out the links below.