Is the 2 for 1 Index® tracked by the market?
The 2 for 1 Index is calculated and published by the NYSE (https://nyse.com/quote/index/SPLITS) and is updated every 15 seconds during the trading day. The index ticker is “SPLITS”.
The value of the 2 for 1 Index® (the “Index”) is calculated by NYSE Euronext or its affiliates (“NYSE Euronext”). The Stock Split Index Fund, which is based on the Index, is not issued, sponsored, endorsed, sold or promoted by Neil Macneale Inc. or NYSE Euronext, and NYSE Euronext makes no representation regarding the advisability of investing in such product.
NEIL MACNEALE INC. AND NYSE EURONEXT MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE 2 FOR 1 INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL NYSE EURONEXT HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
What’s special about companies (and their stocks) that have announced a split?
The 2 for 1 Index® and newsletter is based on research by David Ikenberry, dean of the Leeds School of Business at the University of Colorado Boulder. This research evaluated the performance of stocks that announced a split and compared that performance to the performance of similar companies that had not split. The study was published in the September 1996 Journal of Financial and Quantitative Analysis and indicated that there is a measurable difference in the performance, for up to three years, of stocks that have split as opposed to those that have not.
What is “laddering”?
Laddering is the technique of regularly adding a new stock and removing on older stock from the Index on a monthly schedule, so it consistently contains only 30 stocks. Because there are 30 stocks in the Index, each remains in the index for the optimal 2 1/2 years (30 months = 2 1/2 years). This method seeks to capture the outperformance that is documented in the research, as the ‘stock split advantage’ dissipates after 3 years.
Does this really work?
The Index ‘beat the market’ for 15 of the last 19 years. See the “Performance” page of this website. The real life performance of the IRA account followed in the 2 for 1® newsletter is almost as good, beating the market 14 of the last 19 years with an 11.06% annualized return through 10/31/15. A real portfolio is always slightly behind its corresponding index because of trading costs.