2009 is underway!
Has the market recovered from the recent tough times?
Click this link to see the most recent report on 2008-09 (pdf)
The Chippewa Valley Center for Economic Research and Development (CVCERD) has partnered with the Leader-Telegram to collect and maintain stock market data for a list of publicly-owned companies that are of interest in the Chippewa Valley and surrounding region. We then track the performance of these companies through a simple investment basket called the Eau Claire Area Stock Basket (ECB) which is a regular feature in the business section of the Leader- Telegram each Tuesday. We also compile a report each quarter including the year end report and the Leader-Telegram runs a story coinciding with each of these reports.
At the beginning of each year we will hypothetically invest $100,000 in the ECB with each company receiving an equal share of the initial investment. All dividends paid will be immediately reinvested in the issuing company thereby increasing the value of the basket (1). The total value of the ECB, including these accumulated dividends are redistributed equally across all companies each quarter. This is an example of an equal weight index which gives the same weight to each company regardless of size and also offers greater exposure to under-valued stocks.
The ECB consists of companies with an employment presence in the region including retail, manufacturing, dining and entertainment, health care and more. Should an existing company leave the region, they will be removed from the ECB at the end of the quarter with their share of the value redistributed equally among the remaining companies. Should a company arrive in the region they will be added to the ECB, but not until the beginning of the next year. Should an acquisition occur involving a company in our basket, we will make the appropriate adjustment based on the details associated with the acquisition.
We will also be comparing the performance of the ECB relative to similar investments in variations of the Dow Jones Industrial (DJI), Standard & Poor’s 500 (S&P) and gold. For the DJI we will use the Dogs of the Dow (DOGS), for the S&P we will use Rydex S&P Equal Weight ETF (RSP) and for gold we will use StreetTRACKS Gold ETF (GLD). An exchange-traded fund (ETF) is a type of investment company whose objective is to achieve the same return as a particular market index. For more information about ETFs see http://www.sec.gov/answers/etf.htm.
Investing in the DOGS is relatively simple. After the stock market closes on the last day of the year, of the 30 stocks that make up the DJI, select the ten stocks which have the highest dividend yield. Then simply get in touch with your broker and invest an equal dollar amount in each of these ten high yield stocks. Then hold these ten stocks through the entire year. We will hypothetically invest $100,000 at the beginning of the year in DOGS with each company receiving an equal share ($10,000) and see what happens. All dividends paid will be immediately re-invested in the issuing company thereby increasing the value of the investment, but unlike the ECB, these accumulated dividends will not be re-balanced each quarter. For more information on the DOGS see http://www.dogsofthedow.com/.
The RSP seeks investment results that correspond to the performance of the S&P Equal Weight Index (S&P EWI), an index developed by Standard & Poor’s in cooperation with Rydex Global Advisors. The S&P EWI utilizes quarterly rebalancing to maintain its equal-weight stance. We will hypothetically invest $100,000 in RSP at the beginning of the year and see what happens. All dividends paid will be immediately reinvested in the ETF thereby increasing the value of the investment (1). For more information on RSP see http://www.rydexfunds.com/etfs/.
GLD is sponsored by a unit of the World Gold Council and offers investors the ability to access the gold bullion market, with each share representing one-tenth of an ounce of gold. We will hypothetically invest $100,000 in this GLD ETF at the beginning of the year and see what happens. GLD pays no dividends.
These investments will be reported weekly in Tuesday’s Business Section of the Leader-Telegram. In addition, we will be issuing three quarterly reports and a year-end report tracking the performance of these investments including specific information on selected feature companies.
If you have a further interest in this project or in any of the information presented such a listing of the companies in the ECB and DOGS as well as access to the data or a more detailed analysis, please contact Eric Jamelske in Economics Department at the University of Wisconsin, Eau Claire at 715-836-3254, firstname.lastname@example.org or Liam Marlaire of the Leader-Telegram at 715-833-9215, email@example.com.
(1) Dividends paid in other than cash will be liquidated and treated as cash.
(2) The information provided here is not intended to promote a particular investment strategy or investment in specific stocks. Moreover, this information does not represent the opinion of the University of Wisconsin-Eau Claire.
(3) It should also be noted that the performance of the ECB Investment is not necessarily an indicator of the overall economic activity in the region.
(4) Click here for a current list of the companies in the ECB and the DOGS (2009).
Reports & Analysis: click to view reports and more