The idea of the Bounceback Portfolio is that a portfolio of the 10 worst performing FTSE 350 stocks in one year has historically beaten the index in the first three months of the following year. This is explained in further detail in the UK Stockmarket Almanac 2013 and in this post at the beginning of the year.
The following chart shows the performance of the stocks in the Bounceback Portfolio 2013
The portfolio as a whole increased 2.4% in the first quarter 2013, but this was less than the FTSE 350 Index, which rose 9.2% in the same period. This is the first time since 2002 that the Bounceback Portfolio has under-performed the index in the first quarter.
Hindsight is a wonderful thing: obviously the time to take profits was just two weeks into the year.
Dogs of the Dow
A related strategy is the Dogs of the Dow, where the ten stocks in the Dow Jones Index with the highest dividend yield on the final day of the year are bought. So far, this portfolio is faring better than the above Bounce back Portfolio.
