1. W.E. Donoghue Power Dividend IndexSM (PWRDX) A Tactical Dividend Strategy for Today’s Volatile Market
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2. S&P 500 Index Since the Turn of the Millennium
10/31/12
Cyclical Bull %
See Slide
Source Bloomberg, as of 10/31/2012
Since January 2000, the S&P 500 Total Return Index has Offered a Great Deal of Volatility Without the Returns.
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3. Challenges Facing Investors Today
Secular Bear Market with Volatile Swings
Global De-Leveraging Process
Sluggish Economic Growth Prospects
Historically Low Interest Rate Environment
U.S. Aging Boomer Demographic
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4. Why Dividend Paying Stocks?
Dividends Accounts for 100% of the S&P 500 Returns from the
Beginning of 2000 to the End of September 2012
Dividend Stocks Pay Income and Potentially Hedge Inflation
Dividend Paying Stocks Tend to be Less Volatile
Dividend Paying Stocks Can Potentially Offer Preferential Tax Treatment
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5. Why Tactical Asset Management?
It’s Not What You Make, It’s What You Keep
S&P 500 Index has Offered Significant Volatility with Little Reward
for the Last Decade or So
Shifting Defensively During Periods of Market Decline Can Potentially
Preserve Capital and Enhance Returns
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6. For Broker Dealer Use Only
Why Equal Weighting?
Avoids Domination by Mega-Cap and Large-Cap Stocks
e.g. Top Ten Stocks in Cap Weighted S&P 500 = ~20%
e.g. Top Ten Stocks in Equal Weighted S&P 500 = ~2%
           
SDOGX Avoids Sector Concentration Based on Market Cap
All Ten Sectors Are Equal Weighted
Lowers Allocations to Financials and Information Technology
Cap Weighting Gives Index Momentum Bias
Best Performing Stocks Get Higher Weights with Each Rebalancing
Worst Performing Stocks Get Lower Weights with Each Rebalancing
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7. W.E. Donoghue Power Dividend Index DescriptionSM
Entirely Rules Based and Transparent Tactical Asset Allocation (TAA) Methodology
Dynamically Allocates Index Market Capitalization between a Portfolio of Stocks
That Replicates the SDOGX Index and 90-Day US Treasury Bills
Shifts in Allocations Are Made Based on Intermediate Term Exponential Moving
Average Crossovers
Bullish Crossover Index Invests in Dividend Paying Stocks
Defensive Crossover Index Invests in 90 Day US Treasury Bills
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8. W.E. Donoghue Power Dividend Index DescriptionSM
Moving Averages Based on the Closing Prices of the S-Network Dividend
Dogs Total Return Index (SDOGXTR)
Reallocations Occur on T+1 – Next Trading Day Following Crossover Signal
No Qualitative Screens Are Applied to Allocation Methodology
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9. Power Dividend Index Selection Process
S&P 500
50 Stocks Equal Weighted
Top 5 Dividend Paying Stocks in 10 GIC Sectors
Exponential Moving Average Crossovers
Stocks or
T-Bills
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10. Historical Performance
Source: Standard & Poor’s, as of 11/7/2012
The W.E. Donoghue Power Dividend Index’s TAA Overlay Has Substantially Diminished the Impact of Market Downturns, Improving Performance Significantly Over Time.
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11. What is Buried in the Power Dividend Numbers?*
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Year
2000
-6.06%
-7.66%
11.59%
0.73%
4.41%
-4.40%
-2.16%
5.93%
-1.56%
3.16%
-1.12%
5.14%
6.50%
2001
5.06%
0.95%
7.12%
3.52%
0.34%
1.87%
-1.43%
-7.51%
-1.31%
3.06%
2.16%
12.10%
2002
-0.57%
0.79%
4.04%
-4.57%
2.23%
-8.18%
-0.38%
0.14%
-0.36%
0.10%
0.11%
-6.83%
2003
-0.40%
0.09%
7.14%
1.19%
0.15%
3.76%
-1.28%
5.85%
1.63%
9.57%
30.28%
2004
0.96%
1.48%
-1.55%
-1.38%
0.36%
3.43%
-1.61%
1.86%
1.23%
5.19%
3.33%
15.26%
2005
-3.72%
4.64%
-1.30%
-2.33%
2.61%
1.13%
3.14%
-1.10%
0.90%
-2.67%
1.92%
0.49%
3.40%
2006
1.59%
0.28%
1.29%
0.45%
-1.39%
2.11%
1.49%
1.93%
2.83%
3.05%
1.61%
1.83%
18.38%
2007
1.37%
0.48%
2.71%
3.78%
-0.91%
-5.10%
2.44%
0.60%
-6.91%
0.27%
-0.73%
2008
-0.26%
0.18%
0.13%
-0.39%
0.16%
-0.35%
-0.43%
0.03%
0.00%
-0.51%
2009
-0.49%
0.02%
2.56%
-4.31%
13.49%
8.39%
7.49%
-3.63%
7.06%
4.88%
39.13%
2010
-3.94%
2.68%
2.03%
-7.14%
-4.00%
6.40%
-2.56%
9.29%
2.70%
-0.87%
6.43%
17.98%
2011
0.91%
4.29%
1.72%
2.79%
-1.86%
-4.23%
-5.84%
0.59%
2.59%
2012
4.86%
0.89%
-1.14%
-5.79%
4.94%
1.31%
1.90%
*See Disclosure
Source Bloomberg, as of 10/31/2012
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12. Risk/Return: PWRDXTR vs. SPX
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Source Bloomberg, as of 10/31/2012 12
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13. For Broker Dealer Use Only
Index Drawdown
Source Bloomberg, as of 11/7/2012
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14. Current Dividend Yield Comparison
Index Name
Dividend Yield
W.E. Donoghue Power Dividend IndexSM (Net 2% Fee)
4.60%
S&P 500 Total Return Index
2.14%
Source Bloomberg, as of 10/31/2012
The Current Dividend Yield of the W.E. Donoghue Power Dividend IndexSM Is 115% Greater Than the Dividend Yield of the S&P 500.*
* When Index Market Capitalization is allocated to T-Bills, Dividend Yield Matches T-Bill Yield.
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15. For Broker Dealer Use Only
Index Allocation
Allocation
Begin Date
End Date
Equities
12/31/1999
11/1/2001
90-Day T-Bills
11/2/2001
11/14/2001
11/15/2001
6/25/2002
6/26/2002
5/12/2003
5/13/2003
11/19/2007
11/20/2007
5/27/2009
5/28/2009
8/16/2011
8/17/2011
11/3/2011
11/4/2011
Current
Source Bloomberg, as of 10/31/2012
Since January 2000, All Allocations to Equities Have Lasted for More Than One Year, Thereby Qualifying for Long-Term Capital Gains.
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16. Year-On-Year Performance
Power Dividend TR Index (Net 2% Fee)
S&P 500 TR Index
+/- vs S&P 500 TR Index
12/29/2000
6.503%
-9.105%
15.607%
12/31/2001
12.098% %
23.983%
12/31/2002
-6.831% %
15.269%
12/31/2003
30.285%
28.684%
1.600%
12/31/2004
15.260%
10.882%
4.378%
12/30/2005
3.397%
4.912%
-1.515%
12/29/2006
18.384%
15.794%
2.589%
12/31/2007
-0.726%
5.494%
-6.220%
12/31/2008
-0.508% %
36.490%
12/31/2009
39.126%
26.464%
12.661%
12/31/2010
17.982%
15.063%
2.919%
12/30/2011
0.789%
2.112%
-1.322%
10/31/2012
9.384%
14.293%
-4.908%
Source Bloomberg, as of 10/31/2012
The W.E. Donoghue Power Dividend IndexSM as Outperformed the S&P 500 in 10 of the Past 12 Years.
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17. Index Fundamentals
Index Fundamentals (since inception)
vs S&P 500 TR Index
Outperformance
243.37%
Correlation
60.74%
Periodic Tracking Error (%)
3.75%
Annual Tracking Error (%)
13.00%
Average % ALPHA
0.67%
Information Ratio
17.81%
Index Volatility
Power Dividend TR Index (Net 2% Fee)
0.1228
S&P 500 TR Index
0.1606
Source Bloomberg, as of 10/31/2012
The W.E. Donoghue Power Dividend IndexSM Has Produced Higher Returns with Lower Volatility Compared to the S&P 500.
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18. Statistical Profile I For Broker Dealer Use Only 18 Price Appreciation
Power Dividend TR Index (Net 2% Fee)
S&P 500 TR Index
Since Inception %
22.069%
10 Year %
94.997%
7 Year %
35.689%
5 Year
68.045%
1.809%
3 Year
46.050%
45.090%
1 Year
12.889%
15.207%
Compound Annual Growth Rate
Power Dividend TR Index (Net 2% Fee)
S&P 500 TR Index
Since Inception
10.626%
1.566%
10 Year
12.655%
6.906%
7 Year
11.681%
4.456%
5 Year
10.939%
0.359%
3 Year
13.458%
13.209%
1 Year
12.889%
15.207%
Standard Deviation (Monthly)
Power Dividend TR Index (Net 2% Fee)
S&P 500 TR Index
Since Inception
0.1228
0.1606
10 Year
0.1139
0.1501
7 Year
0.1205
0.1665
5 Year
0.1376
0.1915
3 Year
0.1364
0.1558
1 Year
0.0978
0.1061
Source Bloomberg, as of 10/31/2012
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19. Statistical Profile II
Sharpe Ratio
Power Dividend TR Index (Net 2% Fee)
S&P 500 TR Index
Since Inception
0.8549
0.0895
10 Year
1.0995
0.4516
7 Year
0.9583
0.2599
5 Year
0.7856
0.0120
3 Year
0.9772
0.8395
1 Year
1.3048
1.4215
Tracking (Monthly)
vs S&P 500 TR Index
Since Inception
0.1300
10 Year
0.1227
7 Year
0.1366
5 Year
0.1598
3 Year
0.0932
1 Year
0.0598
Correlation (Monthly)
vs S&P 500 TR Index
Since Inception
0.6074
10 Year
0.6011
7 Year
0.5924
5 Year
0.5782
3 Year
0.8070
1 Year
0.8192
Source Bloomberg, as of 10/31/2012
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20. Statistical Profile III
Outperformance
vs S&P 500 TR Index
Since Inception %
10 Year %
7 Year
81.011%
5 Year
66.237%
3 Year
0.959%
1 Year
-2.317%
Information Ratio
vs S&P 500 TR Index
Since Inception
0.1781
10 Year
0.1085
7 Year
0.1230
5 Year
0.1606
3 Year
(0.0229)
1 Year
(0.2176)
Source Bloomberg, as of 10/31/2012
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21. Statistical Profile IIII
Beta (Monthly)
vs S&P 500 TR Index
Since Inception
0.4645
10 Year
0.4563
7 Year
0.4290
5 Year
0.4155
3 Year
0.7064
1 Year
0.7554
R-Squared (Monthly)
vs S&P 500 TR Index
Since Inception
0.3690
10 Year
0.3614
7 Year
0.3510
5 Year
0.3343
3 Year
0.6512
1 Year
0.6712
Source Bloomberg, as of 10/31/2012
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22. Index Details & Data Distribution
Index Values are Disseminated in US dollars via the New York Stock Exchange
Price Index: PWRDXPX
Total Return Index: PWRDXTR
Values Distributed Once Daily at approximately 4:30PM
Data Available via All Major Providers of Financial Data (BBG, TR, Google, Yahoo, etc.)
Comprehensive Historic Data (including simulated back-tests from 12/31/1999)
Quarterly Portfolio Snapshots (Historic Constituents and Weights)
Extensive Analytic support
Quarterly Reports (“Index Insights”)
Industry Overviews
Extensive Statistical Data
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23. For Broker Dealer Use Only
Disclaimer
The Power Dividend Total Return Index (Ticker: PWRDXTR) is a Service Mark of W. E. Donoghue & Co., Inc. The Power Dividend Index Portfolio is based on the Power Dividend Total Return Index (PWRDXTR) with an inception date of 12/31/1999; one cannot invest directly in an index. The Index is a rules based index, which the Power Dividend Index Portfolio follows; reflects the theoretical performance an investor would have obtained had it invested in the manner shown and does not represent returns actually obtained and does not represent returns an investor actually attained, as investors cannot invest directly in and index. The Power Dividend Index Portfolio returns represented in this material do not reflect the actual trading of any client account. No representation is being made that any client will or is likely to achieve results similar to those presented herein. The Power Dividend Index Portfolio performance is net of a two percent (2.00%) annual fee deducted from the account balance quarterly. The annual fee is derived from the average daily balance of the previous quarter. The Portfolio performance includes the reinvestments of all dividends and distributions. Additional fees will apply for transactions and trading which will be determined by the Custodian of the account and will decrease the return experienced by a client. Individual client account results will vary from the Power Dividend Index Portfolio and the Power Dividend Index (PWRDXTR) returns. Past performance is no guarantee of future results or returns. Therefore, no current or prospective client should assume that future performance will be profitable. The Power Dividend Index Portfolio inception date is 11/30/2012.
The inclusion of the S&P 500 (S&P) Index results are for comparison purposes only. The S&P 500 Index is a market capitalization weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard and Poor’s chooses the member companies based upon market size, liquidity, and industry group representation. Included are stocks of industrial, financial, utility, and transportation companies. The historical performance results of the S&P 500 Index (and all other indexes) are unmanaged; do not reflect the deduction of transaction and custodial charges, or the deduction of a management fee, the incurrence of which would have the effect of decreasing indicated historical performance results and cannot be invested in directly. Economic factors, market conditions and investment strategies will affect the performance of any portfolio, and therefore are not assurances that it will match or outperform any particular benchmark.
Drawdown calculations are based upon month end values beginning 12/31/1999. Drawdown is the percentage loss from the highest month end value to the lowest month end value in the drawdown period. Recapture is the number of months required to return to, or exceed, the account value at the beginning of the drawdown period, including the months of the decline.
The S-Network Sector Dividend Dogs Index, SDOGX and SDOGXTR ("Index") are service marks of S-Network Global Indexes, LLC ("Licensor") and have been licensed for use by W. E. Donoghue & Co., Inc. Any financial product based on the Index or any index derived there from ("the Product") which is offered by W.E. Donoghue & Co. Inc. is not sponsored, endorsed, sold or promoted by S-Network Global Indexes, LLC and S-Network Global Indexes, LLC makes no representation regarding the advisability of investing in the Product. Licensor makes no representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly. Licensor’s only relationship to the Licensee is the licensing of certain service marks and trade names of Licensor and of the Index that is determined, composed and calculated by Licensor without regard to the Licensee or the Product. Licensor has no obligation to take the needs of the Licensee or the owners of the Product into consideration in determining, composing or calculating the Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Product to be issued or in the determination or calculation of the equation by which the Product is to be converted into cash. Licensor has no obligation or liability in connection with the administration, marketing or trading of the Product.
LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Standard & Poor’s and S&P are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by W.E. Donoghue & Co., Inc. S-Network Global Indexes LLC’s trademarks are trademarks of the S-Network Global Indexes LLC and have been licensed for use by S&P Dow Jones Indices LLC and W.E. Donoghue & Co., Inc. The "W.E. Donoghue Power Dividend Index" is a product of S&P Dow Jones Indices LLC, and has been licensed for use by W.E. Donoghue & Co., Inc. W.E. Donoghue & Co., Inc.'s Power Dividend Index is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates, or S-Network Global Indexes LLC and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, their respective affiliates or S-Network Global Indexes make any representation regarding the advisability of investing in such product(s).
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