Transcript W.E. Donoghue Power Dividend IndexSM (PWRDX) A Tactical Dividend Strategy for Today’s Volatile Market For more information call: 800 642-4276

W.E. Donoghue Power Dividend IndexSM
(PWRDX)
A Tactical Dividend Strategy for Today’s Volatile Market
For more information call:
800 642-4276
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
For Broker Dealer Use Only
3
For Broker Dealer use only
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
For Broker Dealer Use Only
4
For Broker Dealer use only
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
For Broker Dealer Use Only
5
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
For Broker Dealer Use Only
6
For Broker Dealer use only
W.E. Donoghue Power Dividend Index Description
SM
 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
For Broker Dealer Use Only
7
For Broker Dealer use only
W.E. Donoghue Power Dividend Index Description
SM
 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
For Broker Dealer Use Only
8
For Broker Dealer use only
Power Dividend Index Selection Process
S&P 500
Top 5 Dividend Paying Stocks in 10 GIC Sectors
50 Stocks Equal Weighted
Exponential Moving
Average Crossovers
Stocks or
T-Bills
For Broker Dealer Use Only
9
For Broker Dealer use only
Historical Performance
W.E. Donoghue Power Dividend Total Return IndexSM (Net 2% Fee) vs. S&P 500 Total Return Index
(12/31/1999 - 11/7/2012)
4,000
: Equities
3,500
: 90-Day T-Bills
3,000
2,500
2,000
1,500
1,000
500
Dec-99
Mar-00
Jun-00
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
0
S&P 500 Total Return Index
W.E. Donoghue Power Dividend Total Return Index Net 2% Fee
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.
For Broker Dealer Use Only
10
For Broker Dealer use only
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%
-1.56%
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%
0.14%
-0.36%
0.10%
0.11%
-6.83%
2003
-0.40%
0.09%
0.10%
-0.40%
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%
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%
0.14%
0.48%
2.71%
3.78%
-0.91%
-5.10%
0.95%
2.44%
0.60%
-6.91%
0.27%
-0.73%
2008
-0.26%
0.18%
0.13%
-0.39%
0.14%
0.16%
-0.35%
0.14%
0.13%
-0.43%
0.03%
0.00%
-0.51%
2009
-0.49%
0.02%
0.02%
-0.49%
2.56%
-4.31%
13.49%
8.39%
7.49%
-3.63%
7.06%
4.88%
39.13%
2010
-3.94%
2.68%
7.12%
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%
0.79%
-1.86%
-4.23%
-5.84%
0.00%
-0.51%
0.59%
2.59%
0.79%
2012
0.11%
4.86%
0.89%
-1.14%
-5.79%
4.94%
2.23%
1.31%
1.90%
0.15%
*See Disclosure
11
For Broker Dealer Use Only
Source Bloomberg, as of 10/31/2012
For Broker Dealer use only
Risk/Return: PWRDXTR vs. SPX
W.E. Donoghue Power Dividend Total Return IndexSM Risk/Return Profile
16.00%
Compound Annual Growth Rate Since Inception
Less Risk More Return
More Risk More Return
14.00%
12.00%
10.00%
W.E. Donoghue Power Dividend TR Index Net 2% Fee
8.00%
6.00%
4.00%
S&P 500 TR Index
2.00%
Less Risk Less Return
0.00%
0.120
0.125
0.130
More Risk Less Return
0.135
0.140
0.145
0.150
0.155
0.160
0.165
Risk
Annualized Standard Deviation Since Inception
For Broker Dealer Use Only
12
Source Bloomberg, as of 10/31/2012
For Broker Dealer use only
Index Drawdown
W.E. Donoghue Power Dividend Total Return IndexSM (Net 2% Fee) Drawdown
(12/31/1999 - 11/7/2012)
+21.56%
4,000
3,500
July 7, 2011: 4601.19
August 8, 2011: 3798.41
August 10, 2012: 4617.22
Drawdown Period: 22 Days
Recapture Period: 256 Days
278 Days
3,000
2,500
-17.45%
2,000
1,500
1,000
Dec-99
Mar-00
Jun-00
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
500
For Broker Dealer Use Only
13
Source Bloomberg, as of 11/7/2012
For Broker Dealer use only
Current Dividend Yield Comparison
Index Name
Dividend Yield
W.E. Donoghue Power Dividend IndexSM
(Net 2% Fee)
S&P 500 Total Return Index
4.60%
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.
For Broker Dealer Use Only
14
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
Equities
11/15/2001
6/25/2002
90-Day T-Bills
6/26/2002
5/12/2003
Equities
5/13/2003
11/19/2007
90-Day T-Bills
11/20/2007
5/27/2009
Equities
5/28/2009
8/16/2011
90-Day T-Bills
8/17/2011
11/3/2011
Equities
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.
For Broker Dealer Use Only
15
For Broker Dealer use only
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%
-11.886%
23.983%
12/31/2002
-6.831%
-22.100%
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%
-36.998%
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.
For Broker Dealer Use Only
16
For Broker Dealer use only
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.
For Broker Dealer Use Only
17
For Broker Dealer use only
Statistical Profile I
Price Appreciation
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
Power Dividend TR Index (Net 2% Fee)
265.440%
229.235%
116.701%
68.045%
46.050%
12.889%
S&P 500 TR Index
22.069%
94.997%
35.689%
1.809%
45.090%
15.207%
Power Dividend TR Index (Net 2% Fee)
10.626%
12.655%
11.681%
10.939%
13.458%
12.889%
S&P 500 TR Index
1.566%
6.906%
4.456%
0.359%
13.209%
15.207%
Power Dividend TR Index (Net 2% Fee)
0.1228
0.1139
0.1205
0.1376
0.1364
0.0978
S&P 500 TR Index
0.1606
0.1501
0.1665
0.1915
0.1558
0.1061
Compound Annual Growth Rate
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
Standard Deviation (Monthly)
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
For Broker Dealer Use Only
18
Source Bloomberg, as of 10/31/2012
For Broker Dealer use only
Statistical Profile II
Sharpe Ratio
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
Power Dividend TR Index (Net 2% Fee)
0.8549
1.0995
0.9583
0.7856
0.9772
1.3048
S&P 500 TR Index
0.0895
0.4516
0.2599
0.0120
0.8395
1.4215
Tracking (Monthly)
vs S&P 500 TR Index
0.1300
0.1227
0.1366
0.1598
0.0932
0.0598
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
Correlation (Monthly)
vs S&P 500 TR Index
0.6074
0.6011
0.5924
0.5782
0.8070
0.8192
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
For Broker Dealer Use Only
19
Source Bloomberg, as of 10/31/2012
For Broker Dealer use only
Statistical Profile III
Outperformance
vs S&P 500 TR Index
Since Inception
243.370%
10 Year
134.238%
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
For Broker Dealer Use Only
20
For Broker Dealer use only
Statistical Profile IIII
Beta (Monthly)
vs S&P 500 TR Index
0.4645
0.4563
0.4290
0.4155
0.7064
0.7554
Since Inception
10 Year
7 Year
5 Year
3 Year
1 Year
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
For Broker Dealer Use Only
21
For Broker Dealer use only
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
For Broker Dealer Use Only
22
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).
For Broker Dealer Use Only
For additional information please call 800-642-4276 or email [email protected].
23
For Broker Dealer use only