W.E. Donoghue Power Dividend Index SM (PWRDX) A Tactical Dividend Strategy for Today’s Volatile...

W.E. Donoghue Power Dividend IndexSM

(PWRDX)

A Tactical Dividend Strategy for Today’s Volatile Market

For more information call:

800 642-4276

For Broker Dealer Use Only

Challenges Facing Investors Today

3 For Broker Dealer use only

Secular Bear Market with Volatile Swings

Global De-Leveraging Process

Sluggish Economic Growth Prospects

Historically Low Interest Rate Environment

U.S. Aging Boomer Demographic


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


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


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


W.E. Donoghue Power Dividend Index DescriptionSM

For Broker Dealer use only7

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


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


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


Historical Performance


The W.E. Donoghue Power Dividend Index’s TAA Overlay Has Substantially Diminished the Impact of Market Downturns, Improving Performance Significantly Over Time.

Source: Standard & Poor’s, as of 11/7/2012

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

W.E. Donoghue Power Dividend Total Return IndexSM (Net 2% Fee) vs. S&P 500 Total Return Index(12/31/1999 - 11/7/2012)

S&P 500 Total Return Index W.E. Donoghue Power Dividend Total Return Index Net 2% Fee

: Equities : 90-Day T-Bills

For Broker Dealer Use Only11 For Broker Dealer use only

What is Buried in the Power Dividend Numbers?*

Source Bloomberg, as of 10/31/2012

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


Risk/Return: PWRDXTR vs. SPX


0.120 0.125 0.130 0.135 0.140 0.145 0.150 0.155 0.160 0.1650.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%W.E. Donoghue Power Dividend Total Return IndexSM Risk/Return Profile

Annualized Standard Deviation Since Inception

Co

mp

ou

nd

An

nu

al G

row

th R

ate

Sin

ce

Inc

ep

tio

n

Risk

Less Risk More Return More Risk More Return

More Risk Less ReturnLess Risk Less Return

W.E. Donoghue Power Dividend TR Index Net 2% Fee

S&P 500 TR Index


Index Drawdown


Dec-9

9

Jul-0

0

Jan-0

1

Jul-0

1

Jan-0

2

Jul-0

2

Jan-0

3

Jul-0

3

Jan-0

4

Jul-0

4

Jan-0

5

Jul-0

5

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Jan-0

8

Jul-0

8

Jan-0

9

Jul-0

9

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

W.E. Donoghue Power Dividend Total Return IndexSM (Net 2% Fee) Drawdown(12/31/1999 - 11/7/2012)

July 7, 2011: 4601.19August 8, 2011: 3798.41August 10, 2012: 4617.22

Drawdown Period: 22 DaysRecapture Period: 256 Days 278 Days

+21.56%

-17.45%


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%

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.



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

Since January 2000, All Allocations to Equities Have Lasted for More Than One Year, Thereby Qualifying for Long-Term Capital Gains.



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%


The W.E. Donoghue Power Dividend IndexSM as Outperformed the S&P 500 in 10 of the Past 12 Years.


Index Fundamentals


The W.E. Donoghue Power Dividend IndexSM Has Produced Higher Returns with Lower Volatility Compared to the S&P 500.

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



Statistical Profile I


Price Appreciation Power Dividend TR Index (Net 2% Fee) S&P 500 TR Index

Since Inception 265.440% 22.069%10 Year 229.235% 94.997%7 Year 116.701% 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 IndexSince 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 IndexSince 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



Statistical Profile II


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

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

Sharpe Ratio

Power Dividend TR Index (Net 2% Fee) S&P 500 TR IndexSince 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



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)



Statistical Profile IIII


Beta (Monthly)

vs S&P 500 TR Index


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


10 Year 0.3614

7 Year 0.3510

5 Year 0.3343

3 Year 0.6512

1 Year 0.6712



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


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 additional information please call 800-642-4276 or email [email protected].

mailto:[email protected]

W.E. Donoghue Power Dividend Index SM (PWRDX) A Tactical Dividend Strategy for Today’s Volatile...

Documents

Transcript of W.E. Donoghue Power Dividend Index SM (PWRDX) A Tactical Dividend Strategy for Today’s Volatile...