Through monthly letters and notifications of any trade activity, the Day Hagan Logix Tactical Dividend portfolio management team offers frequent and substantive updates on our portfolio holdings. Looking closely at the rationale behind current portfolio construction as well as recent performance is intended to provide a deeper level of understanding of the strategy.

In this piece, we will take a big-picture look back at historical performance and associated risk. Our outperformance over the last 16+ years, since April 2002 inception, is significant but only tells part of the story. We will also look at the more recent past to evaluate how we’ve performed in a bull market environment that has lasted several years. Remember that our strategy is formulated to have significant upside market capture versus its Russell 1000 Value benchmark but less than 100 percent to have more modest downside market capture, in turn optimizing the strategy’s risk-return trade-off.

Since 2002, the Day Hagan Logix Tactical Dividend strategy has returned +9.63* percent annualized. This compares to the Russell 1000 Value Index benchmark at +7.31 percent (for comparison purposes, the broad-based S&P 500 Index has returned +7.50 percent annualized for the same period); all numbers are total return, gross of fees. While over 200 basis points of annualized outperformance is attractive, what is more important is how we got there. Our up capture ratio is 76.1 and down capture ratio is 52.7. In other words, in periods of market weakness, Day Hagan Logix goes down by about half as much as the Russell 1000 Value. Another risk measure, beta, measures the level of volatility versus a benchmark. A beta of 1 indicates a strategy has volatility equivalent to the benchmark. Our beta since inception is 0.61, indicating drastically lower volatility than the Russell 1000 Value (in fact, our beta vs. the S&P 500 is relatively similar, at 0.63).

Day Hagan Logix takes a deep value approach to finding attractively valued industry groupings and underlying equities. While it is value investing, it is somewhat differentiated in its methodology than other, more traditional value strategies. Day Hagan Logix uses historical dividend yield data to objectively model buy/sell/hold decision points. This complex modeling is done in conjunction with a comprehensive, fundamental overlay that starts with balance sheet and cash flow characteristics. The result is a highly screened universe of eligible names that are further evaluated for inclusion in our invested portfolio. While we consider ourselves deep value investors, we see it as an advantage that we do not correlate particularly highly to the Russell 1000 Value benchmark (although it remains our best fit) or really any one index. R-squared, a percentage between 0 and 100, is meant to statistically measure the relationship between a given portfolio and its benchmark. Our R-squared since strategy inception is 71.9 to our benchmark (69.0 to the S&P 500). Our approach to measuring value is highly focused on capital preservation as a means of generating long-term outperformance.

More recently, Day Hagan Logix has realized upside capture vs. its benchmark that exceeds its historical average, leading to outperformance. In fact, over the last 12 months, the strategy has outperformed the Russell by nearly 300 basis points (+10.46 percent* vs. +7.50 percent), with an upside capture ratio of over 131. The strategy has been roughly in-line with the benchmark over the last three and five years (three years lagging by 39 basis points, 5 years ahead by 30 basis points). However, over the last decade, Day Hagan Logix is meaningfully ahead of the Russell by 379 basis points annually (+11.09 percent* vs. +7.3 percent), which is also ahead of the S&P 500 at +9.02 percent.

While we have never wavered from the foundation of our process and its strict discipline, we do not operate in a “black box” mentality. The ability to leverage our technology, to generate clean, real-time yield data and generally go deeper with our modeling has improved drastically since 2002. We are continuously thinking about risk management that is consistent with our strategy’s two primary goals: downside protection and capital appreciation. Dividend income is certainly an attractive byproduct of what we do, but is more a means to an end than an end unto itself.

The Day Hagan Logix strategy has delivered attractive absolute and relative returns even with a recent market environment that does not play to its most significant strengths. More specifically, growth has been outperforming value over the last several years, and there has been no extended test on the downside. Our current portfolio is among the most meaningfully undervalued, versus our measure of fair market value, that we have experienced since our inception in 2002. Regardless of what comes next for the broader macroeconomic environment and the capital markets, we are positioned to deliver for clients of the Day Hagan Logix Tactical Dividend strategy.


  • Robert Herman
  • Donald L. Hagan, CFA
  • Jeffrey Palmer
  • Arthur S. Day

Day Hagan Logix Tactical Dividend Net Returns (through 4-30-2018): Annualized net return since 2002 = 8.54%. 12-month net return through April 30, 2018 = 9.92%. 10-year annualized average net return through 4-30-2018 = 10.19%.

The S&P 500 Index is based on the market capitalizations of 500 large U.S. companies having common stock listed on the NYSE or NASDAQ. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. Indexes are unmanaged, fully invested, and cannot be invested in directly.

PDF copy of the article: Day Hagan Logix Tactical Dividend Strategy Mid May 2018 (PDF)

Disclosure: *Note that individuals’ percentage gains relative to those mentioned in this report may differ slightly due to portfolio size and other factors. The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Day Hagan Logix (DH Logix), any of its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any DH Logix literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DH Logix, accounts that DH Logix or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. DH Logix uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior DH Logix recommendations or DH Logix performance rankings, one should also consider that DH Logix may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse effect of transactions costs or management fees or reflect actual investment results, that some model results do not reflect actual historical recommendations, and that investment models are necessarily constructed with the benefit of hindsight. For this and for many other reasons, the performance of DH Logix’s past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.


Day Hagan Logix is registered as an investment adviser with the United States Securities and Exchange Commission. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability. Day Hagan Logix claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Day Hagan Logix has been independently verified for the periods April 30, 002 through December 31, 2016. A copy of the verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. 2 Calculation Methodology: Pure gross of fees returns are calculated gross of management, custodial fees and transaction costs and are shown as supplemental information. Net of fees returns are calculated net of actual management fees, transaction costs and gross of custodian (trust) fees. Net of fees returns for wrap accounts are calculated net of management fees, transaction costs and all administrative fees charged directly to the client by the broker-dealer.