The Current BSP 30
as of March 1999

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What is Beating the S&P?

Beating the S&P (BSP) is a simple stock selection strategy devised to be analogous to Beating the Dow (BTD), using a different universe of stocks than that of BTD, which uses the Dow 30 stocks as a basis for stock selection. BSP uses a different group of highly-capitalized stocks, intended to have similar characteristics to that of the 30 Dow stocks.

Why develop BSP?

There are a number of reasons why the system was created. The best returns from BTD utilize 4 or 5 stocks; many investors (especially those with larger portfolios) desire to have more than 4 or 5 stocks in their high-dividend portfolios, in order to achieve better diversification. Some investors might be concerned that, given BTD is fundamentally a contrarian strategy, the increasing popularity of BTD and its variations might limit future results of this strategy. Also, BSP (and its backtesting results) might shed light on BTD and the theory of high-yield investing.

How are BSP stocks chosen?

The system was devised to be as simple as possible and very analogous to BTD. Instead of using the Dow 30 as the basis for choosing a smaller group of high-yielding stocks, an entirely different group of 30 stocks is chosen, from which a smaller group of high-yielders is culled. Unlike the Dow 30, the "BSP 30" changes once a year. The BSP stocks are chosen in the following manner:

1. Business Week annually publishes a list of the largest 1000 U.S. companies. This list usually appears in March each year, and has a number of very useful data points from which a list of 30 stocks is chosen. Starting with the highest capitalized stocks and working downward, a stock is included if:
   
   

   
   

   
   

   1. it is not in the Dow 30 group,
   
   
   2. it is listed as paying a yield, and
   
   
   3. it is not a utility.
   
   
   
   

To achieve diversity, only the first three stocks from any one sector (defined right there in the list) are chosen; after three stocks from any one sector are included on the "master list," the fourth highest-capitalized stock in the same sector is excluded. Stocks are added to the list until a group of 30 stocks are chosen--The BSP 30. These 30 stocks thus represent highly-capitalized, non-Dow, non-utility stocks which have paid a recent dividend and are diversified.