The AOG Investment Committee recently approved an investment for all Conservative, Moderate and Aggressive portfolios managed by our firm. Constructed by First Trust Portfolios, the investment company is known as Sabrient Systems and they produce an investment portfolio called The Baker’s Dozen.
Sabrient Systems was founded in 2000 by retired NASA scientist David Brown and four associates. Together they developed algorithms to rank a universe of approximately 5,000 stocks. They then narrowed the list to 50 stocks that outperformed the relative indices when back tested and forward tested when utilizing the Sabrient model.
In 2004 Sabrient began providing their research to major brokerage firms (at that time) such as Merrill Lynch, Lehman Brothers, and Deutsche Bank. In 2006, they began developing portfolios for Guggenheim, BlackRock’s iShares, and Direxion funds, among others.
Up until 2009, Sabrient’s portfolios were performing well above related indexes, but there were consistently one or two stocks negatively affecting their exceptional performance each year. As a result, they began doing a deeper analysis of the individual stocks by reviewing the public filings and analyst reports. They used this information to rank the fifty stocks from highest to lowest according to the quality of the company earnings. From the earnings ranking system, they chose the top 13 stocks to represent the “Baker’s Dozen” which officially launched in 2009.
Since its inception, the Sabrient Baker’s Dozen has outperformed the S&P 500. However, even with that success, Sabrient decided to further refine the process by purchasing a company called Gradient Analytics in 2011. Gradient Analytics takes the top fifty stocks, applies the earnings rank, then conducts additional forensic analysis in order to weed out the stocks which may have had some accounting irregularities. This method has been used to construct the Sabrient “Baker’s Dozen” since 2012.
Sabrient first offered the Baker’s Dozen through First Trust in 2013. AOG then waited one year to chart the actual (not back-tested) performance with First Trust before deciding to place it in some portfolios in 2014, a part of AOG’s rigorous due diligence process. The Baker’s Dozen will be a position in all AOG portfolios for 2015, and is an excellent example of an investment that falls in line with our Endowment Model. AOG goes beyond the traditional asset classes of stocks, bonds and cash, employing an endowment-style model.