I recently received the following article from an investment advisor in western Canada. It contains a proven strategy for achieving outstanding returns, and the advisor has agreed to share it with readers of Canadian Couch Potato:

Recently, a small group of investors has unlocked the secret to investing success. It is called the U Portfolio. People who use this strategy invest only in stocks that start with the letter U.

Although stocks that start with the letter U comprise only a tiny fraction of the world’s equity markets, by a strange twist of fate they primarily include energy, materials (gold, copper, zinc, etc.) and financials.

Because of these fascinating qualities, investors in stocks that start with the letter U have enjoyed some of the best equity returns over the last eight years. It is true that in January 2000 gold was hovering around $280 an ounce and oil was averaging $11 dollars a barrel, and since then the price of gold has increased by five times, and oil by eight times. In addition, the banks in the U Portfolio did not to have exposure to the US housing market, though we cannot determine if this was mere luck or a function of their relatively small size. Either way, it is clear that investors who were fortunate enough to have a portfolio skewed to the letter U are now enjoying the fruits of their intelligence.

Although U stocks did not fare as well in previous periods — the J Portfolio dominated the 1980s, while the E Portfolio was the clear winner during the 1990s — there seems little doubt that the next decade will also be brought to you by the letter U.

Any investor can now buy the entire U Portfolio through an ETF that allocates 26% to energy, 23% to materials and 28% to high-dividend financials. However, the most popular strategy is to limit the number of stocks that start with the letter U to just 20 or 30, preferably ones that pay a high dividend.

Some academics warn about the risk of such a portfolio: their data show that it is unwise to restrict your investments to a small number of stocks that start with only one letter, while ignoring the other 96% of the alphabet. But many investors are comfortable with their U-focused holdings, and they feel their strategy is the safest way to go, with the alphabet being such a dangerous place right now. Others are simply loyal to the letter U and feel that investing in other letters of the alphabet would be unpatriotic.

U investors will hear nothing of the academic gobbledygook: they have done well in U, and investments outside U did not do well for a couple of years, and that’s all the evidence they need.

Recently there have been many debates on blogs and television about the best way to capture the fantastic returns of U, but all agree that U is the only way to go.

P.S. Replace “U” with “Canada,” and then read Meir Statman’s book.