Archive | April 2013
April 3, 2013  

Portfolio, April 3, 2013

S&P 500:         1557 (110.8%)

Portfolio: $576,323 (115.3%)

IBB      1253 shares    $200,166

ITB      8160 shares    $183,110

IYT     1785 shares    $190,959

Cash                            $582

Notes: The portfolio sold XLP, the consumer staples ETF that was bought last month as a defensive position, and bought IBB, a biotech ETF that has been performing well.  XLP’s modest gains helped mitigate some losses incurred, as housing (ITB) is down slightly on the month.

Our portfolio is up 15.3 percent since May 1, 2012 compared with 10.8% for the S&P500.  The portfolio briefly reached gains of 20% mid-month, while the S&P 500 reached a mid-month high of 1570, for a 11.7% gain since May 1, 2012.

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April 3, 2013  

Stocks? Pt. 2

As it turns out, buying the “unloved” stock examples Blackberry and Netflix would have dramatically outperformed the Morningstar stock portfolio of 20 undervalued stocks through the first quarter, as the portfolio returned only 1.4%.  Note the S&P 500 was up 7.4%, and our unloved examples of BBRY and NFLX (very risky/volatile) would have been up 60%.

Although the Morningstar value portfolio did well with a few picks such as Berkshire Hathaway and Excelon (+15%), it also had poor picks like Weight Watchers (-23%) that weighed down the portfolio.  The performance difference between the hand-picked stock examples and Morningstar’s portfolio of undervalued wide-moat stocks is largely due to earnings and product announcements from BBRY and NFLX, as well as somewhat broader interest in these names than in most companies in the Morningstar portfolio.

Many of the Morningstar portfolio stocks remind me of another holding I have – China Gueri (CHOP), a Chinese specialty metal producer that is tremendously overvalued but isn’t on many people’s radar.  The price of a stock is based both on the free cash flow of the underlying company and on market sentiment, and it seems market sentiment may change with less-known stocks relatively slowly.

I’m not inclined to rebalance the Morningstar portfolio given the few changes and poor performance through the first quarter, but will revisit its performance in coming quarters.