We finally saw decent portfolio gains this quarter in the Moose Pond portfolio. Here are the details.
For the quarter justed ended, our net gain is +3.5%. For comparison, the S&P 500 rose +5.2% for the same period. The five stocks advancing the most were: PFE (+21.9%), SYK (+17.8%), UTSI (+13.9%), AMGN (+15.4%), and JKHY (+11.1%). The five stocks declining the most this quater were: MXIM (-6.0%), COF (-7.9%), LOW (-7.3%), OXY (-5.99), and ITW (5.11).
Looking back over the past 12 months, the portfolio gained +6.3%. (compared to 8.7% for the S&P 500). The big gainers were: FDS (+38.6%), IFIN (+31.2%), OXY (+29.4%), BRO (+23.9%), and CBH (+21.3). The decliners were: MXIM (-33.2%), INTC (-11.4%), PDCO (-14.7%), LOW (-14.2%), and COF (-7.9%).
Overall, we have achieved decent performance this quarter. It would be nice to start beating the S&P 500 once again. We need to do a little fine tuning of the portfolio.
Learning about investing is a continuous process. There are several radio programs that are available in digital (MP3) format. These “podcasts” can be downloaded and played at your convenience through a computer or with an MP3 player. Here are several excellent programs.
The Wise Investor Show has been broadcast in the Washington, DC, area for 17 years. The program advocates a conservative, value-oriented approach to investing. The program is always informative and educational. The weekly program can be downloaded from the WMAL.com website. Currently, the program is only archived one week at a time, with the Sunday program becoming available on Monday. The program lasts about 2 hours.
Paul Douglas Boyer, who happens to live near here in Vienna, Virginia, has a blog and a podcast that discusses fun investment topics and reviews the Mad Money recommendations of guru Jim Cramer. His weekly podcast last about 30 minutes and is entertaining and well produced. The program advocates an asset allocation strategy. Both podcasts and model portfolios can be found on the Mad Money Machine.com website.
Jim Cramer is interesting, educational, and, at times, controversial. He has a daily radio program that lasts about 30 minutes. Podcasts for the radio program can be found on the TheStreet.com website. He advocates a trading approach with a small percentage of a portfolio. While his near term trading philosophy differs significantly from an NAIC-approach, he often offers interesting and insightful perspectives. His book Real Money: Sane Investing in an Insane World is well worth reading.
It is easy to become a fan of podcasts. You can find podcasts on many different subjects, not just investing. They allow time shifting. With an inexpensive MP3 player, you can listen to a podcast in the car, while walking, or while exercising. Apple offers a free program called iTunes. It includes a link to a podcast directory maintained by Apple. It can be configured to manage your podcasts by automatically downloading new programs and deleting old ones.
Following up on the earlier posting, this performance report shows year-to-date return for each stock in the portfolio. Stocks with more than 10% return (up or down) are highlighted in yellow. A number of our high quality stocks, have not done well this year.
Stocks down more than 10% year-to-date: COF (-22.9%), LOW (-20.5%), INTC (-16.7%), MMC (-16.1%), AMGN (-13.7%), ACS (-13.2%), and PDCO (-13.0%), Stocks up more than 10% year-to-date: OXY (29.1%), IFIN (+26.0%), PFE (+20.5%), CVX (+15.4%), and SNV (+12.8%). Note that the YTD return is simply a snapshot in time. It does not reflect the overall, long term return we have achieved for these stocks.
We need to to be patient. The business models seem intact for each of the stocks that have declined. (Although we do need to take a hard look at MMC.)
In terms of investment return, we been treading water for most of 2006. The value of a unit in the funds is almost where it was when we started the year. We have an excellent portfolio. Although it is weight more heavily with larger growth stocks.
In general terms, stocks that have consistent increases in earnings and revenue, at a rate faster than the growth of the economy, are characterized as growth stocks. In contrast, stocks with a low price-to-book (P/B) ratio and low price-to earings (P/E) ratio are characterized as value stocks. Mutual funds are frequently characterized as either growth, value, or blend (a combination of growth and value). Mutual funds are further characterized as large, medium, or small capitalization. Market capitalization is simply the number of shares issues time the market price of share of stock.
All of this is a leading up to the observation that large capitalization stocks have not done as well as value stocks. Similarly, growth stocks have not done as well as value stocks, in the last 12 months or so. The Callen Periodic Table of Investing Returns shows how different sectors (large, medium, and small capitalization, and growth, value, and blend) have different returns from year to year.
So what do we do at this point? Stay the course. We have an excellent portfolio, even though it is weighted more heavily in larger growth stocks. As we buy more stocks, we should look for opportunities in smaller stocks, especially smaller growth stocks that are cheaply priced.
You can see how growth, value, and market capitalization interact, using this spreadsheet. The spreadsheet calculates return for a portfolio over the last 15 years based on the asset classes in the portfolio. The S&P 500 is a good surrogate for large capitalization stocks. Similarly, the Russell 2000 is a good proxy for small capitalization stocks.
To compare investment returns, enter a number, e.g., “100” in the blue column for the asset class you want to examine and “0” for all others. You can also look at the return of various combination of asset classes. You might find this spreadsheet helpful if you are trying to decide how to allocate long term savings.
After a great deal of research, I see considerable merit in having a substantial amount of core savings allocated among index funds that represent these asset classes. I am paying much closer attention to asset classes. (Moose pond Investors is really a large/medium cap, growth asset class.) Asset allocation might be the subject of a future posting if there is any interest. But for now, the returns of the various asset classes will help explain why the Moose Pond returns have not been stellar this year.