Using data from our portfolio dashboard on Manifest Infesting, here are some proposed changes to the portfolio.
First, sort the portfolio by projected average return (PAR) to show which stocks have the highest and lowest PAR. You do this by clicking on the PAR column heading or look at this PDF file. (Place your mouse over the embedded yellow note in the PDF file.)
The six stocks on the bottom (highlighted in yellow in the PDF file) have the lowest projected average return. Looking at these stocks, that is not surprising. Two are bank stocks (WFC and SNV). The current housing market adversely impacts LOW. Similarly, a decrease in consumer spending impacts BBBY and WMT.
We should consider replacing all of these except JNJ. (JNJ is a high quality blue chip stock despite the mediocre PAR. It is a keeper.)
Now we can add to our positions in stocks we already own with stocks that have a higher projected average return than those we are replacing.
Look at again at our portfolio dashboard. Now sort by the value this time, so our largest positions are on top and our smallest positions are on the bottom. Look for stocks for which we don’t yet have a 5% position and which have a projected average return of more than 20%. We can would increase our position in those shares to about 5% or $2,000 total.
This PDF file shows the idea. The candidates for replacement are shown with struck through text. These are the five stocks with the lowest projected average return or PAR. The candidates for additional shares are highlighted in yellow.
There are several additional stocks we may want to consider, including ADBE, AAPL, PCP, and PTR. More to follow on this.
Like the fighter who says “if you think I look bad, you should see the other guy,” a few hard blows have landed on the Moose Pond portfolio but we are still ahead of the broad market indices this year by slightly more than 10%.
Using the performance benchmark report in Bivio, the internal rate of return for the Moose Pond portfolio was a negative 27.6% year-to-date on October 31. In comparison, the Vanguard Total Market Index Fund was down 38.6% and the Vanguard S&P 500 index Fund was down 38.5% for the same 10-month period.
It will take a strong post-election rally to take the edge off the losses for this year. Stock valuations are at a low for several decades. So while there has to be pony in here somewhere, no one can be sure exactly when we’ll find it. In the interim, we should continue to follow out investment objectives and remain fully invested and commit new cash.
We do have an opportunity to replace several of our stocks with ones that have a higher projected average for the next five years. More to follow on that.
Here are performance reports for the one month and 12 month periods ending on October 31, 2008.