Quarterly Report

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.

YTD Returns

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.)

Report for July 2006

In July, the Moose Pond Investors portfolio declined 0.13% while the S&P 500 increased 0.52%. Year to date, the portfolio declined 0.12% while the S&P increased 2.28%. The unit value of a share was $13.12 on July 31.

The biggest gainers in July were Pfizer (PFE) +10.8%, Stryker Corp. (SYK) +8.1%, and Brown & Co. (BRO) +7.4%. The biggest losers were Capital One Financial (COF) -9.5%, Maxim Integrated products (MXIM) -8.5%, and Factset Research (FDS) -7.2%.

The portfolio remains diversified with 25 holdings. The following chart from Morningstar compares the sector diversification of the portfolio with the S&P 500.  In adding to the portfolio, we should probably avoid further overweighting of the services sector. 

As the chart on the rights shows, the portfolio consists of large cap (57%), medium cap (38%), and  small cap (65%) stocks.  We should focus on finding more medium and small cap stocks.

Looking at style, the portfolio consist of value (18%), blend (35%), and growth (48%).  This mix is probably OK but growth stocks have taking quite a drubbing over the past 12 months.  (For a comparison of growth and value stock returns by year see the Callan Periodic Table.)

SSGs Updated

The stock selection guides (SSGs) for each of the stocks in the portfolio have been updated as of June 30. Follow the links in the portfolio summary for the current SSGs.

The PERT Chart and Trend Report also have been updated. The PERT chart is sorted by total return while the trend report is sorted by projected average return.

Mid-Year Report

Unit share price on June 30 was $13.14 up only slightly from the $13.09 at the beginning of the year. The IRR was 0.7%.  In comparison, the S&P 500 was up 1.76% for the same six month period.  (Actual gain for the S&P will be slightly higher with dividends.)

Top five advancers for the first half of 2006 were:  Occidental Petroleum, OXY (+29.4%), Investors Financial, IFIN (+20.2%), FactSet Research Systems, FDS (+15.2%), Chevron, CVX (11.1%), and Maxim Integrated products, MXIM (+5.0%).  The five biggest decliners for the same period were:  INTC (-20.2%), Amgen, AMGN (-17.6), Affiliated Computer Systems, ACS (-13.8), Marsh & McLennan Companies, MMC (-14.4), and Stryker, SYK (-8.0%).

With the possible exception of MMC, the fundamentals of the decliners remain intact and don’t warrant sale of these stocks.  The wide range reflected by the return of the top and bottom stocks for 2006 underscores the importance of diversification and adding regularly to the portfolio. 

Quarterly Report

The net asset value for Moose Pond Investors increased +4.1% in the first quarter of 2006.  Unit price is up from $13.10 to $13.65.  All of the major indices are up as well:  the Dow +3.7%, the Nasdaq +6.1%, the S&P 500 +3.7%, and the Russell 2000 +13.7%.  See quarterly performance report.

The portfolio summary on this web site has been updated through March 31.  (You can find the portfolio snapshot the “Portfolio Summary” section in left side column.)  Also, the stock selection guides linked to the portfolio summary has been updated so you can see how we computed projected average return. 

Winner and Losers.  Winners for the quarter were:  Jack Henry & Associates (JKHY) +27.2%, Johnson & Johnson (JNJ) +20.1%, and Occidental Petroleum (OXY) +16.5%.  Losers were:  UTStarcom (UTSI) -22.0%, Intel (INTC) -21.7, and Amgen (AMGN) -7.8%. Fortunately the winners outflanked the losers and the net gain for the quarter was $1,260.

Transactions.  During the quarter, we purchased new positions in Illinois Tool Works (ITW) and Stryker (SYK).  We also added to our position on Intel (INTC).  We have continued to reinvest dividends as we receive them.

Diversification.  Our holdings are spread across six sectors.  The financial services sector (27%) remains our largest sector holding, with technology (21.9%) and healthcare (20.9%) the next largest.  See diversification report.

The Way Ahead.  We currently have 26 companies in our portfolio.  We only need 17 or so to achieve diversification of nonsystematic risk.  Nonsystematic risk results from the volatility of the prices of individual companies.  Systematic risk comes from volatility of the overall market (e.g., movement of the market — all or most stocks — as a whole).  We can’t diversify for that risk within the portfolio.  Some people address systemic risk through asset allocation, i.e., investing in various asset classes.  Quality growth stocks might be one such class.  This gives us the flexibility to reduce the number of companies, without harming our overall diversification.

Looking at the projected average return (PAR) and the current P/E ratios for the companies listed in the portfolio summary, Brown & Brown (BRO) and Cardinal Health (CAH) appear to be candidates for replacement.  Patterson Companies (PDCO) also is a possible candidate for replacement. 

Report for February 2006

For the first two months of 2006, the Moose Pond Investors portfolio increased in value by 3.1%.  In comparison, the S&P 500 index increased 2.6% for the same period. 

The best performing stocks were Investors Financial, IFIN (+22.5%), Jack Henry & Associates, JKHY (+15.3%), and Occidental Petroleum, OXY (+15.1%).  The worst performing stock was Intel, INTC (-17.5%).

A performance report for 2006 can be downloaded here.

Annual Report for 2005

Happy New Year to all! We started Moose Pond Investors a little over five years ago. It is hard to believe that five years have gone by. We now have 18 partners made up of family and friends.

Given the amount of effort that went into research and analysis this year, the results for 2005 were a little disappointing. However our 5-year total return is well ahead the S&P 500 (large stock index) and almost even with the Russell 2000 (small stock index).

Here is our Annual Report for 2005.

Performance for 2005

Given the amount of effort that went into research and analysis this
year, the results for 2005 were a little disappointing.  On a
cash flow basis, we finished with a very small gain.  While
that is better than losing money, we did not beat either the
S&P 500 or the Russell 2000.  They were up 4.9% and
4.6% respectively.  On a positive note, we have soundly beaten
the S&P 500 over the past five years and we are almost even
with the Russell 2000.

The table and chart below show the annual return for Moose Pond
Investors over the past five years.  The “Stocks
Only” column only shows the return of the stocks we
held.  The next column, “Stocks &
Cash,” includes cash awaiting investment and monthly
brokerage fees.  As a result, the return is slightly
lower.  As our portfolio holdings grow larger, cash on the
sidelines and fees will have less of an impact on overall portfolio
return. 

 

The annual returns for Moose Pond Investors are calculated using
internal rate of return (IRR).  This method is more precise
because it
looks at actual cash flows.  It better accounts for partner
investments
and market fluctuations throughout the year.  We could have
calculated
annual return using the change in unit value from year to
year. 
However, we opted for the more accurate IRR method. 

The two
indices that we have been using for comparison, the S&P 500 and
Russell 2000, show the total return for each year including
dividends. 
These return calculations do not take into account the actual cash
flows for Moose Pond Investors. 

Portfolio Summary Updated

The Moose Pond Investors portfolio has an average projected average return (PAR) of 14.2% and an average quality rating of 72.6 (out of 100). Both the portfolio summary and the related stock selection guides have been revised. Follow the links in the portfolio summary to open the SSGs.

You can cross check our calculations for PAR with the club dashboard from Manifest Investing.