Portfolio two is my second longest running portfolio. It has been in existence for 6 years. The portfolio lost 12% during the quarter, with the indexes dropping about 10% and then the ADR’s in foreign currency generally falling a bit further because of the appreciation of the dollar during this time frame (for the Euro denominated ones).
Over the long haul (6 years) this portfolio has an annual return of -2% and we have put $9000 into the portfolio ($6000 by me, $3000 by the beneficiary) and it is worth $8387, which is down about 7%. These numbers are good as far as “relative” performance over the 6 year time frame, but as they say, “You can’t live on relative performance”. The portfolio has been above cost and below cost for the last few years during the market tumult. The sales that we did generally turned out OK; in particular we sold China Mobile (CHL) for a big gain and BHP the Australian mining giant for another big gain and their stocks today are far below the price we sold them at. I track subsequent performance of all sales in the cover sheet for each portfolio (I must be a masochist to do this, but the kids ask).
The portfolio has 10 stock holdings, with an average balance of a bit more than $800. This makes it a reasonably well diversified portfolio, all else being equal (at about 10 stocks you achieve most of the benefits of diversification, assuming that the stocks aren’t mostly from industries with the same characteristics). One stock that looks like it is on the block is Nokia (NOK), which has failed to restructure and although it has a large percentage of the worlds’ cell phone market, it is a laggard in smart phones. Toyota (TM) is another holding, and I was very worried about it with the brake issue in the US but since then BP showed us all how to really decimate market value so paradoxically I feel a bit better about this. In the past Toyota has always proved resilient so I am inclined to give them the benefit of the doubt.
Diageo (DEO) has lost about 23% of its value but pays a decent dividend and per my recent analysis on currency moves and an ADR the bad performance as of late has mainly been due to the decline of the UK pound against the US dollar and not an absolute decline in the company’s performance.