Portfolio One is our longest portfolio, going on 11 years soon. Here is the latest update or it is on the links on the right side of the dashboard.
Portfolio one is worth $24,609 on a beneficiary investment of $5000 and a trustee investment of $11,500, for a total of $16,500. Thus gains are $8,109 or 49% over that 11 year period, an average of approximately 7.1% / year when the investment pattern is taken into account (we have been adding to the portfolio annually since 2001).
Due to the fact that our brokerage company no longer charges an annual fee for an account and commissions are often waived (due to the trustee having a certain number of “free” trades each year), total expenses across from the life average about 0.3% / year and trending down. Since a large element of total return consists of minimizing fees, this is a positive statistic.
Current Portfolio Update
The main purpose of updating the portfolio now is to prepare for our annual process of stock selections. At this time we review the stocks in the portfolio to see if there are any that we should consider selling.
On the “down” side, we have three – 1) Exelon, the big utility, which I want to hold onto as a long term play because there will be a coming lack of baseload generation 2) Urban Outfitters, which lost almost 30% of its value due to a quarterly earnings miss but has since gained about 1/2 of that loss back, and 3) Canon (ADR), a Japanese company that recently has hit an uncharacteristic spell of bad performance.
Another stock which still has big gains from long term dividends (and share buybacks, which should have the same net effect) but has had poor performance relative to its peers is P&G. The CEO is now cutting costs at headquarters (including moving some elements out of Cincinnati, which makes sense given that it is a global company and that is a regional location) and is under pressure to improve results, which I view as a positive potential element for the stock price.
Ebay was down for a significant period of time but recently had a big run up and is net positive. Ebay pays no dividends so it is exclusively a bet on share price appreciation. We will monitor eBay going forward.
In order to “learn” from past decisions, I update the CURRENT prices of all stocks that we’ve sold in the past.
In general, with 20/20 hindsight (something the “real world” lacks), our sales were generally the right thing to do, with the exception of Amazon (AMZN) which continues to defy gravity and is now near $235 / share despite earning little in real earnings. It’s price / earnings ratio is over 200, which is generally a sign of a “bubble” stock that is overvalued (although, like everything else, there are always exceptions to the rule, such as when a write-off occurs).
There are 16 stocks in the portfolio. Assuming that the stocks are from different industries and / or countries without high correlation, when you get beyond 10 or so you can generally consider yourself “diversified”. There will be a couple of new picks this year, and we may consider buying more of an existing stock that we want to keep long term.
Given the size of the portfolio, we do try to keep some money in “cash” in case some liquidity is needed. We have about $2000 in cash now, and will draw down at least $750 of that as part of the 2012 investments.