Portfolio Three Updated January 2013

Portfolio Three is our third longest lived portfolio. It began in 5 1/2 years ago and the beneficiary contributed $3000 and the trustee $6000, for a total of $9000. The current value is $9792, a gain of $792 or 8.8%, which is 2.4% / year when adjusted for the timing of cash flows. You can see the details on the links bar on the right or here.

Portfolio Three stocks that are off watch include Urban Outfitters which finally climbed above its purchase price and WYNN which is underwater but the gap is closing, buoyed by recent returns and special dividends.

For tax purposes, we sold Metro PCS for a gain of $300 (it subsequently fell back to its original price) and had $219 in dividends.


Portfolio Three Updated November 2012

Portfolio Three is our third longest lived portfolio at five years. The beneficiary has invested $3000, the trustee $6000, for a total of $9000. The portfolio value is $8462, which is ($537) below the invested amount, for a return of negative (6%) or negative (1.8%) over the life of the portfolio. Detail on the portfolio is in the link on the right side of the page or you can see it here.

Portfolio Three bought Metro PCS on the possibility of a takeover and when offers occurred we sold it for an approximately $300 gain. Wynn (casinos) was a poor initial performer but it has come back recently and gave a special dividend prior to the end of 2012 to avoid 2013 tax uncertainty (one of the few companies to do this so far). Urban Outfitters also is now above its initial purchase price. Bank of Columbia (CIB) suffered early in the year but has come back recently.

Portfolio Two Updated November 2012

Portfolio Two is our second longest lived portfolio, at 9 years. $5000 has been contributed by the beneficiary and $10,000 by the trustee for a total of $15,000. The fund is now worth $16,481, for a gain of $1481, or 10% on the total invested, at a rate of about 1.7% / year over the life of the fund. Go to the right to see a spreadsheet with details or here.

Portfolio Two recently invested in Metro PCS which received a buy out offer and we sold immediately for a gain of $220. WYNN has started to come back from a 30% losing position and is now down about 22%. Urban outfitters also came back from a big loss and is up 7% on the original investment.

On the other hand, the Japanese company Nidec (NJ) has suffered a serious decline, along with the rest of the Japanese market. Portfolio One recently sold Canon (CAJ) and I am thinking strongly of selling NJ, too. The Japanese market is suffering from slow to no growth and a very strong Yen (currency) is hurting exports.

This portfolio also shows the importance of dividends. The portfolio has received $1148 in dividends over its lifetime, which is equal to its gain above investment.

Stock Discipline

When I started the trust funds I was pretty much in “Buy and Hold” mode.  Since each of the owners of the trust funds has a very long time horizon (their whole life ahead of them), there is a lot of time to recover from a short-term event such as a market downturn and I wanted to encourage thrift and savings rather than a short term attempt to profit from immediate market conditions.

This article shows a graph that the average time a stock is held has dropped from 8-9 years in the 1940’s down to less than half a year in 2010.  While all averages are subject to skew, if you are holding stocks longer than 1/2 a year in your portfolio, you are likely a long term thinker (of sorts).

Thus I have been forced to change my thinking, too.  If a stock is selected in the group because it is a potential takeover target, when that event occurs, you ought to sell.  The prospect of a stock that is part of a larger company is much different than a stock that is an acquisition candidate.  Thus when there was a run up of approximately 40% on Metro PCS the pre-paid wireless carrier, I put in an order to sell this morning for Portfolios 2 and 3.  We will take these winnings and then decide what to do with the remaining funds.

It’s Stock Picking Time (for 2012)

We traditionally select stocks at the end of the summer, before the beneficiaries go back to school or off to college (or even graduate school). This allows the a chance to earn money over the summer because the equation is 1) trustee contributes $500 2) beneficiary contributes up to $500 3) trustee matches up to $500. The matching concept has worked well at aligning interest in these investments because it is “their” money, too.


1. Facebook (FB) – oversold, still has enormous momentum long term

2. Royal Dutch Shell (RDS.B) strong dividend (5.4%), good cost control, focus on liquid to oil. No foreign withholding on “B” ADR shares because they are out of the UK which has zero withholding (this is a UK ADR)

3. Metro PCS (PCS) – plays on no prepaid plan smartphones, buyout candidate (right size)

4. P&G (PG) – great consumer products company, being shaken up, good dividend (3.3%)

5. Toronto Dominion Bank (TD) – top North American (US and Canada) bank in terms of safety, dividend of (3.4%), good financial performance (this is a Canadian ADR)

6. Sasol (SSL) 4.51% – can play Africa growth and also gas to fuel synthetic gap to leverage low gas prices (this is a South African ADR)