Portfolio One Updated November 2020

Portfolio One is our longest lived portfolio.  It is 19 years old.  The beneficiary contributed $5000 and the trustee $19,000 for a total of $24,000.  The current value is $72,519 for a gain of $48,519 or 202%, which is 8.6% / year adjusted for the timing of cash flows.  You can see details here or at the link on the right.

Portfolio one has 20 stocks.  The major gains have come from Taiwan Semiconductor Manufacturing (TSM), PayPal (PYPL), Nvidia (NVDA), and Procter & Gamble (PG).  Other winners include Alibaba (BABA), Accenture (ACN), Infosys (INFY), Toyota (TM), and American Electric Power (AEP).  Stocks hitting recent bumps include EA (earnings), CME (ZIRP), SAP (earnings), and BABA (delay of ANT IPO).

Portfolio Two Updated November 2013

Portfolio Two is our second longest lived portfolio, at nine years. The beneficiary contributed $5500 and the trustee $11,000 for a total of $16,500. The current value is $23,245, for a gain of $6745 or 41%, which works out to annual performance of 5.6% / year over the life of the portfolio. There are 18 stocks in the portfolio, of which 9 are US and 9 are overseas. As we noted with Portfolio One, a rough guide is that when you have beyond ten or so “different” stocks you have a diversified portfolio. Most of the stocks are around $1100 / each, with a few around $2000. You can see the detailed portfolio here or at the list on the right.

The portfolio recently has had a couple of big winners with Facebook and Splunk. These two combined for about 1/3 of the total gain in the portfolio. Many of the stocks are near all time or 5 year highs, including Oracle, China Petroleum, Siemens, Diageo, Exxon-Mobil, Toyota and NIDEC. These stocks had been hit hard just a couple of years’ ago and we will watch them closely to make sure they don’t fall back too far.

Oracle, WYNN and Urban Outfitters currently have stop loss orders in that we will need to review in early December. We are going to keep them on Urban Outfitters and WYNN because we don’t want to fall below original purchase prices and Oracle we will review along with many of the other stocks that have soared over the last couple of years.

Japanese Stocks

The recent events in Japan have impacts on stock portfolios around the world, including the trust funds that I manage and discuss on this site. There are really four general areas to discuss:

1) Japanese companies which have been directly hit hard by the events as the Japanese market dived (the EWJ ETF which represents the broad market is down about 11% in the last 30 days, vs. 5% decline in the S&P 500)
2) The impact on the Japanese currency, which is up about 3% vs. the US dollar in the last 30 days (after an intervention by the Bank of Japan which tried to stem the gain)
3) The impact on other firms because of the supply chain in Japan (for example GM is shutting down some plants in the US due to a lack of spare parts)
4) The impact on companies that sell to the Japanese people (for example Japan is the largest luxury market in the world for Tiffany)

While I watched with dismay as some of the stocks in my portfolio were part of this decline, notably Canon (CAJ) and Toyota (TM), and Nidec (NJ). The popular wisdom is that the hedge funds bailed out of the Tokyo market, accelerating the decline, much of which has subsequently been recovered. I can’t verify if that is true or not.

In our portfolios, we tend to sit tight and hold unless there is a compelling reason to sell. I think that these three companies are still good companies and if anything, at their current values, they are more of a “buy” than ever. I am not averse to selling when I think that a company is poorly managed or stuck in a dead end industry, but this is not the case with these stocks.

Some of the losses (in local currency terms) were pared by the fact that the currency appreciated vs. the dollar, which shielded some of the blow. This is part of a long term trend of the USD weakening vs. the Yen, as you can see below.

While I make my own choices I do like to go to multiple sources for research. I appreciated the directness of Barron’s approach in their most recent issue, which makes no bones about their recommendation.

Buy Japan

The earthquake, tsunami and subsequent nuclear events also raise the value of diversification. While you can’t prepare for these sorts of events in your portfolio directly, by spreading your bets across countries, industries, currencies and asset classes you can diminish the blow (and also limit your upside).

For now I am happy with my decision to sit tight on the Japanese stocks, which has been partially vindicated by the recent rally as well as the increase in currency values (which has other long term negative impacts as well).

Portfolio Two Performance

We have been contributing to Portfolio Two for five and a half years. The beneficiary has contributed $3000, the trusted contributed $6000, and the fund is worth $9531, for a gain of $531, or 6%. This translates into an annual rate of approximately 1.6% over this time period.

For 2009 we had $92.57 in dividends, $4.53 in interest income, and a Long-Term capital loss of ($834) from a sale of Cemex during the height of the debt crisis.

This portfolio has 10 stocks, which makes it reasonably diversified. Until you get near 10 or so stocks your portfolio can move significantly based on the activities of just 1 or 2 stocks. This portfolio took a hit on Toyota (TM) with the recent problems with that company, although we are about break even on our investment in that stock net of dividends received.