Friday, November 14, 2014

A Look at the Portfolio - November 14, 2014 Update

The Chump IRA finished this week, week 45 of 52, up 1.2%.  The past four weeks have seen nice, slow growth:

3.30% 2.02% 1.00% 1.20%

Comparing the portfolio to the S&P 500 Index, Chump has edged back into the lead for YTD performance.  Here is a graphic of weekly performance, which I started tracking in week 27:

For the year to date, the Chump IRA up 13.01% vs. 12.33% for the S&P 500.  Not a bad year so far.  It seems the Chump IRA declines a bit less than the broader market, rises a bit less sharply, though no clear predictable pattern is evident.  

Here are a few thoughts at random:
  • The Chump IRA always has a little cash;  the S&P Index does not.  Therefore, I would expect a slight damping effect when comparing the two.
  • It's hard to beat the S&P 500 over any period.  I keep thinking that a portfolio of a few Vanguard ETFs might be the best strategy for those not into stock research.  
  • My ideal ETF portfolio would be:
    • VOO (S&P 500 Index)
    • VO (Mid Cap Index)
    • VB (Small Cap Index)
    • VIG (Dividend Appreciation Index)
    • VWO (Emerging Market Index)
    • VNQ (REIT Index)
  • I own these in my taxable account, and some other accounts that I manage.  This group of ETFs is pretty tough to beat.  All are very low cost, and not actively managed.
  • One thing I really like about the Chump IRA though, is the growing dividends....they just keep growing every year by 15%-20% in total, which creates a very nice compounding effect.
  • I need to keep tweaking my strategy to see if I can get some more alpha!
  • I'm going to tweak my strategy to be a bit more active selling overvalued holdings and replacing them with undervalued holdings.
  • I'm also going to look for a little more growth in my new adds......the portfolio should only contain fast growers and high yielders.  It should not contain slow growers with low yields......I need to analyze the holdings, and weed these out....
Here is an analysis of the Chump stock holdings, not including my high yielders.  I've screened the stocks for today's PE vs. the "normal" PE for the past 6 years.  If the PE today is over 15, and greater than the "normal," it gets a red box.  I've also boxed low yields below 2%, and low growth rates below 7%.  Here is the result:

Using FASTGraphs, it turns out that EYE ratio, earnings yield estimate, is a good proxy for overall attractiveness of a stock.  All of the stocks with an EYE ratio of 3.5 or lower have two or more red boxes.  I was surprised to see the low yield on BBL, was the dividend recently cut?  I need to check.**  Regarding the others, here are a few thoughts:

  • I bought MCD slowly, and its never been at an attractive valuation.  My total gain on MCD over the past couple of years is a mere 5.54%.  Weak.
  • I bought WMT, like MCD, for its stellar history, but its never been a great value.  My total return on WMT since purchase is 12.02%.  Better than MCD, but still weak, and 4% came in the past week....
  • MDT has been a great stock for the's up 74% since purchase, and is getting a little overvalued.  I've trimmed it several times these past two years.
  • GD is another great performer, now a bit overvalued, with a total gain since purchase of over 115%.  I've trimmed this holding, but may need to again.
  • JNJ is up 59% since purchase, and may need to be trimmed.
  • KO is another that I added for reputation and moat, but has never been undervalued.  My total return since purchase is a weak 11%.
Need to give this some thought.

Here is a screen of my high yield, low growth stocks, screened by cash from operations (instead of earnings).  As long as the yields stay above 4%, and they continue to raise the dividend, which might become a problem for SO and PM, I'll continue to hold these:

That's all for now,


**Note:  BBL yield is actually 4.6%...FASTGraph had it as half of that....I'll continue to hold BBL


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