It is highly unlikely the investment club that holds the following sixteen stocks had all of them in their portfolio for five years, but if they had, here is their outstanding performance when measured against their benchmark.
- RNT – Made Money ~ +10%
- BFAM – Made Money ~ +100%
- CHS – Lost Money ~ > -100%
- CTSH – Made Money ~ +400%
- EXBD – Made Money ~ -80%
- HWAY – Made Money ~ +120%
- IIVI – Made Money ~ +200%
- JNJ – Made Money ~ -3%
- LCAV – Made Money ~ > +100%
- SBUX – Made Money ~ +10%
- SYK – Made Money ~ +65%
- TGT – Made Money ~ +5%
- UBFO – Made Money ~ -15%
- VLO – Made Money ~ > +300%
- WFMI – Made Money ~ -50%
- WRLD – Made Money ~ +110%
I consider this to be an amazing five-year portfolio. Only one stock, CHS lost money over the five years and only five failed to outperform their benchmark. There are several stellar performers in this group of stocks.
Lowell Herr
Photograph: Eze, France
Moments ago I updated the Asset Allocation-Mosaic Portfolio (AA-Mosaic Portfolio) and I see where the Mosaic has an Internal Rate of Return (IRR) of 20.1% while the VTSMX is nearly flat at 0.9%. Since I last updated the portfolio, the Mosaic dropped 4.4% while the benchmark dropped 2.2%. While I prefer not to see the Mosaic drop any points to the benchmark, the percentage drop for the Mosaic was less than it was for the benchmark.
Depending on what is available, we may add an equity ETF to the AA-Mosaic Portfolio this week. Note that one can always access the Mosaic spreadsheet from the Bivio site. I provide a link on the right side of the blog page.
Lowell Herr
Photograph: Time trial at Alpenrose Velodrome, Portland, Oregon
The asset allocation plan used to construct the AA-Mosaic Portfolio is guided in large part by the Fama-French Three-Factor Model.
- Since the performance of the portfolio is highly dependent (at least 70%) by market factors, we want a broadly diversified portfolio that covers over ten asset classes.
- The second factor is size dependent. Historically, smaller companies outperform larger companies. For this reason we skew the overall portfolio toward mid and small-cap asset classes. For example, a high percentage of our total holdings are concentrated in smaller companies. At least it is higher when the Mosaic portfolio is compared to more ‘traditional’ portfolios.
- The third factor is one of price. The Mosaic portfolio is designed to take advantage of ‘cheap’ stocks outperforming expensive stocks. Our emphasis on value over growth is how we construct the portfolio to take advantage of any inefficiencies in the market.
Overweighting asset classes in value and smaller companies does add more risk to the portfolio. Taking on this risk does not mean we are adding alpha to the portfolio. Hebner points out that managers making this sort of move are “systematically subjecting their clients to two additional risk factors – size (small company) and high BtM value (distress).” BtM is Book to Market Price or Book/Market Price.
We offset the additional risk of size and ‘cheap’ price by adding additional asset classes such as international, emerging markets, REITS, commodities, and perhaps in certain situations, bonds.
Lowell Herr
Photograph: Gaudi window design – Barcelona, Spain
