Growth Portfolio Hits 2 Years
Relative outperformance has been on par with our expectations at over 11.5%. Take the 10.3% annualized gain listed below and add 1.25% in excessive fees charged by the site and you get the 11.5%. In normal times, beating a market by double digits would be exciting, but an annualized return that falls short of 5% doesn't cut it for us. Not bad for this environment, but hardly better then investing in 10 year treasuries and alot more stressful.
Gains were lead by stocks like Baidu (BIDU) sold for a 240% profit, Apple (AAPL) at 145% and counting, and Tween Brands (TWB) boughtout for a gain of 140%. Some losers have been significant as well including Zoltec (ZOLT), Terex (TEX), and Alvarion (ALVR). All exceeding 50%. This is probably typical of a portfolio designed for maximum gains. In a diversified portfolio of 20-30 stocks, we'd expect a few 100%+ gainers offset some by 50% losers especially in a weak market.
For the next year, our stocks remain extremely cheap especially in an environment of extremely low interesting rates. Our top 5 picks are AerCap Holdings (AER), Apple (AAPL), Riverbed Systems (RVBD) , Hartford Financial (HIG), and Millicom Int'l Cellular (MICC). The group is diverse amongst Industrials, Tech, and Financials. They all of a common theme of being very cheap. Whether its AAPL trading at a low multiple to its growth rate or AER trading at low cash flow multiples or HIG trading below book value.
Some notable additions of late include biotech Chephalon (CEPH) trading at 10x earnings. Positions were added to Atwoods Oceanics (ATW) and Brazlilian homebuilder Gafisia (GFA) that both trade significantly below reasonable values. This portfolio is starting to sound like a Value Fund, but truthfully stocks are just that cheap. A good portion of our picks are designed to take advantage of exploding growth in the Developing and Emerging economies and its as big of a surprise to us that they trade at value stock levels.
Despite the supposed head winds in the market we continue to expect the rebound to be lead by Asian growth and a rebounding US economy. A very positive yield curve will ultimately win out and we're invested to take advantage of the eventual market bounce. Might not be today or tomorrow, but the market will not remain this cheap for much longer.