Thursday, November 18, 2010

Updated Portfolio Names

Anybody that has followed this blog or follows my trades over on has probably noticed the names I use for the different portfolios that I track. When I originally started tracking these portfolios, the typical names were either growth or value, domestic or international, small cap or large cap, etc.

Sinc I typically invest aggressively and for a high level of portfolio growth I tended to follow that logic for the names. But the names Growth, Hedged Growth, and Aggressive Growth never seemed to fit because I invest a lot of money in stocks like a Hartford Financial (HIG) that was based on a deep value play and not growth. Sure my portfolios have stocks like Riverbed Tech (RVBD) were the goal was for huge growth, but ultimately my investment style is to take what the market gives. Find value or growth stocks that are mis-priced. Whether the stock is trading below book value or below its growth rate, it doesn't matter to our management style. Not having restrictions is crucial to a portfolio manager.

Our style lets us invest in a small cap Chinese coal miner (PUDA) or a large cap tech player like Apple (AAPL) all in the same portfolio. This provides an ultimate advantage when looking for an investment manager to make the decisions.

Now if you have a CFP or want to select the sectors yourself, you'll likely find focused ETFs, mutual funds, and even focused managers more attractive. In that case, you take on sector selection risk. Maybe you pick the best manager in the small cap tech sector, but that sector drops 50% and hence you lose slightly less then the sector. Or maybe you'll select the best sector, but the manager will underperform. In that process the selections can still require a lot of work for the individual investor even though your not picking individual stocks. Why not go with a manager that makes all the decisions? Focus on finding a good manager and let him do all the work.

Ultimately through my work with, it became clear that my portfolios were 'opportunistic' by nature. Invest in the best ideas regardless of market size, style, or sector. Labels need not apply. Ultimately the goal is to buy the stock that now trades for $10, but will eventually hit $20 or $30. Generally one that has limited downside risk placing me solidly in the value concept though most value investors wouldn't touch a cloud computing stock like the 2 in our portfolios.

Naturally we apply certain restrictions such as the market cap greater then $50M and daily trading volume of 10K. Those are the lowest trades they'll accept on Covestor, but typically our internal restrictions are much higher. Daily volume needs to be higher and usually much higher. More like 100K+ to ensure enough liquidity. Other then that, the playing field is wide open to all stocks traded on US exchanges.

Below are the updated names. They are now more reflective of the fact the 3 Opportunistic portfolios invest in the same basic stocks but with different focuses on shorting and the use of leverage. See the right hand column of the website for more details on each portfolio.

Growth                                -------      Opportunistic Long Only
Hedged Growth                   -------      Opportunistic Hedged
Opportunistic (Aggressive)  -------      Opportunistic Levered
Net Payout Yields                -------      Net Payout Yields (no change)

Contact me at for more information.

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