Ultimate Stock-Picker's Portfolio - All Comments

Re:Back in the Saddle

georgellie — Wed, 20 Aug 2008 18:29:45 GMT

I have been riding out the ups & downs of the market. I have also added some money to some of my better large cap growth funds. That being said, I have sold some of my bank stock to take the losses on my tax form. After 30 days, I will be buying them back again. I think banks will have among the largest percent increases when the financial sector finally turns around. I also plan on adding to some of my health care stocks, such as J&J, Abott, Pfiser and Novardis.

Re:Back in the Saddle

DavidVanKnapp — Wed, 20 Aug 2008 18:30:49 GMT

Justin,

On "growth" stocks, I use a strict sell-stop discipline. That removes emotion from the equation. I set the sell-stop immediately upon buying a stock (usually at 5%-10% below my purchase price), then re-set the stops once per week. If the stock opens up decently, I widen the sell-stop percentage. My "default" percentage is usually 15%. I keep trailing it along behind the actual price (always up, never down).

On dividend stocks, which I keep in a separate portfolio, I use a buy-and-watch strategy. I hold for at least 6 months, then do a portfolio review to see if any changes are warranted. In my dividend portfolio, I'm looking principally at the continuation and raising of each stock's dividend, plus its apparent safety. I'm way less interested in each stock's price than I am in its dividend.

Finally, even though I "know you can't time the market," I do compute what I call a Timing Outlook every two weeks. It has 10 components and is meant to be a short-term predictor (a few weeks). If the Timing Outlook is not favorable, it's rare that I will purchase a stock at all, because I like all my stocks to get off to good starts.

The practical effect of the approaches above are:

(1) I've been mostly in cash for most of the year in growth stocks...therefore way ahead of the market; and

(2) My dividend stocks are running a little better than the market, with the portfolio throwing off about 5.1% at the moment (based on my original investment).

Re:Back in the Saddle

LHixson — Wed, 20 Aug 2008 19:07:29 GMT

I was looking at Berkshire since it has been down along with the rest of the market this year wondering how it does during recessions. It's performance over the years has averaged 10.8% better than the S&P which we all know is exceptional. If you look at the last 4 recessions for a 3 year period it's performance is even better with a return that exceeds the S&P by around 13%. It would seem to make sense that he would do even better is a tough market because there are more opporitunities. Based on how much it is down from it's 52 week high, this would seem to be a very good entry point.Comments?

Re:Back in the Saddle

shaggydog — Wed, 20 Aug 2008 23:43:06 GMT

I agree with LHixon -- Within the next week or two I will be selling some of my disappointments and using the proceeds to buy a few more shares of Berkshire Hathaway. I will also be buying some more BAM and FAST.

Re:Back in the Saddle

sce4golf — Thu, 21 Aug 2008 01:37:19 GMT

I use X-Ray, along with some other tools, to take a close look at my portfolio's asset allocation and performance on a quarterly basis. Since I'm retired I also try to map my accounts into Ray Lucia's "Buckets" approach to manage the gradual distribution of money to live on as well. On the basis of these reviews I decide whether adjustments are needed and implement changes accordingly. My general strategy has been to concentrate holdings in fewer, larger, and (hopefully) higher quality positions (funds and ETFs) over time. This has yielded benefits as my largest positions have outperformed the market over short and long-term time horizons and have helped to mitigate other losses in the past year. I'm about 80% in equities and the rest in cash for now. I have to continually remind myself to resist the knee-jerk reactions to the daily news--I get burned every time it seems when I act on impulse.

Re:Back in the Saddle

Hershey — Thu, 21 Aug 2008 16:59:43 GMT

Justin,

I have enjoyed following the Ultimate Stock-Picker's Portfolio. Unlike the poster who uses a stop-loss strategy, I like to find companies selling at less that they are worth, then invest more if the price drops (so long as my original premise for buying still holds true). I hold about 50 stocks and the total portfolio is currently priced at .73 of Morningstar's fair value. I buy to hold long term and try to avoid selling just because the price drops.

Re:Back in the Saddle

DSAreias — Sat, 23 Aug 2008 11:15:48 GMT

Justin,

Thank you for your insights, they have been very usefull in the last toow years, since I have started investing.

I have my portfolio divided into US stocks and Portuguese stocks (which has seen huge profits in the last few years, but suffered major losses this year). In a small market like this one it is even more important to focus on the real value of the companies, and not on the excitement of newspapers and investment banks always screaming to sell or buy, normally with negative results.

I hope we can all deal with all this volatility and distress and have a great year!

Re:Back in the Saddle

kaziku — Thu, 04 Sep 2008 23:50:14 GMT

Hi Justin,

I saw your review of performance for Aug 08. I was wondering what the start ate for this portfolio is and how it has done since then.

Re:Back in the Saddle

christurner2 — Wed, 10 Sep 2008 20:42:10 GMT

Justin,

I'm beginning to lose confidence in Morningstar's process for evaluating stocks. Clearly, someone at Morningstar lost confidence in Matt Nellans' ability to evaluate AIG and kicked him to the side. Matt had brushed off the company's problems, and maintained his stance that the company was an incredible bargain, even after the most-recent earnings announcement. So the Morningstar left the stock unranked for a month--and now a new guy chops the valuation by two-thirds. I understand evaluating stocks is a difficult undertaking, but shouldn't someone have been raising questions about the process Nellans used for arriving at a fair value estimate as the stock was falling from 70 to the low-20s? Pity the poor AIG shareholders who relied in part on Nellans' estimate. Perhaps you need more group input in arriving at fair-value estimates.

Re:Re:Back in the Saddle

Jim8327673 — Thu, 21 Aug 2008 01:20:00 GMT

David, interesting system you have....would you consider sharing

it in more detail?

Re:Re:Back in the Saddle

M*_Justin — Thu, 21 Aug 2008 14:52:21 GMT

I agree that Berkshire is looking attractive at these levels.

I think that some of the reason the stock has come down a bit is that pricing in the insurance markets is heading south, and that also some investors use their Berkshire holdings as almost a cash equivalent. By that I mean that when there is nothing else to buy they take some of their excess cash and just buy Berkshire, and then when more opportunities exist in the market they sell their Berkshire and recycle the capital into these stocks.

I think its fairly clear that Buffett has been able to put some capital to work in these turbulent markets. So far, it looks like most of the investments he has made have been in the fixed income arena--the area with the biggest convulsions. In fact, at the annual meeting he mentioned his involvement in purchasing some mis-priced auction rate securities, and then not long ago he mentioned purchase of mortgage debt that he wasn't going to allow to reset.

The two most sensitive elements to Berkshire's valuation are the cost of the capital he sources through the insurance markets, and then the rate at which he is able to invest the float. Clearly the cost of capital via the insurance markets is rising, which we've been forecasting for some time now. However, it is also likely the the investment rate will more than offset this, which is also what we have been projecting. And presently Berkshire is rated a five-star stock.

Justin

Re:Re:Back in the Saddle

angie123 — Fri, 22 Aug 2008 12:06:54 GMT

David,

I am about 10 years away from retirement and am holding about 30% of my portfolio in cash right now. Since my main goal is retirement, I am considering taking about 5% of my cash position and purchasing a fixed annuity that will guaranty 6% pre-tax return for 10 years, which will be an equivalent of about 9% taxable in my tax bracket. I've resisted purchasing annuities because of negative feedback from friends. What is your opinion about fixed annuities?

Angie123

Re:Re:Back in the Saddle

angie123 — Fri, 22 Aug 2008 12:07:01 GMT

David,

Angie123

Re:Re:Back in the Saddle

weiwentg — Thu, 11 Sep 2008 16:07:32 GMT

christurner2:
Justin,
I'm beginning to lose confidence in Morningstar's process for evaluating stocks. Clearly, someone at Morningstar lost confidence in Matt Nellans' ability to evaluate AIG and kicked him to the side. Matt had brushed off the company's problems, and maintained his stance that the company was an incredible bargain, even after the most-recent earnings announcement. So the Morningstar left the stock unranked for a month--and now a new guy chops the valuation by two-thirds. I understand evaluating stocks is a difficult undertaking, but shouldn't someone have been raising questions about the process Nellans used for arriving at a fair value estimate as the stock was falling from 70 to the low-20s? Pity the poor AIG shareholders who relied in part on Nellans' estimate. Perhaps you need more group input in arriving at fair-value estimates.

even if I'm not losing confidence in M*'s process as a whole, the reversal on AIG was shocking. Valuing AIG at $76 was a very, very bad call. You've made wrong calls before on a number of banks, bond and mortgage insurers. Your significant hike to the fair values of energy stocks based on rapidly increasing futures prices followed recently by a pullback was also disappointing. I know you aren't commodity traders and I'm not exactly losing a lot of sleep over the last, but it's disappointing nonetheless.

Now, I understand that valuing stocks is an imprecise game and that every stock analyst makes a wrong call. And you've had home runs like Mastercard and Compass Minerals. But the AIG incident was really, really disappointing. I've heard people basically equate you to a bunch of stock picking monkeys. While I strongly disagree, it becomes harder to defend Morningstar when you make major errors like AIG.

Re:Re:Re:Back in the Saddle

lonestar1910 — Fri, 22 Aug 2008 20:03:19 GMT

I am retired and am having difficulty containing my excitement with the opportunities presented in this market. My portfolio is 60% stocks and 40% funds. On July 16, I invested all the cash on hand as well as some margin. In an effort to raise some cash for additional opportunities this market is sure to present, I am selling some loss positions (tax reason) and any stocks that reach a fair value range of 100 – 115%.