The 12 stock for 10 years portfolio consists of stocks I would be comfortable putting into an IRA for 10 years. The main criteria is for companies with a history of large positive cash flow, that seemed likely to continue that trend.
Since April of 2005 the portfolio Marketocracy* calculated annualized rate or return (which excludes Tesco) is 7.1% (the S&P 500 annualized return for the period is 5.4%).
Marketocracy subtracts the equivalent of 2% of assets annually to simulate management fees – as though the portfolio were a mutual fund – so without that (it is not like this portfolio takes much management), the return beats the S&P 500 annual return by about 370 basis points annually (9.1% – 5.4%). And I think the 370 basis point “beat” of the S&P rate is really under-counting as the 200 basis point “deduction” removes what would be assets that would be increasing (so the gains that would have been made on the non-existing deductions in the real world – are missing). Tesco reduces the return, still I believe the rate would stay above a 300 basis point advantage.
The current stocks, in order of return:
|Stock||Current Return||% of sleep well portfolio now||% of the portfolio if I were buying today|
|Amazon – AMZN||473%||11%||8%|
|Google – GOOG||252%||18%||15%|
|PetroChina – PTR||104%||6%||6%|
|Apple – AAPL||94%||15%||13%|
|Templeton Dragon Fund – TDF||84%||6%||4%|
|Danaher – DHR||60%||10%||10%|
|Templeton Emerging Market Fund – EMF||43%||5%||8%|
|Pfizer – PFE||6%||6%||7%|
|Toyota – TM||5%||7%||12%|
|Intel – INTC||1%||5%||7%|
|Cisco – CSCO||-3%||3%||4%|
|Tesco – TSCDY||-18%**||0%*||5%|
The current marketocracy results can be seen on the Sleep Well marketocracy portfolio page.
Related: 12 Stocks for 10 Years: Jan 2012 Update – 12 Stocks for 10 Years, July 2011 Update – 12 Stocks for 10 Years, July 2009 Update – hand picked articles on investing
I would not buy Templeton Dragon Fund at this time (but am not quite selling it all yet – I have been selling a bit of it in the portfolio over the last couple of years). The stock I most would like to buy is too costly for me to want to buy a large amount for a long period of time – Abbot. I really like the prospects for Abbot but I would like a lower purchase price. I am more worried about the risks in China than I have been. I do feel much more comfortable with the managers at Templeton choosing the stocks than using an index for China.
I would rather have a more equal wighting of the stocks ,as I did at the beginning, but as the prices of stocks such as Apple and Google have risen I think the value of the companies has risen even more (making the stocks even better buys). For that reason I have quite large amounts in those 2 companies. Amazon I think has risen a bit beyond the increase in value of the company. I think Toyota is a very strong company for the long term, and the decline in the price is a bit overdone (so am a bit overweighted in the “if I were buying now column” as I think price is good).
While I am very positive on the companies that I have set the largest holdings for I am less strongly positive on the rest of the stocks (compared the the top stocks now, and compared to the rest of the stocks 5 years ago).
I would still consider replacing PetroChina and Pfizer: I like both sectors more than I like the companies themselves. Still as part of the portfolio I think they are valuable. I would like a bit more exposure to commodities and health care but I haven’t found the right companies to add to this portfolio (I tend to like smaller, companies and haven’t found ones I am happy to lock away for a 5-10 year holding period).
In order to comply with the marketocracy diversification rules and deal with not being able to buy Tesco (in marketocracy) I own fairly small amounts of several other stocks in the portfolio (that are included in the marketocracy return). I only have: ATP Oil & Gas (ATPG) and USG left (and may sell them soon ).
* In order to track performance created a marketocracy portfolio but had to make some minor adjustments (and marketocracy doesn’t allow Tesco to be purchased, though it is easily available as an ADR to anyone in the USA to buy in real life – it is based in England). The portfolio has 8% in cash (only 3% if you figure 5% of total is in Tesco but not shown in Marketocracy).
** Tesco had a purchase price of $22.55 on Dec 11th 2006 and has paid approximately 40 cents a year in dividends. The current price is $15.26. The -18% return is just an estimate.