The 12 stock for 10 years portfolio consists of stocks I would be comfortable putting away for 10 years. I look 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 is 8.2% (the S&P 500 annualized return for the period is 7.8%). Marketocracy subtracts the equivalent of 2% of assets annually to simulate management fees – as though the portfolio were a mutual fund. Without that fee the return beats the S&P 500 annual return by about 240 basis points annually (10.2% to 7.8%). And I think the 240 basis point “beat” of the S&P rate is really less than a fair calculation, as the 200 basis point “deduction” removes what would be assets that would be increasing.
In reviewing the data it seemed to me the returns for TDF and EMF were too low. In examining the Marketocracy site they seem to have failed to credit dividends paid since 2010 (which are substantial – over 15% of the current value has been paid in dividends that haven’t been credited). I have written Marketocracy about the apparent problem. If I am right, the total return for the portfolio likely will go up several tens of basis points, maybe – perhaps to a 10.5% return? And the returns for those 2 positions should increase substantially.
Since the last update I have added Abbvie (part of the former Abbot which was split into two companies in 2013). I will sell TDF from the fund (I include it in the table below, since I haven’t sold it all yet).
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||622%||10%||10%|
|Google – GOOG||388%||18%||16%|
|Danaher – DHR||111%||10%||10%|
|Templeton Dragon Fund – TDF||100%***||3%||0%|
|PetroChina – PTR||82%||4%||4%|
|Toyota – TM||65%||9%||10%|
|Apple – AAPL||57%||15%||15%|
|Intel – INTC||32%||7%||7%|
|Templeton Emerging Market Fund – EMF||29%***||5%||7%|
|Pfizer – PFE||27%||6%||5%|
|Abbvie – ABBV||18%||3%||5%|
|Cisco – CSCO||12%||3%||4%|
|Tesco – TSCDY||-5%**||0%*||3%|
The current marketocracy results can be seen on the Sleep Well marketocracy portfolio page.
I make some adjustments to the stock holdings over time (selling of buying a bit of the stocks depending on large price movements – this rebalances and also lets me sell a bit if I think things are getting highly priced. So I have sold some Amazon and Google as they have increased greatly. These purchases and sales are fairly small (resulting in a annual turnover rate under 5%).
I will likely sell out the Tesco position this year (I would like to see a higher price before selling) and may sell PetroChina.
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). This is the reason for a much more unbalanced position size than at the beginning. I am uncomfortable with the price of Amazon but still very much like the company. if I had better candidates in the 2nd tier I would likely reduce the Amazon position size.
I would still consider replacing PetroChina and replacing or eliminating 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 but I haven’t found the right company to add to this (RYN can help some in the commodities area – they own large amounts of forest land).
I am not altogether thrilled with ABBV, it is very reliant on one huge drug that is losing patent protection (though how big the impact will be is debatable – for various reasons). The company is also not as cheaply priced as I would like, but given all the alternatives adding it makes more sense than not doing so.
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: RYN and USG (less than of portfolio 1% each).
* 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 7% in cash (only 4% if you figure 3% of the portfolio 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 $16.84.
*** as noted above TDF and EMF are likely showing lower than actual returns as large dividends from 2010-2013 are not being credited properly.