Over the last couple of months, we’ve introduced a couple of new demonstration portfolios. We believe the concepts represented are at the core (pun intended) of decades of successful long-term investing.
The first demonstration is squarely centered on the core of our method — selecting the best-of-the-best highest-quality companies when their stock price sets up a favorable/superior return forecast. We select three stocks every day for this portfolio from the top one-tenth of the top percentile of all stocks covered at Manifest Investing. The selection criteria is our MANIFEST rank: a combination of quality rating and projected annual return. The amount invested every day depends on the median projected return for all stocks on the day of selection.
We’ve been quite surprised that the same six stocks have been taking turns since mid-October. Eventually another stock will join the party — and we’ll build out the portfolio to a Top Twenty and manage it from there. This morning we accumulated Coach (COH), Cognizant Technology (CTSH) and Solar Winds (SWI). For now, this is what Core Diem looked like:
The second demonstration portfolio — likely the HARE in the opinion of most investors — will utilize the balanced investing concepts centered on preservation of capital and an allowance for non-core (general market securities) investing. The allocation is heavily influenced by the standing recommendation of The Value Line Investment Survey. (See accompanying image) With the median return forecast at 8.8% versus a long-term average of 8.5%, we’ll keep cash equivalents and non-core components near the 35% mid-point — our BUDGET.
The balance will be formed by a common stock component — but not just any old mix.
We’ve often been asked why we don’t simply invest in the Value Line 1700 all-of-the-above collection of individual stocks based on the following image. In a nutshell, a blend of smaller (faster-growing), medium-sized workhorses, and larger (slower-growing blue chip stalwarts) is an impeccably good idea.
The S&P 500 large company entrant — investing equally in the whole 500 — has outperformed the S&P 500 cap-weighted index by 2% per year over the last nine years! This advantage extends and manifests in both of the other groups also, producing the stellar performance of this all-of-the-above blend (^VAY):
How about you? Are you afflicted by a lost decade or two? We think seven decades of avoiding lost decades is worthy of considerable attention and implementation.
We’re toying with the notion that the Guggenheim equally-weighted series is just what the doctor ordered.
Out of the gate, here’s what the Balanced Budget Demonstration Portfolio looks like:
Ladies, Gentlemen, Hounds, Hare and Tortoise, Start your engines!