For the first time in awhile, Portfolio A1 gave back some ground to the benchmark S&P 500 index last week. Even with last week’s sub-par performance, since the February 16, 2007 inception, Portfolio A1 now has a cumulative gain of 20.7%, compared to a 3.7% loss for the SPX.
After falling 7% last week, Sinopec, a.k.a. China Petroleum & Chemical Corp (SNP) has been dropped from the portfolio, victim of a rule whereby a position is automatically closed once it falls 20% from its high during the ownership period. Also dropped were Norwegian energy and aluminum giant Norsk Hydro (NHYDY), but in this instance as a result of a declining rank from the stock ranking system. The ranking system partly reflects several technical factors and picked up on the fact that NHYDY’s stock has also struggled and is down about 17% for the first two weeks of 2008.
Replacing SNP and NHYDY in the portfolio are returnee Fresh Del Monte Produce (FDP) and a second Brazilian telecom company: Tele Norte Leste Participacoes (TNE), an integrated fixed line and mobile telecom provider with a $9.5 billion market cap. TNE joins long-time favorite BRP to give Portfolio A1 an unusual mix of 2/5 Brazilian telecoms in this five-legged portfolio. By design a focused five stock portfolio is intended to make significant bets in specific sectors and regions, but it is unusual to find this type of concentration in the portfolio, which uses a maximum sector weighting of 30% to place sector limits on all new purchases. The reason there are currently two telecom companies in the portfolio is that Mosaic (MOS) has had such a strong run (up 175.7%) that it now comprises 42% of the portfolio, so that it is possible for the other four holdings to split the remaining 58% with two companies in one sector that do not total to 30%.
Note that the portfolio has no provision for limiting the concentration of holdings by country or region.
There no other changes to the portfolio this week.
A snapshot of Portfolio A1 is as follows: