Portfolio A1 Reshuffles Holdings for Holidays

Portfolio A1 continued its strong performance last week, with cumulative gains of 18.9% since the portfolio’s February 16^th inception – 16.9% better than the 2.0% return of the benchmark S&P 500 index during this period.

Notwithstanding the excellent recent run, this high turnover portfolio continues to seek out better opportunities and therefore dropped DryShips (DRYS) and Fresh Del Monte Produce (FDP), replacing them with Norwegian energy and aluminum giant Norsk Hydro (NHYDY), as well as The Pepsi Bottling Group (PBG), a Pepsi subsidiary. I find the Pepsi move a little surprising, especially since the portfolio had already experimented with PepsiAmericas (PAS) in November. How can a computer program have an affinity for a particular brand…?

There are no additional changes to the portfolio this week.

A snapshot of the portfolio is as follows:

Portfolio A1 Moves Up Smartly

It was a very good week for Portfolio A1 – and an excellent week for the portfolio’s top three holdings. With Mosaic (MOS) gaining 13.4%, Sinopec (SNP) up 13.7%. and DryShips (DRYS) surging 22.8%, it is not surprising that the full portfolio tacked on 10.6% in a remarkable week.

With less than a month to go in the trading year, Portfolio A1’s cumulative 12.2% gain is 10.4% better than the meager 1.8% gain in the benchmark S&P 500 index.

Despite the recent success, the portfolio is not standing pat, as beverage company PepsiAmericas (PAS) is being swapped out for Fresh Del Monte Produce (FDP) in a move that I cannot attempt to explain. As fun as it has been watching and commenting on the doings of this mechanical portfolio, I am looking forward to rolling out a discretionary portfolio at the beginning of the new year.

There are no other changes to the portfolio this week.

A snapshot of the portfolio is as follows:

Mosaic (MOS) Continues to Lead Portfolio A1

The title is probably a considerable understatement, but what else can you say about a stock that is up 91% in only ten weeks in the portfolio?

The amazing run of The Mosaic Company (MOS) has helped to push Portfolio A1’s performance to a cumulative return of 14.15% since the portfolio inception on February 16, 2007. This is 8.67% better than the 5.48% returned by the benchmark S&P 500 index during the period.

Mosaic’s performance has triggered a number of thoughts about portfolio design, backtesting, and the likelihood of catching lightning in a bottle. Simply stated, in the 8 ½ months that Portfolio A1 has been up and running, it has purchased 27 stocks. Almost half of these stocks are up 50% during this period and 30% (MOS, DRYS, BRP, PCU, PBR, RIO, CNH, and SNDA) are up an astonishing 100% or more. The bottom line is that I believe it is possible identify stocks that have a high likelihood of doubling or tripling in one year (with attendant risk, of course) and build portfolio rules to maximize the probability of capturing those gains during the time they are held in one’s portfolio. I will expand upon this going forward, but Portfolio A1 should provide some evidence to support that contention.

There is one change to the portfolio: Navistar International (NAVZ) has been dropped and is being replaced by returnee PepsiAmerican (PAS), the beverage bottler. There are no other changes to the portfolio this week.

A snapshot of the portfolio is as follows:

Portfolio A1 Slowly Closing Gap on SPX

For the second week in a row, Portfolio A1 has taken a small bite out of the gaping performance hole between the portfolio and the benchmark S&P 500. What was a 17.5% gap two weeks ago is now down to a slightly more manageable 11%.

The two agriculture-based holdings, Mosaic (MOS) and CNH Global (CNH), continue to lead the resurgence, up 16.8% and 9.5% respectively in the two weeks they have been in the portfolio.

Speaking of bright lights, I was more than a little surprised to see the portfolio drop PepsiAmerican (PAS) this week. The Minneapolis-based bottler was added to the portfolio three weeks ago on the strength of very solid fundamental numbers across the board and has been very strong technically, making a new 52 week high on Friday (and again this morning)…but apparently an 8.8% gain in three weeks is not good enough to keep it from yielding its slot in the portfolio to shipping juggernaut DryShips (DRYS), a company that is up almost 500% in the past year and yet still manages to sport a P/E under 13.

From my vantage point, it appears that adding DRYS is an implicit endorsement of continued global economic growth and a move away from a more conservative food and beverage play. Even though the mechanical system behind Portfolio A1 doesn’t use this type of market logic in its decision-making, this does not stop me from putting my interpretive spin on what comes out of the black box.

There are no other changes to the portfolio this week.

A snapshot of the portfolio is as follows:

Portfolio A1 Losing Altitude Quickly

First, an apology. Last week I was on vacation and made a best efforts attempt to keep the information for Portfolio A1 current. As you can see from the transaction log below, I posted an ‘update’ of the portfolio too soon and missed the signal to sell Amkor Technology (AMKR) and replace it with AST Test Limited (ASTSF), the Taiwanese semiconductor testing company.

As it turns out, ASTSF lasted only one week in the portfolio and is being dropped along with Navistar International (NAVZ) in an effort to find a way to stop the bleeding.

The task of propping up the portfolio falls to Western Refining (WNR) and PepsiAmerican (PAS) – two relatively conservative plays that appear to be ideally suited to minimizing further downside risk rather than maximizing any gains from a bounce.

In the meantime, the equity curve tells the story of the damage. The total return is now -13.7% and the peak to trough drawdown currently sits at -22.6%. This will be a very difficult hole to dig out of, but I still like the long-term performance characteristics of this portfolio and have no intention of cutting the portfolio off without at least a year’s worth of performance statistics from which to learn some lessons.

A snapshot of the portfolio is as follows: