Portfolio A1 Makes Big Bet on Brazilian Telecoms to Start Year

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:

Portfolio A1 Finishing Year With Big Gains

What was largely an up and down year for Portfolio A1 through Thanksgiving has suddenly turned out to be a very successful one, thanks to what is shaping up as a very strong finish. Essentially even on the year at Thanksgiving, Portfolio A1 is now up 19.3% just two weeks later, putting a lot of space between the portfolio and the benchmark S&P 500 index, which is now showing a 3.4% gain since the portfolio’s February 16^th inception.

While a bullish run in Sinopec (SNP) and a resurgent DryShips (DRYS) have helped, the 121% gain in Mosaic (MOS), added to the portfolio in mid-August, is the primary reason that the portfolio has made such impressive recent gains.

Given that the portfolio is putting up such superb numbers, I am inclined to reverse my previous thinking and continue to highlight it here past the end of the year, rather than start a new portfolio from scratch.

There are no 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:

Portfolio A1 Increases Lead Over SPX as Markets Drop

After the disastrous mid-August performance, it was heartening to see Portfolio A1 outperform the benchmark S&P 500 index during last week’s market turbulence. While the margin of outperformance was small, this now means that the portfolio is up 9.6% since the February 16, 2007 inception – a period in which the SPX is down 0.1%.

Some of the portfolio’s individual holdings did not fare particularly well during the week, with the result that the stock ranking system has elected to drop DryShips (DRYS) and StatoilHydro (STO). These stocks are being replaced by China Petroleum & Chemical Corp., more commonly known as Sinopec (SNP), as well as Perini (PCR), the large Boston-based construction company. In spite of the very strong year it has had, I am not sure I would be chasing Perini at this point, but, this being a mechanical portfolio, all I can do is raise an eyebrow and be prepared to eat some crow.

There are no other changes to the portfolio this week.

A snapshot of the portfolio is as follows: