My Personal Finance Journey

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Portfolio Update - March 2007

Contributed by mm | April 2, 2007 8:00 PM PST

My portfolio performed quite well in the month of March. The monthly gain of $13,120, or 1.9% of the portfolio size, is almost a full percentage point above the S&P 500 gains. The gain is helped by my sizable foreign equity exposure, and an opportunistic gain in a particular stock position.

Below is the breakdown of my portfolio at the end of March:



1) I sold all 430 shares of Prepaid Legal Services (PPD) at about $50. I had been very patient holding this stock after my initial purchase at $28 in April 2002. I also added more in August 2002 at $18 and more in August 2006 at $36. Although there is almost no top line growth, this prepaid legal service company is a cash cow and management has been very investor friendly in using buyback and dividend to maximize shareholder returns. The stock is recently helped by an apparent short squeeze that lift the stock by 20% since my last update. I'm selling the stock since it is fully valued at 14x EPS with no top line growth. (Total dollar return: $10,793; Annualized return: 21%)

2) I also sold all shares of The Coca-Cola Company (KO) at $48. Again, there seems to be anemic top line growth and 19x forward looking EPS is too rich a valuation for me. (Total dollar return: $2,175; Annualized Return: 17%)

3) I bought more of American International Group (AIG) at $67, the insurance giant. The company is turning the corner and is quite cheap at 11x forward looking EPS. (Disclosure: I first bought into AIG in June 2005 at $56.)


1) Apparently my problem, again, is too much cash. While my $200,000 cash position is generating a risk-free $10,000 return a year, I will need to be more aggressive if I want to do better.

2) I will start dollar-cost averaging to gradually increase my foreign equity exposure from the current 30% to 35% in the next six months. It will mean a monthly purchase of $10,000.

3) I'm also in the lookout for more stock ideas.

This Post Has Received 35 Comments. Share Your Opinions Too.

drchunger Commented on April 4, 2007

i'd think about if you're upping your position on AIG, you may want to up your position in COP or create a position in XOM. the reason being is that i think that might hedge against an active hurricane season - if there is a big insurance outlay because of damages, price of the refined oil will also likely have been effected.

also, XOM and COP, to me, are solid investments that will appreciate over time anyways so, no downside, per se.

CPA1298 Commented on April 4, 2007

MM - I think the S&P500 is a bad benchmark, due to your portfolio allocation. A rough calculation shows that you have just under 50% of your total equity portfolio in overseas-oriented funds. Shouldn't you use a 'blended rate' of say the S&P500 and a foreign index, such as the MSCI EAFE? The S&P500 was up 1% in March, and the MSCI EAFE was up over 4%. A rough benchmark of 60% S&P500 and 40% MSCI EAFE would yield a benchmark return of 2.24%, which beats your portfolio's return of 1.9% by almost 20%. To me, it's important to have an apples-to-apples comparison when analyzing performance.

Think about how much easier your life would be, and the better returns you'd earn, if you dropped your amazing nest egg into just three Vanguard Funds: 10% in the Prime Money Market Fund, 55% in the Total Stock Market Index Fund, and 35% in the Total International Stock Index Fund. Your performance last month would've been right at 2%, or 5% better than your portfolio, with no hassel. 5% over an investing lifetime can add up to millions of dollars.

bryan Commented on April 4, 2007

always nice to have too much cash on hand haha. just wait for the right investment

Jamie Commented on April 5, 2007

I agree totally with CPA1298. In fact, try as a different benchmark the IFA 100 portfolio. That's not to detract from you having had a good month, but was your month's returns worth higher risk and your personal effort. The latter it may be, the former I highly doubt.

CPA1298 Commented on April 5, 2007

Jamie - thanks for the support and for leading me to the IFA website. Do you think MM could benefit from the 12-step proram?

To me it's important to note that MM's portfolio, with it's risk and effort, did not match the benchmark index; it returned less than the index. As he might say, his portfolio has negative 'alpha'.

I'm convinced that no investor can consistently beat the market, especially amateur investors who lack the time, training, and (inside) information to which the professionals have access.

GiaMa Commented on April 6, 2007

"... I will need to be more aggressive if I want to do better...".
More aggressive means more risk. Do you really think that, at this time, would be a good idea? My opinion is to look for "risk free" opportunities during the next months. Looking at liquidity in the world it seems as there's a problem with leveraging positions. Private equities (as KKR or Blackstone) have too much credit and this results in a debit/credit too risky in the long term (only my simple opinion....). Today they can leverage much more than few years ago...

Nish Commented on April 8, 2007

How do you track your investment?
I use microsoft money but not very happy. It has trouble doing asset allocation and report investment gains.
Have not found a good portfolio tracking software.

Michael Halls-Moore Commented on April 12, 2007

Have you considered some more leveraged products? Over in the UK we have some types of derivatives known as CFDs (Contract For Difference) and of course, Spread Betting.

I myself haven't investigated either of these two yet but it would seem that if your views about a particular stock are strongly held then it could be time to venture into the derivatives world?

StockRake Commented on April 17, 2007

Insurance companies are good with Hurricane season. The big hits are rare, but what happens if the insurance company does get hit is that they up the premiums and pass the price onto customers.

AIG's dividend is growing and its pe is under 11.

This portfolio is too slow money for me, but its working for you.

KO had a nice day today also.

Mossi N lvus Commented on June 16, 2017

He’s quiet, sensible and down to earth.


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