Its been a full month of market experience for my fledgling model portfolio – Timely Value. As a refresher, the timely value model portfolio invests in companies with good return on equity while not being over leveraged. The timely part comes from our use of MSN Money’s stock ranking system. For a far more complete description of the portfolio, see my initial post on this subject.
As you might expect from the worst January in stock market history, the portfolio did not fare so well this month. The portfolio fell 9% for the month. However, this was 1 percent better performance than the S&P 500 over the same period. So its hard to complain. Is this just beginner’s luck? Well perhaps, though this outperformance was fairly common during the heady days of the bull market. As they say, “we shall see” — which is the whole point of this exercise.
According to the portfolio rules, we must dump stocks that fall 15% or more from our purchase price. Emerson Electric (EMR) just barely stays in the game this month rallying back today to close with a 14.9% loss for the month. However, our property and casualty insurance company Employers Holdings (EIG) is a goner with a dismal -18.3% return last month. So the rules say we must turn our back on this guy and never look back — at least for a year. We will sell EIG tomorrow at halfway between the daily low and high, paying a commision of 1%. Likewise with employment agency Robert Half International (RFI) which fell 15.4%. Same pricing and commision rules will apply. The other selling rule — a stock who’s timeliness rank falls below 7 — didn’t take anyone out this month.
Replacing EIG will be Deckers Outdoor (DECK) which is an outdoor footwear company. The stock screener now returns 15 possibilities out of 7000-odd stocks of which DECK is rated highest for timeliness. We will buy it on the same basis as we sell EIG — a price halfway between the daily high and low with transaction costs will be 1% per trade. Replacing RFI will be Knightsbridge Tankers (VLCCF) a crude oil shipper. I swear that this stock screen has a masochistic tendency. Oh well, ours is not to reason why….
So that’s it until next month. Hopefully it will be warmer in Vero Beach at that point. Its freezing (almost literally) in Vero currently. Hasta la vista!