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Undervalued Predictable Portfolio Up 20.4%; All Positions Gained

December 23, 2010 | About:
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gurufocus

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All of the GuruFocus undervalued model portfolios have beaten the market by wide margins for the past two years. To further clarify and validate the performance of our Undervalued Predictable Portfolios, we follow up the previous one with this article.

The GuruFocus model portfolio of undervalued predictable companies, shown below, consists of the top 25 stocks that had the highest predictability rank, yet were the most undervalued as of Jan. 1st, 2010. We calculated the daily balance of the portfolio throughout the year, updating and reporting the data on the chart below. The portfolio is due to be rebalanced on Jan. 1, 2011, as we only rebalance once a year.

Excluding Laundry’s Restaurants, which was bought out, all of the companies currently in the model portfolio are the same ones that we had on Jan 1st, 2010. Laundry’s Restaurants was added in the portfolio at $11.60, the company’s closing price on Dec. 31, 2009. It was bought out in May 2010 at $24, a gain of 107%. After the buyout, the cash was not reinvested.

As of December 22nd, 2010, the model portfolio gained about 20.4% since rebalance on Jan. 1st, 2010. Comparably, the S&P500 was up approximately 12.9% during the same period. The model portfolio gained 56.7% in 2009, while the S&P500 gained 20.4%. The two years’ cumulative performance of the model portfolio was 88.61%, while the S&P500 gained 39.37%. All statistics do not include dividends. The chart below outlines the performance of the model portfolio compared to the S&P500:

vari_chart_all.php?mp=smallcap&period=40

This is the complete portfolio of the portfolio:

(Current Value: $188,614. Invested: $100,000 on December 31, 2008 Last Rebalance: January 1, 2010)



Symbol Company # of Shares Bought on Share Cost Current Price Change Value ($)
CASH Cash 9528.1 xxxx 1 1 0 9528.1
AAN Aaron'S Inc. 339 01/02/2010 $18.4867 19.97 +8.02% 6,770
AFL AFLAC Inc. 87 01/01/2009 $45.84 57.23 +24.85% 4,979
ANF Abercrombie & Fitch Co. 173 01/01/2009 $23.07 56.97 +146.94% 9,856
BDX Becton Dickinson and Company 79 01/02/2010 $78.86 84.38 +7% 6,666
BRO Brown & Brown Inc. 349 01/02/2010 $17.97 24.2 +34.67% 8,446
CSC Computer Sciences Corp. 114 01/01/2009 $35.14 48.87 +39.07% 5,571
DST DST Systems Inc. 144 01/02/2010 $43.55 45.19 +3.77% 6,507
FCNCA First Citizens BancShares Inc. 38 01/02/2010 $164.01 198.06 +20.76% 7,526
GD General Dynamics Corp. 92 01/02/2010 $68.17 70.53 +3.46% 6,489
HD The Home Depot Inc. 216 01/02/2010 $28.93 35.18 +21.6% 7,599
JKHY Jack Henry & Associates Inc. 271 01/02/2010 $23.14 29.49 +27.44% 7,992
JOSB Jos. A. Bank Clothiers Inc. 222 01/02/2010 $28.1267 41.19 +46.44% 9,144
KEX Kirby Corp. 180 01/02/2010 $34.83 44.63 +28.14% 8,033
LBAI Lakeland Bancorp Inc. 355 01/01/2009 $11.26 11.47 +1.87% 4,072
LNY Landry's Restaurants Inc. 345 01/01/2009 $11.6 Buyout in May +107% 0
NBR Nabors Industries Ltd. 286 01/02/2010 $21.89 22.35 +2.1% 6,392
PPD PrePaid Legal Services Inc. 152 01/02/2010 $41.08 63.46 +54.48% 9,646
RGA REINSURANCE GROUP OF AMERICA, INC. 131 01/02/2010 $47.65 54.7 +14.8% 7,166
TRK Speedway Motorsports Inc. 248 01/01/2009 $16.11 16.48 +2.3% 4,087
TSCO Tractor Supply Company 236 01/02/2010 $26.485 48.19 +81.95% 11,373
TTC The Toro Company 150 01/02/2010 $41.81 63.2 +51.16% 9,480
UNH UnitedHealth Group Inc. 205 01/02/2010 $30.48 35.84 +17.59% 7,347
WMT WalMart Stores Inc. 117 01/02/2010 $53.45 53.31 -0.26% 6,237
WRLD World Acceptance Corp. 202 01/01/2009 $19.76 53.13 +168.88% 10,732
XOM Exxon Mobil Corp. 95.823 01/02/2010 $46.53 72.8 +56.46% 6,976
Total Market Value: $188,614; Cost: $100,000; Change: 88.61%


As one can see from the table above, with the exclusion of WalMart Stores Inc (WMT), all of the companies performed positively during the year. WalMart lost only 0.26% in price year to date. If dividends were calculated, WalMart would still be positive. Among the other companies, three more than doubled, while four were up between 50% and 100%. 28% of all the companies in the model portfolio returned more than 50%.

We don’t claim that the portfolio will outperform the market every year; obviously there are chances that it will underperform the S&P500 in the future. However, as value investors, we strongly believe that a group of high quality companies selling far below their intrinsic values will outperform the market average most of the time. This is the principle for our value strategies and model portfolios. This is also the principle that GuruFocus is built on.

The model portfolio will be rebalanced on New Year’s Day of 2011. You can see the current list of undervalued predictable companies in its screener.

Here we take the chance to say Merry Christmas and Happy New Year to you. Thank you for your continuous support to GuruFocus. We wish you great success in value investing. If you are not a premium member, we still invite you for a 7-day Free Trial of our Premium Membership. Time is running up for the year. Start the new year with the strategies that work.

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 3.3/5 (19 votes)

Comments

jeffmart
Jeffmart - 3 years ago
Good job! XOM doesn't look right however.

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