It has been a year since we rebalanced our model portfolios, it is time to review and rebalance again. Each model portfolio consists of the top 25 stocks top ranked with its criteria. How did the model portfolios do? What worked and what didn’t?
Most Weighted Portfolio
The Most Weighted Portfolio consists of the 25 stocks with the highest combined weightings from the portfolios of the 25 selected Gurus. This portfolio gained 22% in 2006, without counting dividend. However, it lost 2% in 2007, compared with S&P500’s gain of about 3%. The portfolio was dragged down by the holdings like Sears (SHLD), and Countrywide (CFC). For the two-year history of this portfolio, it gained 19.7% relative to SP500’s 15.7%, outperforming by 4% in the last 2 years.
This portfolio had only 20% of turnover at the 2007 rebalance. The portfolio gives up some of its gain in 2006. For the 2008 rebalance, about half of the stocks are replaced on Jan. 1.
The underperformance of the Most Weighted Portfolio is related to the general underperformance of value stocks during 2007, as many of our Gurus also underperformed during 2007. The portfolio includes holdings from our Gurus who invested heavily in financials, the recent declines in financial stocks hurt the performances of this portfolio.
Broadest Owned Portfolio
The Broadest Owned Portfolio consists of stocks that are most popular among Gurus. The rank is based on the number of the gurus that hold the stock. If this number is the same, the stocks that the gurus hold in higher positions (percentage to portfolio) are ranked higher. The portfolio is updated every 12 months.
This portfolio gained 15.8% in price only, outperforming S&P500 by more than 4% in 2006. However, like the Most Weighted Portfolio, it lagged the market in 2007 by losing 6%. Over the past 2 years, it lagged the market by about 7%.
This year’s rebalance replaced 10 stocks out of the 25, compared with the 20% turnover last year. After the rebalance, the portfolio is heavily weighted in financials and retails, both of the sectors have significantly underperformanced the market during the past months.
Guru Consensus Picks Portfolio
The Consensus Picks Portfolio consists of the consensus picks by the 25 selected Gurus. The rank is based on the number of the gurus that have bought the stock over the past 6 months. If this number is the same, the stocks that the gurus bought in higher positions (percentage to portfolio) are ranked higher.
The Consensus Picks portfolio gained about 10% during 2007, outperforming the SP500 by more than 6%.
The rebalance of the portfolio replaced almost all of the stocks in this portfolio. It will be interesting to see if this portfolio can continue to beat the market.
Guru Bargains Portfolio
Guru Bargains 25 is the best performing portfolio in 2007, it gained 15.4%, beating SP500 by wide margins. This portfolio consists of stocks that have declined since Gurus bought. Is it telling us that buying stocks at lower prices that Gurus have paid has great rewards? If we believe in value, it should.
The Guru Bargain portfolio did poorly in 2006. We did things different for 2007. First of all, we did not use the portfolios of all the Gurus in our database to make the portfolios. We selected a subgroup of 25 Gurus who have very conservative approach and the lowest turnovers. Then we limit the market cap of the stocks to be above $4 billion. These requirements made the portfolio much less volatile, and changed the results dramatically.
The rebalance of this year replaced almost all of the stocks but AMD.
Most Weighted Portfolio
The Most Weighted Portfolio consists of the 25 stocks with the highest combined weightings from the portfolios of the 25 selected Gurus. This portfolio gained 22% in 2006, without counting dividend. However, it lost 2% in 2007, compared with S&P500’s gain of about 3%. The portfolio was dragged down by the holdings like Sears (SHLD), and Countrywide (CFC). For the two-year history of this portfolio, it gained 19.7% relative to SP500’s 15.7%, outperforming by 4% in the last 2 years.
This portfolio had only 20% of turnover at the 2007 rebalance. The portfolio gives up some of its gain in 2006. For the 2008 rebalance, about half of the stocks are replaced on Jan. 1.
The underperformance of the Most Weighted Portfolio is related to the general underperformance of value stocks during 2007, as many of our Gurus also underperformed during 2007. The portfolio includes holdings from our Gurus who invested heavily in financials, the recent declines in financial stocks hurt the performances of this portfolio.
Broadest Owned Portfolio
The Broadest Owned Portfolio consists of stocks that are most popular among Gurus. The rank is based on the number of the gurus that hold the stock. If this number is the same, the stocks that the gurus hold in higher positions (percentage to portfolio) are ranked higher. The portfolio is updated every 12 months.
This portfolio gained 15.8% in price only, outperforming S&P500 by more than 4% in 2006. However, like the Most Weighted Portfolio, it lagged the market in 2007 by losing 6%. Over the past 2 years, it lagged the market by about 7%.
This year’s rebalance replaced 10 stocks out of the 25, compared with the 20% turnover last year. After the rebalance, the portfolio is heavily weighted in financials and retails, both of the sectors have significantly underperformanced the market during the past months.
Guru Consensus Picks Portfolio
The Consensus Picks Portfolio consists of the consensus picks by the 25 selected Gurus. The rank is based on the number of the gurus that have bought the stock over the past 6 months. If this number is the same, the stocks that the gurus bought in higher positions (percentage to portfolio) are ranked higher.
The Consensus Picks portfolio gained about 10% during 2007, outperforming the SP500 by more than 6%.
The rebalance of the portfolio replaced almost all of the stocks in this portfolio. It will be interesting to see if this portfolio can continue to beat the market.
Guru Bargains Portfolio
Guru Bargains 25 is the best performing portfolio in 2007, it gained 15.4%, beating SP500 by wide margins. This portfolio consists of stocks that have declined since Gurus bought. Is it telling us that buying stocks at lower prices that Gurus have paid has great rewards? If we believe in value, it should.
The Guru Bargain portfolio did poorly in 2006. We did things different for 2007. First of all, we did not use the portfolios of all the Gurus in our database to make the portfolios. We selected a subgroup of 25 Gurus who have very conservative approach and the lowest turnovers. Then we limit the market cap of the stocks to be above $4 billion. These requirements made the portfolio much less volatile, and changed the results dramatically.
The rebalance of this year replaced almost all of the stocks but AMD.
