Undervalued Predictable Portfolio Up 20.4%; All Positions Gained

Author's Avatar
gurufocus
Dec 23, 2010
Article's Main Image
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 Laundrys 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. Laundrys Restaurants was added in the portfolio at $11.60, the companys 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:





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, Financial), 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 dont 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 Years 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.


Rating:
3 / 5 (19 votes)
1 Comments
Load More
Author's Avatar
<img src="https://images-na.ssl-images-amazon.com/images/I/41HZteDolmL._AC_SX75_CR,0,0,75,75_.jpg" align="right"> Charlie Tian, Ph.D., is the founder of GuruFocus. You can now order his book <a href="https://goo.gl/OZ6xWO">Invest Like a Guru</a> on Amazon.