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We are drilling down on the stock portfolios we have measured to derive a short list of the best of the best. So far, only one portfolio has made it through and that is the stock portfolio derived from Seeking Alpha readers' comments.

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
P 10 Dividend Stocks From SeekingAlpha Readers 27% 277% 10% 47% 11% 54%

The next set of comparisons take the list of stocks that have been suggested for 2011.

Fool's 5 Stocks for the Rest of 2011: Jim Royal presented five stocks that he thought would do well for the rest of the year. The stocks are reasonably priced, offer very attractive dividends, and even give you great downside protection as some investors grow concerned about the rest of 2011.

  • Annaly Capital (NYSE: NLY)
  • Wal-Mart (NYSE: WMT)
  • Exelon (NYSE: EXC)
  • Brookfield Infrastructure Partners (NYSE: BIP)
  • McDonald's (NYSE: MCD)

SmartMoney Magazine Where to Invest 2011: Reshma Kapadia and Russell Pearlman laid out where they believe there is opportunity in the market even with the uncertain outlook. Their choices were:

  • Lowe's Companies Inc. (LOW)
  • The TJX Companies, Inc. (TJX)
  • Yum! Brands Inc. (YUM)
  • Comcast Corporation (CMCSA)
  • Republic Services (RSG)
  • PepsiCo Inc (PEP)
  • Cisco Systems Inc (CSCO)
  • Google Inc (GOOG)
  • Oracle (ORCL)
  • United Technologies (UTX)
  • 3M Company (MMM)
  • United Parcel Serv (UPS)

All of these are high quality stocks and there is no overlap between the portfolios. All of these selections are likely to provide stable portfolios for the long term investor. We contrast this with an ETF portfolio that doesn't select a company but selects asset classes.

Fund in this portfolio
REAL ESTATE (ICF) iShares Cohen & Steers Realty Majors
CASH (CASH)
FIXED INCOME (TIP) iShares Barclays TIPS Bond
Emerging Market (VWO) Vanguard Emerging Markets Stock ETF
US EQUITY (DVY) iShares Dow Jones Select Dividend Index
US EQUITY (VIG) Vanguard Dividend Appreciation ETF
INTERNATIONAL EQUITY (IDV) iShares Dow Jones Intl Select Div Idx
High Yield Bond (HYG) iShares iBoxx $ High Yield Corporate Bd
INTERNATIONAL BONDS (EMB) iShares JPMorgan USD Emerg Markets Bond

This dividend bearing portfolio has US, international and emerging market equities as well as real estate. Note that while there is a fixed income portion, to make a fairer comparison, we will exclude them for this comparison although we would recommend at least 20% of the portfolio be dedicated to fixed income assets.

  • SmartMoney Magazine: Where to Invest 2011 12 Stocks -- Total of $10K invested equally in each stock
  • Fool's 5 Stocks for the Rest of 2011 -- Total of $10K invested equally in each stock
  • Retirement Income ETFs Tactical Asset Allocation Risk Profile 0 -- Above funds using TAA 50% for each of the top two asset classes
  • Retirement Income ETFs Strategic Asset Allocation Risk Profile 0 -- Above funds using SAA 25% for each of the four asset classes -- funds selected based on price momentum

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Risk Profile 0 20% 127% 16% 88% 16% 76%
P SmartMoney Magazine Where to Invest 2011 12 Stocks 22% 143% 10% 43% 9% 34%
Retirement Income ETFs Strategic Asset Allocation Risk Profile 0 20% 141% 6% 26% 7% 20%
Fools 5 Stocks for the rest of 2011 24% 258% 9% 38%

This list is sorted in descending order of the 5 year Sharpe ratio -- i.e. what has given the best risk adjusted returns over a five year horizon. We note that the 5 Stocks for the rest of 2011 don't have sufficient history as a group to qualify for the five year ranking. The diversified ETF portfolio with a momentum strategy leads the field by a long way in both returns and Sharpe ratio, but the other two portfolios look interesting compared to the buy and hold portfolio. So for those who want to fire and forget the Smart Money portfolio does a decent job.

Three Month Chart

[Click all images to enlarge]

It is interesting to note that the Fools portfolio manages through the recent turbulence well -- which is a point in its favor.

One Year Chart Three Year Chart Five Year Chart

All the portfolios display reasonable volatility properties. Note that the SmartMoney portfolio has 12 stocks which adds to its stability.

The momentum strategy with the dividend ETF portfolio is the clear winner for those what are willing to intervene in the portfolio on a monthly or quarterly basis. However, the SmartMoney portfolio does a good enough job that it makes it through to the next round. The Fool portfolio doesn't clear the bar until we have a little more history and we can see how it performs over a five year time horizon.

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Source: Portfolio Playoffs: 2011 Stock Picks