We are drilling down on the stock portfolios we have measured to derive a short list of the best of the best. So far, five portfolios have made it through.
| Portfolio/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Street's Growth at a Reasonable Price 2011 Selections | 60% | 284% | 28% | 85% | 27% | 79% |
| P 10 Dividend Stocks From SeekingAlpha Readers | 25% | 221% | 10% | 50% | 12% | 61% |
| 22 Stocks Good Enough For Buffett And Lynch | 25% | 145% | -2% | -8% | 13% | 42% |
| P SmartMoney Magazine Where to Invest 2011 12 Stocks | 22% | 143% | 11% | 43% | 9% | 34% |
| 7 Stocks With Exploding Profits | 43% | 201% | 8% | 21% | 12% | 32% |
We are examining the different ideas for selecting a portfolio and then measuring which ones are best in class and worth watching. We now move to rocket stocks -- those that have reason for significant growth. First we cover The Street's five rocket stocks for growth potential.
- Alcoa Inc. (AA)
- Capital One Financial Corp (COF)
- Danaher Corporation Common (DHR)
- Lockheed Martin Corporation (LMT)
- U.S. Bancorp (USB)
The Fool's Jim Royal offers four special stocks paying out dividends that, he claims, blow the lid off the average yield of S&P 500 stocks. His selections are:
UAN only went public a month ago. 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.
Jonas Elmerrajifrom Thestreet.com searches for companies with short-term gain catalysts and longer-term growth potential for July 2011.
| 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.
- Street's 5 Rocket Stocks to Grab Gains in July -- Total of $10K invested equally in each stock
- 4 Special Dividend Plays -- Total of $10K invested equally in each stock
- Street's 5 Rocket Stocks With Growth Potential -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA 40% fixed income, 30% for each of the top two asset classes
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA 40% fixed income, 12% for each of the five 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 |
|---|---|---|---|---|---|---|
| Street's 5 Rocket Stocks to Grab Gains in July | 46% | 232% | 24% | 72% | 34% | 103% |
| Retirement Income ETFs Tactical Asset Allocation Moderate | 14% | 155% | 12% | 93% | 11% | 79% |
| Retirement Income ETFs Strategic Asset Allocation Moderate | 17% | 155% | 6% | 33% | 5% | 27% |
| 4 Special Dividend Plays | 48% | 271% | 9% | 27% | ||
| Street's 5 Rocket Stocks With Growth Potential | 24% | 96% | -2% | 1% | 1% | -2% |
This list is sorted in descending order of the five-year Sharpe ratio -- i.e. what has given the best risk-adjusted returns over a five year horizon. We have a clear winner in this round. The Street's 5 Rocket Stocks certainly have grabbed gains in July -- even with choppy conditions and has delivered solid returns over a five-year period. The special dividend play has good short term returns but the history is too short to be considered and the Street's five rocket stocks with growth potential -- has yet to show that potential and so is excluded.
It is to be remembered that five stocks is an inherently volatile portfolio compared to the ETF portfolios which are much more broadly based and still deliver reasonable returns.
Three-Month Chart
[Click all to enlarge]
This is a clear case of getting the call right. If you wanted a portfolio to deliver in July, the rocket portfolio clearly has.
One-Year Chart
The dividend play portfolio has done well over the one-year timeframe but you have to look longer term to get the complete picture.
Three-Year Chart Five-Year Chart
Full details
The final graph shows you the rocket portfolio that has grabbed gains ever since the recovery started. This is a very appealing up-and-to-the-right picture.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
