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As we continue to look for good investment alternatives, we look into Alex Dumortie's take on Hedge fund pioneer Michael Steinhardt's "variant perception." Simply put, if your view is no different from the consensus when you buy a stock, you may as well be putting that money into an index fund. Alex then goes on to outline the Motley Fool's variant perception on five stocks from their real-money Million-Dollar Portfolio service.

  1. Yongye International (Nasdaq: YONG) may be caught up in the questions being asked of Chinese companies but this is one that has a sound business base and will recover.

  2. Berkshire Hathaway (NYSE: BRK.B) may be on the ropes but the Oracle from Omaha still knows what he is doing and this should return to better days

  3. Yahoo! (Nasdaq: YHOO) has been in the news for its missteps but that can obscure some of its strong fundamentals

  4. Bridgepoint Education (NYSE: BPI) has been caught up with the funding restrictions on education but this is still a valuable stock.

  5. Denbury Resources (NYSE: DNR) pumps carbon dioxide into wells to get the last bit of oil out -- not glamorous but can be lucrative as oil prices rise.

This is an interesting approach and worth measuring against our benchmark ETF portfolio.


Asset 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)

Portfolio Performance Comparison
Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Moderate -4% -35% 10% 76% 8% 58%
Retirement Income ETFs Strategic Asset Allocation Moderate -2% -15% 11% 59% 3% 12%
5 Stocks The Fool Owns -19% -53%

This is too short of a history to draw any conclusions on which I would be willing to act. This is a portfolio that is worth watching and reporting as time evolves. The idea is interesting but whether this results in a long term portfolio is still a question. (Click on charts below to enlarge)

Three Month Chart

One Year Chart Three Year Chart Five Year Chart

The graphs give a better view of the performance over its short history. It is clearly volatile -- to be expected with only four choices. However, I think that this portfolio is better as a satellite and not the core of any portfolio. For any more than that, I think we need more time to elapse.

Disclaimer: 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: 'Variant Perception': 5 Stocks To Consider