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.
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.
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
Yahoo! (Nasdaq: YHOO) has been in the news for its missteps but that can obscure some of its strong fundamentals
Bridgepoint Education (NYSE: BPI) has been caught up with the funding restrictions on education but this is still a valuable stock.
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) |
- 5 Stocks The Fool Owns-- 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/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr 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.
