While I'm not one to get taken in by Santa Claus rally euphoria, I'm cautiously optimistic about the reincarnated $10,000 portfolio's performance heading into 2012. In case you missed it in the pre-holiday rush, here's the article I published that gives the lowdown on how I plan to proceed from a triple in the new year:
The portfolio's dividend-paying core got off to a rousing start with every stock (except one) not only rising, but posting fresh 52-week highs after my initial purchase. Here's how things stand, as of intraday Wednesday, after a decent-size pullback:
|Company (Ticker)||Lump-Sum Investment||Lump-Sum Price (Shares)||Intraday Value/Price 12/28/2011||% Change|
|American Electric Power (AEP)||$6,000||$39.70 (151.1)||$6,234/$41.26||3.9|
|HCP, Inc. (HCP)||$6,000||$39.35 (152.5)||$6,307/$41.36||5.1|
|Rogers Communications (RCI)||$6,000||$36.91 (162.6)||$6,180/$38.01||3.0|
|Verizon Communications (VZ)||$6,000||$39.04 (153.7)||$6,105/$39.72||1.8|
I also made initial $500 dollar cost average buys into each stock. Ultimately, I want to compare the impact of lump-sum investing with the power of dollar coast averaging. It's a bit too early to make that analysis (I'll probably wait until the six-month mark or thereabouts), so, in the near-term, we'll measure the $10,000 portfolio's performance on the basis of the lump-sum positions alone.
The 24-grand invested in AEP, HCP, RCI and VZ sports a value of $24,826, as of midday Wednesday, good for a 3.4% pop. Again, it has been only a week and things can change in a hurry, but these stocks - and stocks like them - are the ones I want to be in for 2012. That goes for my real-life portfolio and the simulated $10,000 portfolio.
While it was great turning a quick $900 profit overnight by shorting Sirius XM (SIRI) and riding Research In Motion (RIMM) puts to the company's death, I think I serve myself and Seeking Alpha readers best by scaling back a bit on the more risky, speculative stuff in favor of what I've always considered a relatively can't-miss approach - long-term investments in growing companies that pay respectable and potentially-rising dividends.
That said, every portfolio should contain some speculation. It's the spice of life. Thus far, the speculative section of the $10,000 portfolio looks good. Here's what I had to say last week when making the choice to go long Apple (AAPL) options over Amazon.com (AMZN):
Here's how the options plays I initiated last week look, as of intraday Wednesday. Here as well, I'm moving forward comparing how different strategies play themselves out. In this case, it's using options with similar strike prices, but various expiration dates to play anticipated upward momentum. In "real-life," when I opened the trades, I noted I am most comfortable using the options with July expiration to play the AAPL upside.
|Option Contract||Investment/(# Of Contracts||Value/% Change, As Of Intraday, 12/28/2011|
|AAPL Jan 2012 $380 Calls||$8,492 (4)||$10,900 / 28.4%|
|AAPL Feb 2012 $380 Calls||$8,310 (3)||$9,900 / 19.1%|
|AAPL July 2012 $395 Calls||$8,110 (2)||$9,000 / 11.0%|
Because AAPL moved with such force after I went long, the more risky near-term options provide a bigger return. That said, if you want to use options more like investments than short-term swing trades and mind risk a bit more closely, the long-dated calls make more sense. This is the type of thing that the basic options eBook I intend to publish at the beginning of January covers.
Depending on which options position you look at, the AAPL on-paper profits, thus far, bring the value of the $10,000 portfolio to $35,726, $34,726 or $33,826.
That's the investment mix for me - a 36-year old squirrel just trying to get a nut - in 2012. About two-thirds allocated to dividend-paying growth stocks and about one-third in more speculative plays like options and risky plays with considerable upside potential like Pandora (P). With that in mind, if you can only buy one stock heading into 2012, that one stock has got to be AAPL. It has $500 or higher written all over it.
Additional disclosure: I will open a position in RCI in an IRA in January 2012.