Q1 2012 Portfolio Review: Making Some Noteworthy Changes

by: Old Trader

Since I get a steady stream of inquiries from readers as to my retirement portfolio holdings, I've been putting together quarterly reviews of my portfolio since Q1, 2011.

For the first time since 2007, I've been able to add additional cash to my portfolio which consists of 2 IRAs, one with Fidelity, and one with TD Ameritrade. Given the strong performance of the market, I've been very deliberate in putting the additional funds to work, attempting to add new positions on dips, rather than "chasing" after the stocks I'd like to add.

Because the portfolio is relatively concentrated, I've opted to add positions, rather than "averaging down" on the laggards. Only time will tell if that was the right call.

The first new position added was ABB. I wrote about this Swiss-based electrical engineering firm here. As I noted there, ABB's area of expertise is in energy management and control, which is an area that's growing increasingly important as energy demand and usage grows.

The second addition is Vodafone (NASDAQ:VOD). As the second largest mobile phone service provider in the world, I was attracted to the geographic diversity it offers, although a case could be made that perhaps a bit more focus on management's part is in order, given that many of their positions are minority holdings.

Finally, right before the end of the quarter, I initiated a position in Royal Dutch Shell (NYSE:RDS.B). I opted for the B shares rather than the As since the holding is within an IRA. Because of the tax treaty currently in effect between the US and the UK, there's no tax levied on B share dividends. In the case of the A shares, tax is levied, but if the shares are held in a taxable account, the amount can be credited against an investor's US tax bill/payment. In the case of a tax advantaged account, the tax is effectively "lost" money.

Here are the current positions in descending order, as of the end of Q1, 2012, along with weightings (figures in parentheses are change from previous quarter):

GIM (Templeton Global Income) 17.0% (-3.2%)

MMP (Magellan Midstream Part.) 7.44% (-0.68%)

TOO (Teekay Offshore Part.) 7.00% (-0.27%)

PVX (Provident Energy Ltd.) 6.29% (+0.63%)

MO (Altria) 6.02% (-0.44%)

JNJ (Johnson & Johnson) 5.49% (-0.60%)

KMR (Kinder Morgan Mgmt.) 5.43% (-1.04%)

Cash 4.90% (+3.56%)

STO (Statoil) 4.57% (-0.28%)

BIP (Brookfield Infrastruct. Part.) 4.20% (+0.43%)

TEI (Templeton Emerg. Mkt. Inc.) 4.12% (-0.10%)

GG (Goldcorp, Inc.) 3.96% (-0.17%)

RDS.B (Royal Dutch Shell) 3.80% (new position)

SDS (ProShares 2Xshort S&P 500) 3.73% (-1.08%)

ABB (ABB Ltd.) 3.71% (new position)

VOD (Vodafone Group) 3.45% (new position)

HIX (Western High Income) 3.15% (+0.05%)

FTE (France Telecom) 2.34% (+0.25%)

O (Realty Income) 1.83% (+0.64%)

OTC:ESCOF (Enel SpA) 1.57% (-0.31%)

It should be noted that while PVX has been acquired by Pembina Pipeline Corp., as of the end of Q1, the transaction had not closed, so the account statement was still carrying the position as PVX. The Q2 update will show the holding as PBA, the new ticker of the combined entity.

Between the defensive posture I've held, and being careful in deploying cash, the portfolio only managed a 3.75% gain for the quarter, well below the S&P's 12.00% gain. Still, investing is a marathon, rather than a sprint.

I don't rebalance on any sort of schedule, preferring to just monitor position weightings. By that light, I'm seriously considering adding to my GG position, or perhaps opening one in ABX, given that I'm notably under my 10-15% PM target weighting.

Disclosure: I am long GIM, RDS.B, VOD, ABB, JNJ, KMP, MMP.

Additional disclosure: I'm long all of the securities listed in the portfolio holdings.

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