We are all aware of the ongoing crisis in Europe and its knock-on effect on the markets around the world. I am always interested in hearing what experts have to say and Rebecca Lipman of Kapitall.com reported on an interview with Jim Kee, Chief Economist and President of South Texas Money Management.
Its investing strategies:
Value and growth, which appeals to me provided it doesn't result in too much volatility.
Kee's definitions are:
- Growth: acceleration in sales and earnings, top and bottom line growing over the near term - usually three-year periods.
- Value" is determined by a low price to cash flow and price to sales ratios, as well as a history of consistent cash flow generation.
Given that, I thought it would be worth looking at its top 10 holdings to see how that selection of stocks is faring.
STMM's portfolio's top 10 holdings:
- Technology Select Sector of the S&P 500 (XLK)
- iShares S&P SmallCap 600 (IJR)
- International Business Machines (IBM)
- Patterson-UTI Energy (PTEN)
- UnitedHealth Group (UNH)
- Texas Instruments (TXN)
- Bristol-Myers Squibb (BMY)
- Archer Daniels Midland (ADM)
- Hancock Holding (HBHC)
- FedEx (FDX)
I am going to make each of these selections and equally weight them in the portfolio and measure the results to see how well this selection performs against our benchmark ETF portfolio.
|Asset||Fund in this portfolio|
|REAL ESTATE||(ICF) iShares Cohen & Steers Realty Majors|
|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|
- South Texas Money Management Top 10 Holdings June 2012 -- 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||1 Week |
|1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Retirement Income ETFs Tactical Asset Allocation Moderate||0.1%||1.8%||7.7%||99.9%||13.8%||115.9%||7.2%||57.4%|
|South Texas Money Management Top 10 Holdings June 2012||-0.4%||4.6%||7.4%||31.5%||16.4%||85.5%||2.1%||6.3%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||-0.2%||3.1%||1.1%||18.6%||12.0%||94.1%||1.6%||6.2%|
*: NOT annualized
**YTD: Year to Date
It is not a surprise to me that the performance compares reasonably well with our ETF portfolio. Bear in mind that the ETF portfolio is lower cost in the sense that you don't have to pay for the management services and that does pretty well. I also think that the ETF portfolio has more asset classes, which helps both returns and reduces risk as shown by the Sharpe Index.
These are decent results but certainly not enough to make me want to move away from the benchmark portfolio.
Additional disclosure: 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.