This update will provide a snapshot of the third quarter 2013 performance for the Bishop Research and Analytics Model Portfolio. Before we get further into the third quarter, let's briefly cover my approach to being a contributor for Seeking Alpha. Specifically, I only write about companies that I would invest in myself - and, in the interest of objectivity during my analysis process, might be purchasing shares at some point only subsequent to publication of my reports on Seeking Alpha. Second, I typically only research and analyze opportunities for long positions in a company. Third, as you can tell, my publication volume is rather limited, which is reflective of the selective manner and strict criteria I apply to my recommendations. It is important to note that my intention is to identify and provide analysis for the very best investment opportunities. I am contributing to Seeking Alpha to demonstrate the value of my research and analysis, with the result of generating strong long-term portfolio performance.
The Bishop Research and Analytics Model Portfolio contains all of the specific companies that I published recommendations for long positions for since I began writing for Seeking Alpha. As my new reports are published on Seeking Alpha, I will update you on the re-weighting of the portfolio to reflect the addition of new companies in coming quarters.
The current Bishop Research and Analytics Model Portfolio is weighted with 20 percent allocations each for the three companies I researched and recommended for Alpha-Rich in Q3. The Bishop Research and Analytics Model Portfolio allocates a 40 percent weighting to Sears Holdings (NASDAQ:SHLD), which I believe is the stock that offers the greatest risk-reward potential of the four components of the model portfolio over the next two to three years.
At this point, allow me to disclose some very important guidance regarding my forthcoming reports on Sears Holdings. Please take the time to read my comprehensive research titled Sears Holdings' Valuation: Between Berkshire Hathaway And Bankruptcy, which was published on Seeking Alpha on June 18, 2013. Since the publication of this report, I have received hundreds of messages, questions, and requests for further Sears Holdings analysis. Additionally, I have around 2,500 words of content that I edited from the June 18 report regarding ESL and Eddie Lampert. Originally, my intention was to publish more analysis of Sears Holdings in September 2013 or thereabouts. During the analysis of new research I have obtained about the company, I have uncovered some information of materially vital importance about Sears Holdings that supersedes even the compelling and outstanding professionalism displayed in the Baker Street Capital report as the definitive reference on this stock. This topic and guidance on the release of the forthcoming Bishop Research and Analytics Sears Holdings report will be discussed further in this performance update.
Turning our attention back to Q3 2013 Bishop Research and Analytics Model Portfolio performance, I have compiled some charts to illustrate the results of each stock recommendation as of the close of the third quarter.
In the chart above, we can see the performance of each stock since the Seeking Alpha publication date of the recommendation. The stock price quoted on the "Article Published Price" was the share price quoted in the article on the day it was published, which was typically the closing price of the trading session prior to the publication date. The SHLD performance was measured against the price mentioned in the article on June 18, 2013. I chose to use this price as the performance metric because taking the price of SHLD on the last day of Q2 - June 28, 2013 - would have skewed the Bishop Research and Analytics Model Portfolio performance substantially to the upside. The 27.33 percent increase in SHLD since June 18 when my report was published on Seeking Alpha is much less than the 41.73 percent increase in the stock since the beginning of Q2. To be honest and accurate, we will avoid exaggerating the performance of this recommendation during Q3 and apply the price mentioned in the report on June 18 of $46.84 a share. Notably, this date was only about a week before the end of Q2 2013.
In the chart above, we see the performance of the S&P 500 SPDR ETF Trust (NYSEARCA:SPY) from the closing price for the publication date of each recommendation to the close of Q3 2013 on September 30. All of these publication dates were in Q3, with the exception of the aforementioned SHLD report from June 18. In two of these instances, for my report on Discover Financial Services (NYSE:DFS) and Signet Jewelers Ltd. (NYSE:SIG), the S&P 500 suffered a loss from the publication date through the end of the quarter. To compare apples to apples, we will use the publication date as the applicable comparison for SPY performance relative to specific stock recommendations for the Bishop Research and Analytics Model Portfolio.
In the chart above, we see the performance of Discover Financial Services of 1.83 percent from $49.64 a share when I recommended it in an Alpha-Rich article on Seeking Alpha on July 19, 2013. This contrasts sharply with the loss of 0.63 percent in the SPY during that same time period. Notably, DFS has generated a solid performance relative to the overall market, yet was the weakest performer in Q3 of the Bishop Research and Analytics Model Portfolio.
In the chart above, we see the very respectable 3.63 percent gain in Inter Parfums (NASDAQ:IPAR) from the price of $28.94 a share published in my Alpha-Rich article for Seeking Alpha on August 15, 2013. This solidly beats the 1.03 percent increase in the SPY for that comparable time period. Importantly, Inter Parfums raised its 2013 guidance a few weeks ago, exactly as predicted in my report, and issued its 2014 guidance below analysts' estimates. That means the bad news of the low guidance is already baked into the stock price and IPAR shares rose in response.
In the chart above, we see the superb 4.42 percent gain in Signet Jewelers Ltd. from $68.62 a share price from my recommendation in my Alpha-Rich article for Seeking Alpha published on September 16, 2013. This is an outstanding performance relative to the SPY, which lost 1.3 percent from that publication date to the end of Q3 2013. Although this is extraordinary outperformance, I would caution that this is only two weeks of trading and my recommendation is for the stock to double by the end of 2015. Indeed, all of my recommendations are long term in nature and this update is only a statement of performance for the end of Q3 to provide a snapshot of how these recommendations are developing.
Out of all the companies in the Bishop Research and Analytics Model Portfolio, Sears Holdings is the recommendation that attracts the most attention - both positive and negative - as well as the stock that produced superior returns for the portfolio in Q3. Let's take a look at how my Sears Holdings recommendation performed both since publication of Sears Holdings' Valuation: Between Berkshire Hathaway And Bankruptcy and throughout Q3 2013.
As we can see in the chart above, Sears Holdings skyrocketed 27.33 percent in the time period since Sears Holdings' Valuation: Between Berkshire Hathaway And Bankruptcy was published on June 18, 2013. In the interest of full disclosure, SHLD dropped in the weeks just after publication, reaching a low of $39.34 in late August. Notably, SHLD shares closed Q2 2013 at $42.08 a share on June 28. This performance stands in contrast to the 1.42 percent from an equivalent position in SPY during that same time period.
In the chart above, we can see the performance of SHLD for the entire Q3 2013 compared to the SPY. As previously mentioned, in the interest of fairness and full disclosure, I applied the price of SHLD at the time my report was published on Seeking Alpha for Bishop Research and Analytics Model Portfolio, which eliminated any exaggerated effects of the stock's 41.73 percent gain in Q3 2013. This performance, relative to the SPY, is worth considering as a way of evaluating the stellar quarter turned in by Sears Holdings in terms of its stock performance. In addition to the short interest rising above the size of the SHLD float around the time of the disastrous Q2 earnings report, the release of the Baker Street Capital report undoubtedly helped the stock and stirred the ongoing debate about the value of Sears Holdings. After receiving a deluge of interest, information, and questions from those following SHLD, I have compiled what I believe to be the most authoritative volume of research and analysis available on Sears Holdings. With determination of the most precise financial valuation and timeframes for the future of Sears Holdings, I am currently in the process of writing and arranging this information to be released by the end of the year. Please follow me on Seeking Alpha for the latest updates regarding the release of this valuable research and analysis.
Finally, the chart above shows the value of the Bishop Research and Analytics Model Portfolio with a baseline of $1 million original funding balance on June 18, 2013. As we can see in the chart above, with the aforementioned portfolio allocation in Q3 2013 taken from dates of publication that $1 million grew by $129,062.32 during the quarter to over $1.129 million. This represents an impressive 12.91 percent gain for the Bishop Research and Analytics Model Portfolio for Q3 2013. Relative to the SPY with a 4.79 percent increase for Q3, the Bishop Research and Analytics Model Portfolio substantially outperformed the benchmark index on a relative basis by over 8 percent.
Thank you for reading. Let's look forward to a profitable and productive Q4 2013.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.