edwin444pr's  Instablog

I have posted the first update of our Large Cap High Dividend Yield Portfolio. For those that do not know the methods I use for stock selection and portfolio construction, please read this post.

This portfolio was initiated on September 4, 2012 and it currently is comprised of only 4 positions. These are: Exelon (EXC) with 6.02%, CPFL Energia (CPL) with 5.57%, Williams Partners L.P. (WPZ) with 5.07% and Energy Transfer Partners L.P. (ETP) with 4.43% of total portfolio assets of $999,669 as of September 20, 2012. Cash holdings as of the same date amounted to $788,907 or 78.92% of total assets. A complete list of all historical transactions for this portfolio is available in the Buys and Sells page of this blog.

My stock screen returned a small amount of potential candidates, many of which, in my opinion, were not attractively priced for purchase. This is not a problem for me. I much prefer to have few positions at prices I like and hold cash until Mr. Market decides to put something on sale than to buy at prices that I don't feel comfortable with just for the sake of being invested in the market. That being said, holding cash causes a drag on returns especially during a market rally which is exactly what happened during this period of time. The portfolio remained essentially flat during this period. Actually it incurred a slight loss of $331 or 0.03%. The loss incurred includes $366 in dividends received from our investment in Exelon (EXC). The dividend was re-invested in additional shares of the company. With the S&P 500 returning approximately 3.94% during the same period, our portfolio's under-performance relative to the benchmark was 3.97%. This means we have some ground to make up to achieve our goals for the portfolio.

On a percentage basis, our best calls so far have been:

1. Williams Partners L.P. (WPZ) - Up 0.78%
2. CPFL Energia (CPL) - Up 0.73%

Our worst calls have been:

1. Energy Transfer Partners L.P. (ETP) - Down 2.26%
2. Exelon (EXC) - Down 0.78%

For a complete view of the portfolio, you can go to the Portfolios page and look up the Large Cap High Dividend Yield Portfolio. I will update this and the other remaining portfolios from time to time so be sure to keep coming back with your comments and ideas. You can also subscribe to our RSS feed, receive updates via email and find updates in our Facebook and Twitter pages. As always, all comments and suggestions are welcome.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This blog is solely for informational, educational and discussion purposes only. GainStacker Investment Blog is not a registered investment advisor. Even though topics may be discussed on this blog that involve investment issues, nothing on this blog shall be deemed to constitute the practice of investment advice nor is it an offer or solicitation of any kind to buy or sell any investment products or securities. No reader should act in reliance on anything discussed in this blog without prior consultation with a licensed professional who is qualified to evaluate the reader's individual facts and circumstances and offer an informed professional opinion with respect thereto. If any reader takes action or makes decisions based solely on the information on this blog without prior consultation with a qualified, licensed professional, the reader does so at his or her own risk and agrees that GainStacker Investment Blog shall have no liability resulting from such unilateral actions or decisions by the reader.

I have posted my first update of the Large Cap High Return on Equity Portfolio. For those that don't know, a detailed explanation of the process I use to select stocks and construct the portfolios is given in this post.

The portfolio was started on September 4, 2012 and it currently has 18 positions. A complete list of all historical transactions for this portfolio is available in the Buys and Sells page of this blog. As a summary, the five largest positions in this portfolio are: Estee Lauder (EL) with 5.53%, Coca Cola (KO) with 5.52%, Dollar Tree (DLTR) with 5.42%, Dell (DELL) with 5.32% and Monster Beverage (MNST) with 5.31% of total portfolio assets of $1,016,404 as of September 19, 2012. Cash holdings as of the same date amounted to $416,287 or 40.96% of total assets.

The portfolio performed fairly well during the period. However, the large amount of cash held did drag down performance compared to the S&P 500 (the benchmark I will use for all Large Cap Portfolios). Total gains for the portfolio amounted to $16,404 which includes $80 in dividends received from our investment in McDonalds (MCD). On a percentage basis, total portfolio return since inception has been 1.64% whereas the S&P 500 has returned 3.99%. Therefore, we under-performed the benchmark by 2.35%. Maybe we had some back luck and held too much cash while we were building our portfolio positions during a rally or maybe it is the fact that two of our biggest positions so far (Dell and Monster Beverage) are our two biggest laggards. For me, it doesn't matter that much it just means that we have to make up that lost ground to reach our goal.

On a percentage basis, our best calls so far have been:

1. AngloGold Ashanti (AU) - Up 10.11%
2. CNOOC (CEO) - Up 11.93%
3. Deere Co. (DE) - Up 10.53%
4. Ford Motor (F) - Up 11.04%
5. Vale S.A. (VALE) - Up 15.68%
6. Wynn Resorts (WYNN) - Up 15.45%

Our worst calls have been:

1. Dell (DELL) - Down 2.19%
2. Monster Beverage (MNST) - Down 2.38%
3. Intel (INTC) - Down 1.07%

For a complete view of the portfolio, you can go to the Portfolios page and look up the Large Cap High Return on Equity Portfolio. I will update this and the other remaining portfolios from time to time so be sure to keep coming back with your comments and ideas. You can also subscribe to our RSS Feed, receive updates via email or find updates in our Facebook and Twitter pages. All comments and suggestions are welcome.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: This blog is solely for informational, educational and discussion purposes only. GainStacker Investment Blog is not a registered investment advisor. Even though topics may be discussed on this blog that involve investment issues, nothing on this blog shall be deemed to constitute the practice of investment advice nor is it an offer or solicitation of any kind to buy or sell any investment products or securities. No reader should act in reliance on anything discussed in this blog without prior consultation with a licensed professional who is qualified to evaluate the reader’s individual facts and circumstances and offer an informed professional opinion with respect thereto. If any reader takes action or makes decisions based solely on the information on this blog without prior consultation with a qualified, licensed professional, the reader does so at his or her own risk and agrees that GainStacker Investment Blog shall have no liability resulting from such unilateral action or decisions by the reader.

When I decided to start this blog, I did not know whether to make it about deep and thorough fundamental analysis which focused on long-term value or about short-term technical analysis strategies. I have always been attracted to both methods of analyzing and selecting stocks mainly because both methods can be profitable if one has the right approach towards them. So this was my dilemma. After thinking through it for a while, I decided to do a mix of the two. I want this blog to be a place where me and my readers can visit regularly, share investment ideas and stock picks and compare strategies and their performance. I think that a blog dedicated to full-fledged fundamental analysis would not accomplish this goal (at least not right now) because performing good and thorough fundamental analysis takes a lot of time. I currently do not have sufficient time because of work and study commitments. That being said, I will definitely make an effort to introduce some fundamental analysis posts to this blog focused on value stocks, special situation stocks and general market commentary.

Therefore, as I said before, I decided to focus this blog discussing stock picks and portfolios consisting of these picks. These securities are selected using a mix of technical and fundamental factors. I believe this will give me a greater chance to communicate with my readers on a more regular basis and still be able to keep my work-study-life balance. So, to start things off, I will discuss the methods I use to screen for stocks, to select entry and exit points and to construct portfolios with the stocks I choose to buy. Always keep in mind that these are virtual picks and portfolios. No real money is involved.

Stock Screening

For me, stock screening is the fundamental analysis portion of the decision making process. All stock picks and portfolios will start from September 4, 2012 (the first trading day of the month). Stock screens will be run on the first trading day of every month to narrow down the universe of possible choices. The stock screener that will be used will be the Yahoo! Finance Stock Screener because of several factors:

1. It contains the fundamental criteria that will be used to select stocks.
2. It has the ability to divide screens based on market capitalization.
3. It has the ability to export the screen results into an Excel worksheet.

The fundamental criteria utilized for screening potential investments are:

1. Return on Equity
2. Price to Earnings Ratio
3. Forward Price to Earnings Ratio
4. Dividend Yield

The stocks returned by each screen are then further divided based on market capitalization as of the date of the screen as follows:

1. Large Cap (Over $10 billion)
2. Mid Cap (Between $2 and $10 billion)
3. Small Cap (Between $250 million and $2 billion)

After subdividing the screen results in this manner, we end up with 12 groups of potential investments. Each group will be the universe of available investments for each of the 12 portfolios during said month.

Stock Selection

The universe of available investments for each of the 12 portfolios are then submitted to a final screening process based on two technical indicators. I utilize these two indicators to help me select the stocks with the most favorable entry points. I will not discuss which two indicators are used for two reasons: I do not know if the strategies will work for a reasonable period of time (hence, the purpose of this blog); and, if the strategies do work, I don't feel I should just give them away for free.

What I will discuss is the general purpose in my use of these indicators. I am a strong believer in the buy low-sell high motto of investing. I like to pick up bargains and re-sell them for a profit. That's definitely the value investor in me. Therefore, my indicators are not momentum indicators. Quite the contrary, they are designed to pick up beaten down stocks that may be poised for a rebound in the short or long-term. Stocks are purchased or sold to a portfolio when both indicators agree on the same action.

Portfolio Construction

The last step is the portfolio construction process. Portfolios will start with a value of $1,000,000 in cash. Whenever my two technical indicators give a buy signal at the same time, the stock is purchased for the specific portfolio that corresponds to the screener list for which the stock belongs. Buy signals for the same stock can occur for several consecutive days, therefore, purchases are made in $5,000 increments. A commission of $0.05 per share is applied to every purchase (with a maximum commission of $25 for any single trade). The same rules used for purchases (technical indicator signals, increments and commissions) are applied for stock sales. Sales are only made whenever both technical indicators agree on said action. No sales are made if a stock fails to meet the specific portfolio guidelines (market cap or fundamental criteria).

Every portfolio will have a maximum of 25 positions. Portfolios can contain less than 25 names if it reaches fully-invested status first. Cash will be considered when measuring portfolio performance. Dividends will be reinvested in the shares of the dividend-issuing company if both technical indicators indicate a buy signal on the date when the stock paid the dividend. If no buy signal is given on the dividend payment date, said amounts will be added to the portfolio's cash balance. In the case of a company being taken over, we will sell the stock on the same date that the deal is announced to the public.

Finally, there are two important things regarding portfolio construction. First, any single company can be part of more than one portfolio at any given moment. Second, I do not consider diversification, correlations between portfolio components, maximum or minimum weights, betas, total portfolio risk or any other measure that might limit which stocks will be purchased. Portfolios are constructed with the mindset of buying the most attractively priced stocks for the purpose of achieving significant capital appreciation without giving consideration to any other factor.

I will make all possible efforts to update on all portfolios' purchases and sales as well as their performance on a regular basis. Please keep in touch for my first portfolio update coming very soon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.