My Q2 Portfolio Review And Update

by: Old Trader

As I mentioned at the outset of my Q1 review, I'm publishing my performance on a quarterly basis because I get a steady stream of mail asking questions about my portfolio.

The portfolio is managed according to an absolute return strategy, which I feel is the most appropriate strategy for a retirement portfolio. Although such a strategy will lag during sharp rallies, any sell-offs are also greatly muted as a general rule. My goals are as follows: 1) to generate income, 2) to preserve capital, and 3) to increase capital.

In keeping with the number 1 goal of generating income, the stocks in the portfolio yield anywhere from a low of 3.70% for JNJ to a high of 8.80% for FTE. The anomalies are GG and SVM, yielding 1.20% for SVM, and 0.90% for GG, but I consider these as falling into the preservation of capital category. For the bond portion, GIM currently yields 5.60%, and TEI, 6.40% (numbers per Yahoo Finance).

Because I tend to favor reinvestment of dividends, my yield on cost ranges as high as 14.29% for long term core holdings like PVX, and even "stodgy" JNJ weighs in at 4.255%.

For Q2, I didn't do much in the way of adding new positions, or eliminating old ones, although I attempted to add some value via engaging in some tactical trading (more on that in a bit). Despite my preference for reinvestment of dividends, towards the end of Q1, I started taking my dividends and distributions in cash, as I was of the opinion that, while not grossly over-valued, the majority of the positions were at least fairly valued.

As of June 30, 2011, holdings and weights were as follows, in descending order of weighting, and showing the change since Q1:

GIM (Templeton Global Income) 22.73% (+1.74%)
TOO (Tekay Offshore Partners) 8.54% (-0.10%)
SVM (Silver Corp. Metals) 8.05% (-3.30%)
GG (Goldcorp) 7.92% (-0.08%)
MMP (Magellan Midstream Partners) 7.41% (+0.08%)
JNJ (Johnson & Johnson) 6.72% (+0.81%)
MO (Altria) 6.63% (+0.56%)
STO (Statoil) 6.17% (-0.19%)
KMR (Kinder Morgan Management) 5.95% (+0.08%)
PVX (Provident Energy Ltd.) 5.64% (-0.10%)
Cash 4.44% (+3.05%)
TEI (Templeton Emerging Mkts. Income) 4.34% (+0.17%)
FTE (France Telecom) 2.59% (-0.11%)
OTCPK:ESOCF (Enel SpA) 1.77% (+0.13%)
O (Realty Income) 1.10% (-0.03%)

As of June 30th, the portfolio was up 4.66%, lagging the S&P slightly, which was up 5.00% for the same period.

As noted, I'd done some short term trading, almost exclusively in my miner positions. Obviously, a fair amount of volatility is required for trading to make any sort of difference in how a portfolio performs, and there's certainly been no shortage of that!

In addition, I did a quick round trip trade in SDS which yielded a modest profit. SDS is my preferred vehicle for either hedging purposes, or when I'm feeling especially bearish. If I'm only "mildly bearish", I tend to hold more cash.

Disclosure: I am long GIM, TOO, SVM, GG, MMP, JNJ, MO, STO, KMR, PVX, TEI, FTE, OTCPK:ESOCF, O.