Annual Portfolio Review

by: Alex Filonov

Portfolio goal. Growth. This is high beta, unapologetic growth portfolio with some safeguards and some boring investments. The goal remains unchanged.

Basic Principles. Most of the stocks in this portfolio were chosen for long term investment, which, for me, is about 18 months. Every stock is under review all the time, with a major review of the portfolio twice a year. I can trade around any position if I feel like it. The portfolio is not diversified by sectors. Diversification reduces risk, but it also reduces potential gain. No change in basic principles either.

Change of strategy since last review. Huge rally started after January 1 was unexpected. Yet again, I'm surprised how good Doug Kass is. It looks like we see a beginning of a huge, long rally. Of course, stock market forecasts are a dime a dozen (even though some people pay thousands for them), but the feeling is unbelievable. Feels like last year's troubles were just a couple of small hiccups. As a result, I am changing my strategy. The goal is to reduce the share of fixed income and cash in my portfolio and increase share of manufacturing and foreign stocks. I already started on this road, adding to IFN and opening PII.

Paradigm Changers. These are stocks of companies that are changing business in sectors or even in the whole world.


Ultimate disruptor. Google is changing the advertising world. The company is also aggressively moving to mobile internet advertising.

Risk: All great empires were destroyed by internal problems. There is also a risk of search ad market saturation.

Plan: Hold, trade around.

Intuitive Surgical (NASDAQ:ISRG)

Robotic surgery that is changing surgery of internal organs. Company has monopoly on robotic surgery right now.

Reduced position since last review.

Risk: new technologies are being developed, legislation changes can reduce demand.

Plan: hold.


Cloud computing is all the rage, and VmWare is on the front line. If a company wants to create its own cloud, VmWare is the way to go.

Traded around and in total added to position since last review.

Risk: it's not clear that internal clouds would win over external ones or over software as a service.

Plan: hold.


Pure brain company. Company designs ARM CPUs for a wide range of mobile devices and licenses them to different companies. Most smartphones and all tablet computers I know run on ARM CPUs.

Added to position since last review.

Risk: Tech world is changing quickly, somebody can invent a revolutionary new design and beat ARMH.

Plan: hold.

Since last review I sold Netflix (NASDAQ:NFLX).

Banks / Financials

Banco Santander (STD)

Probably the best Spanish, and maybe European bank out there. High yield, big investments around the world. Bought it because I believe in resolution of Euro troubles. This is also can be placed in International part of the review.

Risk: Currency fluctuations, more problems in Eurozone.

Sold Goldman Sachs (NYSE:GS) since last review.

Steady growers / high yield. Companies with steady growth, high dividend or both. I am increasing weight of this group, such companies are best investments in depression times.

Annaly Capital Management (NYSE:NLY)

REIT. . Latest developments in real estate and mortgage markets reduced overall REITs income.

No changes since last review.

Risk: drop in mortgage rates, rise of interest rates.

Plan: sell into strength.

American Capital Agency Corp (NASDAQ:AGNC)

REIT. Highest yield among the stocks I know. But I am closing position for the same reasons as Annaly.

Traded around and overall reduced position since last review.

Risk: drop in mortgage rates, rise of interest rates.

Plan: sell into strength

Polaris Industries Inc (NYSE:PII)

One of the best recreation equipment manufacturers out there. Local (for me) company as well.

New position.

Risks: another recession, people don't like buying discretionary items in recessions.

3M Company (NYSE:MMM)

Most innovative company in Dow Jones index. Another company headquartered in Minnesota.

New position.

Risk: another recession, management mistakes.

Since last review I closed Altria (NYSE:MO), Phillip Morris International (NYSE:PM) and Intel (NASDAQ:INTC).


Indian Fund (NYSE:IFN)

India is the only part of BRIC which I like now.

Added to position since last review.

Risk: political.

Plan: hold, add on weakness.

Since last review I closed India Investment Fund (NYSE:IIF)

Fixed Income

PowerShares Financial Preferred ETF (NYSE:PGF)

This is a bet on recovery in financials plus excellent cash management tool.

No position changes since last review.

Risk: Another crash in financials.

Plan: Hold, sell if need cash, trade around position.

Eaton Vance California Municipal Income Trust (NYSEMKT:CEV)

California munis are priced very low, and pay a big, federal tax free yield.

Reduced position since last review.

Risk: mass bankruptcies of California cities and counties. I don't think it's going to happen

Plan: Hold, add on weakness.

Nuveen Municipal Market Opportunity Fund (NMO)

One more muni fund, this one invests around the country. Big, federal tax free yield.

Risk: mass bankruptcies of municipalities around the country. Highly unlikely.

Plan: Hold, add on weakness.

Helios Multi-Sector High Income Fund (NYSE:HMH)

Bought this fund when it traded at big discount to NAV, as a replacement to EAD.

Since last review I sold Evergreen Income Advantage Fund (NYSEMKT:EAD), when it was trading at premium to NAV.

Alpine Total Dynamic Dividend Fund (NYSE:AOD)

Huge discount to NAV, huge yield. This is dividend farming fund, buying stocks before ex day and selling soon after. Long term performance sucks, but short and medium term returns might be good. I bought is as a play on international dividend paying companies.

Risk: fund doesn't work well in down markets. This is probably medium term position.

Managed Duration Investment Grade Municipal Fund (NYSE:MZF)

Yet another muni bond fund. Bought it when munies have been down a lot. Thank you, Meredith Whitney, you made me a lot of money by making that panic call on munies. I love buying panics.

New position.

Risk: same as for other muni bond funds. Maybe Meredith Whitney will be right after all.

BlackRock Long-Term Municipal Advantage Trust (NYSE:BTA)

Another muni bond fund bought during last year panic.

New position.

Since last review I closed positions in Blackrock Income Opportunity Trust (NYSE:BNA) and Wells Fargo Capital Trust XII (BWF).

Disclosure: Any position can be sold any time I feel like that. I will trade around any position when I see the opportunity.