Group portfolio update 12/9/22

Values as of 12/9/22. All positions started 8/8/22 with $4,000.

Markel, 4375.11
Progressive, 4356.51
McKessen, 4289.04
Berkshire Class B, 4192.24
ASML, 4187.01
Blackrock, 4108.37
UnitedHealth, 4044.33
Alibaba, 4033.12
Clearfield Inc, 3735.31
Constellation Software, 3685.61
United Parcel Service, 3682.73
Costco, 3571.84
Microsoft, 3527.86
Apple, 3458.54
Brookfield Asset Mgt, 3443.11
Broadridge Financial Solutions, 3407.00
Qualcomm, 3259.18
Intel, 3234.09
Alphabet, 3170.15
Blackstone, 3085.90
Ally Financial, 3021.48
Salesforce, 2763.85
Meta Platforms, 2712.86
CarMax, 2630.10
Amazon, 2556.21

Total, $88,531.65, down 11.47%
Benchmark, ^sp500tr, down, 4.35%

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Apologies in advance for troubling you. Have just joined the boards and found this portfolio interesting.
Is there a special criteria that this portfolio follows?
Thanks in advance,
L

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Welcome and hope you enjoy the forums here on the fool…doc

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There’s no single criterion (note the singular). It’s just a collection of stocks that individual board members thought were good ideas for long-term holds.

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Thank you Physician and DTBoojum for assisting.

Appreciate the help to a newbie.
L

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Values are with dividends reinvested.

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rrr12345, you may want to consider updating the original thread. That gives context and preserves the thought process behind the original rec.

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The thread was titled “OT: Highest return” on Aug 7 and Aug 8. Board members were asked to pick stocks that they thought would have the highest and most predictable return over the next 10 years. We received 25 picks, which I volunteered to track in a Morningstar portfolio, as Morningstar portfolios track reinvested dividends (So do some other portfolio trackers.
Some trackers allow other people to view the portfolio, which would be nice). The starting prices and starting number of shares for each stock are shown in the post titled “Group portfolio” from August 12.

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Yes, highest return and ALSO most predictable return. Do you remember (or could you reproduce here) how the group interpreted that ‘most predictable’ part?

In my (perhaps faulty) recollection, it was stocks that one would not feel obliged to monitor frequently - not necessarily the ones with the highest potential return, but also with low potential for going seriously wrong. It’s easy to see why Markel, Progressive, Berkshire, McKesson (with an ‘o’), UnitedHealth, Constellation, Costco, Microsoft, Apple, Brookfield Alphabet, Metaand Amazon are in there; it’s a little harder too see how ASML, Alibaba, Broadridge, Qualcomm, Intel, and Ally slipped in, but perhaps it was out of some desire to make the list a little less USA-centric and to get some exposure to retail (Carmax), financials (Blackrock and Broadridge? Ally??) and Chinese (Alibaba) and European (ASML) stocks?

BTW, what a dramatic fall-off, in just 4 months, the last 1/3 in the list are down 20%, with Ally, Salesforce, Meta, CarMax and Amazon down 32% on average! I wouldn’t buy Ally or Salesforce, even at today’s lower price, but here’s an idea for a secondary bet:

Every month, take the lowest 5 stocks of this list of generally reliable stocks, compared to their August starting price, and put another 1% ($1000, in this example) into the one you think has the best moat and is reasonably priced (I would pick Meta, at 10x earnings, but you could make a good argument for Carmax, 12x earnings, or maybe even Amazon, despite the price at 80x earnings). I bet that would give you a pretty good return, although it is not really mechanical enough to test (since I haven’t said how you assess the strength of the moat or the reasonableness of the price.

But anyways, I’ve convinced myself to buy some more shares of Facebook, so thanks!

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I just re-read the thread, and the members who commented on “predictable” seemed to agree that predictability was important. They mentioned things like wide moat and steady revenue growth. My own thinking was that John Kelly found that optimal bets had (1) a high ratio of how much one wins if they win to how much one loses if they lose, and (2) high probability of winning, but with the probability of winning being by far the more important factor. It seems to me that Buffett invests this way, too. He often buys companies like BNSF that have only modest ROE and revenue growth, but which have a high probability of success over many decades to come. It looks like he prioritizes rule number one, and it works. In the group portfolio nobody appeared to swing for the fence.

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Thank you for correcting my misspelling of McKesson.

Thanks again Everyone for taking the time. Sincerely appreciated.

Although the stocks were picked with a 10-year hold in mind, I don’t see why we couldn’t make adjustments to the portfolio periodically. One way to do this would be to create an additional portfolio every six or twelve months. This would allow members to modify their choices of individual stocks, and it would allow new members to participate. We could still calculate the combined return of the portfolios, as if we had one portfolio, but with periodic cash inflows. We’d probably want to move the portfolios from Morningstar to a venue where members could view the portfolios at any time. Maybe MarketWatch Virtual Stock Exchange. What to people think? We could start a second portfolio on Dec 31st.

PS. I’m considering retroactively adding SPY to the portfolio so that I don’t have to calculate the return of the S&P 500 total return index as the benchmark.

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I’m glad to see someone analyzing the portfolio. We learn more that way.

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I did this. Morningstar added $4,000 of SPY to the portfolio at the closing price on 8/8/22, and then it reinvested the dividend on 9/16/22. The starting value of the portfolio on 8/8/22 is now $104,000. It’s just one step easier for me.

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Morningstar added $4,000 of SPY to the portfolio at the closing price on 8/8/22, and then it reinvested the dividend on 9/16/22. The starting value of the portfolio on 8/8/22 is now $104,000. It’s just one step easier for me.

It’s true that SPY with dividends reinvested shouild in principle be identical to sp500tr. But in the end, you still want to compare the portfolio (without SPY) to the SPY return, not include the index IN the portfolio, right? Alternatively, you could compare the $104,000 portfolio with 25 stocks + SPY, vs a $104,000 dividends reinvested portfolio with SPY alone. But the $100,000 25-stock portfolio vs $100,000 of SPY reinvested seems simpler and no more work.

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I take your point. However we could just assume that some member of the board picked SPY for the portfolio, which would not have been a terrible choice. I’ll do it however board members prefer. Until I get more feedback, I’ll leave SPY in the portfolio (Actually I just changed SPY to VOO, as the expense ratio for VOO is 0.01%, versus 0.09% for SPY.)

What do people think about allowing periodic adjustments to the portfolio? If we do so, what would the best way to do it? Add a second portfolio? Add more money to each holding, say, $1,000? The idea is to keep board members, both old and new, involved, as well as, as you point out, to optimize the portfolio. I’d like new members to have a chance to participate in the portfolio.

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What do people think about allowing periodic adjustments to the portfolio? If we do so, what would the best way to do it? Add a second portfolio? Add more money to each holding, say, $1,000? The idea is to keep board members, both old and new, involved, as well as, as you point out, to optimize the portfolio.

It’s a nice idea, if you are prepared to do that. If you occasionally add a stock, you should remove one, too, I think. So here would be my proposal:

Every month (approximately), you conduct a poll about which stock people want to remove and which one they want to add. The first question is easy, jsut choosing from 25 stocks but the second one is hard, because there are so many stocks to choose from. So before you start this second process, you could choose a second set of 25 stocks, the ones that will be waiting in the wings. Then every month, we vote on which of the 25 players on the ice we kick off, and which of the 25 players on the bench we send out onto the ice. Even better, before the polling, we have a discussion about this, so people are voting based on some of the arguments that have been put forward.

Just an idea, maybe someone will think of a better idea.

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rram made the same point during the Aug 7-Aug 8 discussion. Actually he favored leaving BRK.B out as well, and using BRKB and SPY as benchmarks outside of the portfolio. However someone (DTBoojum) chose BRK.B as one of their picks, so I took SPY out but left BRK.B in.

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Here is an idea: Rather than adding to losing positions, every month sell the worst performer since inception, and add to the top three performers since inception, until you are down to 12 stocks.

This is emotionally, much more difficult to do than adding to the losers, which is why it is probably a better strategy.