Monday, October 1, 2007

Equity Select Portfolio, 27.4% YTD

The five stock Equity Select Portfolio (ESP) I track is up 27.4% after three quarters. The S&P returned 7.69% over the same span. I do not have any money directly invested in this portfolio. It is used solely as a research tool. You can see from the graph below that the ESP had a very difficult quarter. However because the ESP has a long-only, buy and hold mandate I did not change any of the positions in spite of a turbulent August.



Some of the key portfolio stats have fallen since a phenomenal first quarter performance, but the Sharpe ratio is still comfortably above 1 and the performance has been strong. Apple was again a top performer in the quarter, making up for weakness in the financial stocks during the ongoing credit market crisis:

The change I made at the close of the market on July 11th to switch from Sears Holdings (SHLD) to BHP Billiton (BHP) turned out to be a smart one in the short term. However, at first the change seemed to have backfired. Five weeks after the change BHP was down almost 20% and it looked like my decision to increase international exposure and increase exposure to basic materials was a bad move. But, over the last 5 weeks of the quarter BHP went on quite a run, ending up 18.92% since the change. Over that same period SHLD is off 17%. At the time of the change the other serious consideration for the spot to replace SHLD was CVS. Since the change CVS is up 9.69%. CVS has also been significantly less volatile than BHP or SHLD. While I would love to add CVS to the portfolio is is not a top 5 position at the current time. Below is the performance of SHLD, BHP, CVS and the S&P 500 since the change on July 12th:

This portfolio has done quite well through three quarters. I have two weeks from today to review the portfolio and make any changes. While I don't foresee any changes to the equity holdings I might pursue a portfolio rebalancing to take advantage of the loss position on Sears Holdings. If you have suggestions for an addition to the portfolio please let me know.

Posted by The La Jolla Guy at 8:11 AM

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