Monday 13 November 2006

US Shares - "Little Book" Portfolio Update: Nov 06

My "Little Book that Beats the Market" Portfolio has progressed nicely this past month, with the gains by ASEI more than offsetting the drop in MOT. I was tempted to sell my Motorola shares when they'd gone up so rapidly and appeared to be dropping back - but my version of the "Little Book" strategy is to hold each stock for 18 months after purchase, then sell and replace with a new pick (unless its still in the short list).

BOUGHT: 150 shares in PW EAGLE, INC. [PWEI] on 13 Oct @ $33.29 - total cost $5,024.29 [AUD $6,758.18] including $65 brokerage.

SOLD: No sale this month (portfolio is in accumulation phase - US$5,000 purchase each month for 18 months)

When selecting which stock to buy I've been keeping clear of commodity (mining & oil) stocks as I think the "e" in their p/e rations may start declining within the next 18 months if commodity prices moderate as production increases meet demand.


I'm currently ahead by 10.62% ($2,642.21) after deducting $65 for selling costs per stock. After deducting approx. $349.00 for interest paid on the loan to date (this portfolio is 100% geared) my total return is currently $2,293.21.

nb. The average gain reported above is spurious as each stock has a different holding period. I'll start tracking net gain (capital gain + dividends - selling costs - interest) once I'm fully invested after 18 months.

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Anonymous said...

Are these real trades? If so, do you have any thoughts on managing foreign currency risk? If the US Dollar were to drop in value against the Australian Dollar, any portfolio gains could evaporate very quickly... said...

Yes, they're real trades. Hedging currency risk is an extra cost, which would be worthwhile if I was investing for the short term. However, as I intend to maintain my "Little Book" portfolio for 20+ years, currency fluctuations are less important. Also, building up the portfolio over 18 months, so this will average out US:AU currency rates over this time.

Even when I'm fully invested this portfolio will only comprise around 10% of my net worth, so a significant decline in the value of the US dollar would actually present a buying opportunity to incease my allocation to US stocks above 10% of my portfolio.