January Performance + Benchmarks
I apologize for the somewhat confusing sequence of my posts. When I started writing I did not have a complete picture of where I was going. Please be patient.
I also apologize for the typos and bad grammar. I am a terrible proofreader, and in a perfect world I would find an editor.
Luckily I do not have to apologize for performance. The January numbers were good, although compared to my best benchmark performance was only average:
Model Portfolio = +12.83%
S&P 500 = +6.28%
Morningstar Small Cap Value Index = +10.19%
FESCX - First Eagle Small Cap Opportunity = +13.00%
Most of the good performance came from one stock, SMG. They reported a good quarter this morning. I still believe they will a long-term winner in supplying the marijuana production buildout.
Twenty stock portfolios will always be volatile. For right now I do not feel the need to rebalance, but I want to think about that issue as we go forward.
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As I looked at the small cap value mutual funds, I got a little better picture of this segment of the market. It made me think about what my goal should be for my final portfolio. Some benchmark other than the S&P 500, will have to be the best choice. I am determined to not let benchmarks affect my stock selection, but I do want to be aware they exist.
Let’ take a quick look at my model portfolio, compared to the S&P 500, Morningstar Small Cap Value Index, and my new hero’s FESCX portfolio of 200+ value stocks.
Basic Materials - S&P 500 = 2%, Small Value = 6%, FESCX = 6%, SPJ = 17% My 10% gold stock position makes this comparison difficult, to me gold stocks are a completely different sector. I consider my portfolio (SPJ) to be be similar to my benchmark.
Consumer Cyclical - S&P = 10%, Small Value = 14%, FESCX = 17%, SPJ = 20%. I guess I have a fatal attraction to this group, even though I have a very negative view on the economy. Restaurants and casinos are not that cyclical.
Financial Services - S&P = 14%, Small Value = 25%, FESCX = 6%, SPJ = 0%. Maybe someday I will find a small insurance company I like, but for right now put me down as a bank hater. When loan losses are in the headlines, I might return.
Real Estate - S&P = 3%, Small Value = 7%, FESCX = 5%, SBJ = 0%, I am not a fan of the REIT structure. Someday I might find a specialty REIT I can invest in.
Communications Services - S&P = 7%, Small Value = 2%, FESCX = 2%, SPJ = 0%. I might add VZ, so could go a little overweighted to my benchmark.
Energy - S&P = 5%, Small Value = 6%, FESCX = 8%, SPJ = 0%. I consider myself market weighted as Kirby and Matrix are really oil service stocks.
Industrials - S&P = 9%, Small Value = 18%, FESCX = 23%, SPJ = 31% Again switch out Kirby and Matrix to Energy, and I am similar to by benchmark.
Technology = S&P = 23%, Small Value = 9%, FESCX = 19%, SPJ = 0%. I just cannot find a technology stocks I really like. Note how the small value index is much less tied to technology than the S&P 500.
Consumer Defensive - S&P = 7%, Small Value = 4%, FESCX = 3%, SBJ = 5%. I am similar to my benchmark here.
Healthcare - S&P = 16%, Small Value = 6%, FESCX = 12%, SPJ = 19%. I am attracted to the defensive nature of these stocks if the economy gets bad
Utilities - S&P = 3%, Small Value = 3%, FESCX = 0%, SPJ = 9%. If I swap VZ for a utility, I will be similar to small value. It is interesting that FESCX does not own any utilities.
Note how different some of the weights are different between the S&P 500 and the small cap universe. Also note how heavy the small cap value index is tied to financial services.
I will never try to hug any benchmark, but I will be aware of them. FESCX has somehow found 19% small tech stocks, but I cannot find any. We both hate the banks. My gold position is a personal quirk. I am sure many disagree.