Newsletter and Portfolio Performance Update for 9/30/09

The last few months have seen a surge of interest in the Stock of the Week (SOTW) selection and has led to several posts on the subject, including a detailed September 7^th piece with the title, Stock of the Week ‘Sequential Portfolio’ Up 466% Since 3/30/08 Launch.

With the increased interest in the SOTW has come increased interest in the VIX and More portfolios in general and has led to my resuming coverage of the Aggressive Trader Portfolio in the newsletter. The Aggressive Trader was one of the original features of the newsletter, but in the early months I became concerned that the newsletter was tilting too much in the direction of model portfolios and stock selection, at the expense of original research on volatility, market sentiment and related subjects. Based on reader feedback over the past few months, I have made some refinements and now believe the newsletter strikes an appropriate balance between commentary, analysis and trading ideas. A large part of the reason that I added the Aggressive Trader back to the fold is that the portfolio has a great deal in common with the SOTW. As recently as two weeks ago, for instance, 79% of the Aggressive Trader holdings were represented by former SOTW selections.

The graphic below shows the updated performance data for the VIX and More portfolios for 2008, 2009 and since inception, both in absolute terms and relative to their respective benchmarks. As noted previously, these are long-only portfolios of individual stocks that do not invest in ETFs or options and are rebalanced only on weekends. The Focus portfolios derive their name from the fact that each portfolio is limited to only five stocks. Both the Aggressive Trader and Stock of the Week portfolios were launched on March 30, 2008 and use the S&P 500 index as a benchmark. The Focus Growth 2 Model Portfolio was launched on August 31, 2008 and utilizes the S&P 500 index as a benchmark; the Focus Foreign Growth, was launched on March 30, 2008 and uses as a benchmark the EAFE (Europe, Australasia and the Far East) Index ETF (EFA).

The unquestioned star performer has been the Stock of the Week ‘Sequential Portfolio,’ which racked up a 97.7% gain during the turbulent 2008 markets and has easily surpassed that mark with a 218.2% gain for the first nine months of 2009. Two other portfolios have had stellar years so far: the Focus Foreign Growth portfolio is up 103.2% year-to-date; and the Aggressive Trader portfolio is up 75.5% during the same period. The laggard among the group has been the Focus Growth 2 portfolio, which is the only portfolio not to have a cumulative gain since inception. Somewhat ironically and to my slight consternation, two sister portfolio to Focus Growth 2 have been up and running for about five years and sport cumulative returns of about 350% during this time.

In terms of content, the newsletter has been relatively stable during the last three months, with no significant changes in terms of the standard sections. For more information on the standard sections and content, readers are advised to investigate:

• Content Changes and Portfolio Performance Update for 6/30/09
• Subscriber Newsletter and Portfolio Performance Through December 2008
• Stock of the Week ‘Sequential Portfolio’ Up 466% Since 3/30/08 Launch

As a reminder, I am currently offering a 14-day free trial to the subscriber newsletter for new subscribers.

Stock of the Week ‘Sequential Portfolio’ Up 466% Since 3/30/08 Launch

By far the subject which seems to generate the most emails is what I call the Stock of the Week ‘Sequential Portfolio,’ often known simply as the SOTW.

I launched this feature on 3/30/08 with the first issue of the newsletter. My intent was to highlight one relatively unknown stock each week, which I believe is worth owning for both fundamental and technical reasons. While all positions are long-only and are limited to one week, the purpose of the SOTW is not to encourage readers to hop on a single stock and ride it for a week, but rather to generate a new idea each week that might be a candidate for further investigation and perhaps an extended holding period.

Each week I combine my broad market outlook, sector analysis and favored stock selection criteria (sometimes overweighting technical factors and other times favoring fundamentals) to arrive at a handful of finalists for the SOTW. More often than not, the selection of the SOTW for a particular week is the result of analysis of the charts, recent news flow for the stock, and sometimes my perception of how likely I think a particular stock is to become a story stock.

The self-imposed rules of the SOTW state that each week the entire portfolio is invested in a single stock that is purchased at the beginning of the week and sold at the end of the week, regardless of performance. To make for easier accounting, I elected to use Friday's closing price as the official cost basis in the newsletter and do not subsequently adjust that priced based on Monday's open or any other data. At one point I toyed with the idea of editing the data the following week so as to use Monday's open as the official cost basis for record-keeping terms, but over the long run, the difference between Friday's close and Monday's open should be negligible. Also, to my knowledge, I have never there have not been any SOTW selections that have had significant news over the weekend.

The results of the SOTW selection are below and include the date of the newsletter in which the SOTW selection was published, the ticker and the price change from Friday to Friday. For 2008, the SOTW was up 97.7%. For the first eight months of 2009, the SOTW is up 186.5%. Over the full 17 months since the SOTW was launched, the cumulative gains to date are 466.5%. For the record, during this same 17 month period, the S&P 500 index is down 22.7%.

For more information, try:

• Stock of the Week ‘Sequential Portfolio’ Up 343% in 14 Months (VIX and More)