The Fat Pitch Financials Portfolio developed nicely during 2006. I added just five positions in 2006. These included Microsoft (MSFT), Realogy (H), USG (USG), Western Union (WU), and Pfizer (PFE). I sold two positions. My sales included shares of closed-end fund Tri-Continental (TY) (after several attempts) and Realogy after the recent buyout offer. Even though the trading in this portfolio was fairly limited, I expect that this light level of trading will be similar in future years given my strategy of waiting for fat pitches.
In the graph above, the orange line represents the Fat Pitch Financials Port. The green line is the S&P 500, the brown line is the Dow Jones Industrial Average, and the blue line is the Nasdaq. As you can clearly see, the Fat Pitch Financials Port started outperforming the indexes in September of ’06 and then continued to outperform for the rest of the year. The Fat Pitch Portfolio returned 19.75% in 2006 versus 15.23% for the S&P 500 according to Marketocracy. I outperformed the S&P 500 by 4.52% while still maintaining a cash position of over 30%! I am very please with this performance. Since inception on September 21, 2004, this portfolio has produced a total return of 24.63%.
All my positions are currently generating positive returns. My worst performer is Western Union, returning only 3.89% since it was purchased on November 6, 2006. My largest position and greatest return to date has been generated by Unilever (UL). Unilever currently makes up just over 20% of the portfolio and it has produced a 75% return since I purchase it on September 21, 2004.
I’ve noticed that this portfolio has become rather dominated by large-cap stocks. That was not my original intent. In 2007, I hope to find some opportunities in small- and mid-cap stocks. I also plan on doing some intense research of foreign ADRs, especially given the rising prices of stocks in the U.S. market. However, it is most likely that my future trades will be dominated by unforeseen events that cause Mr. Market to panic and sell off. These opportunistic moments are what I need to prepare myself for in order to be able to take quick and decisive action. The best value opportunities are often temporary in nature.
I am always looking for feedback on my portfolio, so please feel free to comment below. If you have found a great fat pitch opportunity that I’m unaware of, please feel free to share it as well below. I’ll share my take on your ideas in return.