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This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved

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Day 1 closed up

December 27, 2016

 We're off to a nice start.  One day doesn't exactly make for a trend, but it's always nice to begin with a win.  At the close of the US stock markets today the Mother's Little Helper Portfolio was up .30% for a gain of $1,511.03.

 

The portfolio was published this morning with investments in more companies than I had anticipated but limiting the number of excellent companies isn't my call.  My litmus test weeds out thousands of companies and what's left behind makes the BUY list.  Two years ago my tests here at home produced BUYS for about a dozen companies.  One year ago it was about 50 companies.  Today the BUY list is at 74, with 50 more on "time-out" until they improve.  124 stocks in a portfolio is a lot, I can't argue with that.  While standard investment advice says investing in this many companies is a mistake, I disagree.  Google "how many stocks should I own" and the answers you'll get range from no more than 10 stocks, to a collection of 20-30 stocks.  The premise is, the average investor shouldn't own more than 10-20 stocks, more than this should only be handled by a professional money manager.  This implies that the portfolio is going to be managed, meaning buying and selling through out the year.  This portfolio isn't managed that way, so I don't care how many stocks we own, I just care about the return on every single investment.  However, if an investor could simply reduce the number of companies on the list by setting a stricter standard of approval.  Demand less debt, higher dividend, higher growth rate, lower share price to earning, higher earning over a longer period of time.  There are a lot of ways to reduce the number of companies to produce a smaller portfolio.  I just happen to disagree with the fundamental reasons for doing so.

 

The problem is there are lots of great companies to invest in and picking just 10 that might work dramatically limits you.  We want more shots on goal than that.  I think to own just 10 stocks requires that you know so much about those 10 that you would have to be a professional money manager to run a portfolio that is that tightly concentrated.  You have to be really good at picking 10 stocks that are equally balanced across all sectors (don't forget real estate, that's a new sector now) in order to make this work, and then you need to carefully study the details of each business and look for areas of overlap so that an event that causes one stock to decline doesn't also take out other investments.  That's too hard for most of us.  

 

Stay Invested,

Clay Baker

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