Saturday, August 29, 2009

Portfolios 2 and 3; Winners and Losers

Yesterday we introduced the Morningstar Best Ideas portfolio. We selected stocks that we picked from the top-10 lists of a set of fine Emerging Markets mutual funds. We did not select them in a purely random fashion, but wanted to make sure that there was some level of portfolio diversification incorporated in our selection. We diversified over countries and industries.

Today, we introduce two other portfolios. Namely:
  1. The Emerging Markets Winners Portfolio
  2. The Emerging Markets Losers Portfolio
The Emerging Markets Winners Portfolio contains top stocks from those Emerging Markets that had the best price performance over the last 12 months. Markets with positive momentum. The stocks we selected were not chosen based on some complicated analytical model. We used the Forbes-2000 list of the World's largest companies for our selection. Nothing difficult that one needs a CFA for, just pick what is large and respectable so as to capture a substantial part of the economic power of the country that we want to invest in.

The Emerging Markets Losers Portfolio contains top stocks from those markets that were still struggling with the Global Crisis. Again, we made sure that our portfolio was diversified, but refrained from fancy selection methods and simply went for the Forbes-2000 again. We bought our two portfolios per August 28, 2009.

Here are the portfolios:

The Emerging Markets Winners Portfolio:
  1. Industrial and Commercial Bank of China (CHI)
  2. Reliance Industries (IND)
  3. Turkiye Is Bankasi (TUR)
  4. Mercantil Servicios Financieros (VEN)
  5. America Movil (MEX)
  6. Petrobras (BRA)
  7. Telekom Indonesia (INDO)
  8. San Miguel (PHI)
  9. Sime Darby (MAL)
  10. CASH
An equally-weighted portfolio of 9 stocks - with 10% of our investment each - and 10% in cash. The 10 percent in cash is held for safety purposes (are markets really recovering?) or maybe even to attack whenever we see some fantastic opportunity.

The Emerging Markets Losers Portfolio
contains the following stocks:
  1. Gazprom (RUS)
  2. SABIC - Saudi Basic Industries (KSA)
  3. First Bank of Nigeria (NIG)
  4. PTT Thailand (THA)
  5. MTN Group Telecom (SAF)
  6. National Bank of Pakistan (PAK)
  7. Teva Pharmaceuticals (ISR)
  8. Kuwait Finance House (KUW)
  9. CASH
Eight different stocks and a cash holding. All get an allocation of 11.1% (rounded). All stocks are from countries that struggled a lot and are still far from recovery, notwithstanding the fact that Western markets and some of the more successful Emerging Markets seem to be recovering already. In the coming months we will see to what extent this portfolio can challenge the others. We will then of course also tell more about our holdings.

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