233 How to Review
Your Portfolio – Part 2
Puget Sound Chapter
Mike Torbenson
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BETTERINVESTING – PUGET SOUND CHAPTER
Disclaimer
•
The information in this presentation is for educational purposes only and is
not intended to be a recommendation to purchase or sell any of the stocks,
mutual funds, or other securities that may be referenced. The securities of
companies referenced or featured in the seminar materials are for
illustrative purposes only and are not to be considered endorsed or
recommended for purchase or sale by BetterInvesting™ National
Association of Investors Corporation (“BI”) or its Puget Sound Chapter
(“PSC”) or volunteers. The views expressed are those of the instructors,
commentators, guests and participants, as the case may be, and do not
necessarily represent those of BetterInvesting™ or PSC. Investors should
conduct their own review and analysis of any company of interest before
making an investment decision.
•
Securities discussed may be held by the instructors in their own personal
portfolios or in those of their clients. BI presenters and volunteers are held
to a strict code of conduct that precludes benefiting financially from
educational presentations or public activities via any BetterInvesting
programs, events and/or educational sessions in which they participate.
Any violation is strictly prohibited and should be reported to the President
of BetterInvesting or the Manager of Volunteer Relations.
BETTERINVESTING – PUGET SOUND CHAPTER
Course Objectives
Use the knowledge, skills and
resources needed to actively
manage a portfolio of quality stocks
to achieve a 5-year annualized return
of 15% or better
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Agenda
What, Why & How
PART 1
• Diversity
– Purpose & Resources
– Guidance (Metrics & Goals)
– How-to Steps
• Quality
PART 2
• Value
• Performance
Resources
• Toolkit 6
– PERT
– Defense
– Sector/Industry
• Club Accounting
– Valuation
– Performance
– Capital Gains & Losses
• Review Spreadsheet
• Review Form
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BETTERINVESTING – PUGET SOUND CHAPTER
Portfolio Review Form
Part 1
Diversity
Quality
Part 2
Value
Performance
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BETTERINVESTING – PUGET SOUND CHAPTER
Portfolio Review Spreadsheet
DATA/REFRESH ALL to update
Row Labels
Technology
Financial
Energy
Industrials
Grand Total
%Total Num
85%
8%
7%
0%
100%
5
1
1
1
8
$Value
$135,524
$12,974
$11,695
$0
$160,194
Growth Diversity
15%
10%
7%
Sector Diversity
Enter your data in the blue cells
Portfolio
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Valuation
Valuation Valuation
Stock
AAPL
AFL
AL
BIDU
CTSH
GOOGL
RAX
XOM
Shares
350.0
205.0
0.0
248.0
300.0
62.0
93.0
114.0
Price
$94.03
$63.29
$38.48
$191.20
$50.30
$593.08
$35.86
$102.59
Diversity
$20,024
12.5%
Sector/Industry
Value
$32,911
$12,974
$0
$47,418
$15,090
$36,771
$3,335
$11,695
Valuation
% Port
21%
8%
0%
30%
9%
23%
2%
7%
Sector
Technology
Financial
Industrials
Technology
Technology
Technology
Technology
Energy
Size by Growth
57%
Small
36%
Medium
7%
Large
Growth =
15.0%
P/E=
0.0%
Quality
Valuation
14.3%
14.3%
0.8%
2.17
9.3%
13.6%
Defense
Defense PERT
PERT
Trend
PERT
Est. EPS Dividend
Est. Sales Growth Growth
Yield
U/D
PAR
Return
9.0%
9.6%
2.0%
1.8
8.4%
13.1%
8.0%
6.0%
2.3%
2.0
6.6%
1.5%
20.0%
20.0%
30.0%
5.7
21.1%
32.0%
20.0%
20.0%
0.0%
2.6
11.7%
19.1%
15.0%
15.4%
0.0%
4.3
15.5%
18.3%
16.0%
16.0%
0.0%
1.3
6.3%
10.8%
15.0%
15.0%
0.0%
6.0
18.4%
22.9%
6.5%
6.0%
2.7%
0.5
4.4%
6.9%
Quality
Value
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BETTERINVESTING – PUGET SOUND CHAPTER
Portfolio Review Spreadsheet
Return
Summary
Percent Winners =
Percent Loosers =
Percent over 15% =
93%
7%
50.0%
BIVIO/REPORTS/CAPITAL GAINS & LOSES/Spreadsheet/Open
Description
Acquisition Date Date Sold Sales Price
Cost Basis Wash Sale Gain/(Loss)
50 BP Plc (BP)
7/23/2010 3/19/2013
2,049.03 1,837.99
211.04
158 BP Plc (BP)
1/31/2012 3/19/2013
6,474.94 7,095.87
-620.93
48 Fiserv Inc (FISV)
1/13/2005 4/9/2013
4,122.79 1,907.44
2215.35
175 Intel Corp (INTC)
8/25/2004 5/21/2013
4,213.85 3,815.45
398.4
219 Intel Corp (INTC)
1/13/2005 5/21/2013
5,273.34 5,013.15
260.19
64 Starbucks Corp (SBUX)
7/26/2007 5/21/2013
4,095.75 1,724.15
2371.6
124 Starbucks Corp (SBUX)
11/21/2007 5/21/2013
7,935.51 2,818.08
5117.43
99.999996 AFLAC Inc (AFL)
10/24/1994 6/18/2013
5,764.90
566.26
5198.64
78 Fiserv Inc (FISV)
1/13/2005 6/18/2013
6,831.90 3,099.59
3732.31
22 Fiserv Inc (FISV)
2/9/2010 6/18/2013
1,926.95 1,011.63
915.32
25 Mc Kesson Corp (MCK)
5/1/2003 6/18/2013
2,868.35
613.31
2255.04
60 Mc Kesson Corp (MCK)
11/22/2010 6/18/2013
6,884.04 3,957.79
2926.25
6 Starbucks Corp (SBUX)
11/21/2007 6/18/2013
395.84
136.36
259.48
100 Starbucks Corp (SBUX)
6/25/2008 6/18/2013
6,597.34 1,717.83
4879.51
Capital Gains
Bought
@
36.76
44.91
39.74
21.80
22.89
26.94
22.73
5.66
39.74
45.98
24.53
65.96
22.73
17.18
Sold @
40.98
40.98
85.89
24.08
24.08
64.00
64.00
57.65
87.59
87.59
114.73
114.73
65.97
65.97
Held
(yrs)
2.66
1.13
8.24
8.74
8.36
5.82
5.50
18.66
8.43
3.36
10.14
2.57
5.58
4.98
CAR
4%
-8%
10%
1%
1%
16%
21%
13%
10%
21%
16%
24%
21%
31%
Return
Calculations
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Buy/Sell History
Under-valued Today
Over-valued Today
VALUE
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Value
• Purpose – Find potential buys and
sells demonstrating appropriate
– Potential Total Return
– P/E Expansion
– Risk
• Resources
– PERT
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BETTERINVESTING – PUGET SOUND CHAPTER
Buy Guidance
• Manage reward by buying only when potential return
is greater than your portfolio potential return
• Manage P/E expansion by buying when the stock is
historically underpriced, ideally at or near the bottom
of your estimated business cycle (4B P/E)
• Manage risk by buying when Projected Relative
Value and PEG are below 5-year averages and U/D
is high (>3)
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1. Qualified to Buy Low?
What is “low”?
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
Toolkit PERT
• Right side provides valuation ratios
• % Total Return shows potential reward
• U/D and RV manage downside risk
• PEG manages growth risk
• Proj P/E vs. Proj 5yr High and Low
manage P/E expansion potential
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
– Manage reward by buying only when
potential return is greater than your
portfolio potential return
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
Toolkit PERT
• Sort by Total Return (high to low)
• Total Return > 14.1%
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
Manage for Risk
• RV < 100 AND
• PEG < 150 AND
• U/D 3-10
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
Manage for P/E Expansion
• Near Bottom (5yr Lo P/E)
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BETTERINVESTING – PUGET SOUND CHAPTER
1. Qualified to Buy Low?
Only QCOM and LKQ meets
all criteria to BUY LOW!
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BETTERINVESTING – PUGET SOUND CHAPTER
Sell Guidance
• Manage reward by selling only when potential
return is less than your portfolio potential return
• Manage P/E expansion by selling when the
stock is historically overpriced, ideally at or near
the top of your estimated business cycle (4A
P/E)
• Manage risk by selling when Projected Relative
Value and PEG are above 5-year averages and
U/D is low (<3)
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Qualified to Sell High?
Which stocks are
“high”?
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Qualified to Sell High?
Toolkit PERT
• Sort by Total Return (high to low)
• Total Return < 14.1%
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Qualified to Sell High?
Manage for risk
• RV > 100 AND
• PEG > 150 AND
• U/D < 3
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Qualified to Sell High?
Manage for P/E
expansion
• P/E near Hi P/E
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Qualified to Sell High?
GMCR & COST meet all
criteria to SELL HIGH!
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BETTERINVESTING – PUGET SOUND CHAPTER
Value Summary
• What is our strategy to optimize
portfolio return?
• Buy near the bottom; Sell near the
top of the business cycle
• What are we managing for buy and
sell?
• Total Return, P/E expansion and
risk of loss and growth
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BETTERINVESTING – PUGET SOUND CHAPTER
Practice
Recommendations?
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Potential Risk
Potential Return
Historical Return (AIRR)
PERFORMANCE
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BETTERINVESTING – PUGET SOUND CHAPTER
Performance
• Purpose – measure your performance
over time to determine if you are
improving and/or achieving your goals
• Resources
– Capital Gains Report
– Excel Spreadsheet
– Potential Return Report Card
– Investment Performance Reports
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BETTERINVESTING – PUGET SOUND CHAPTER
Performance Guidance
• Backward with Realized Gains
– Capital Gains vs. Rule of 5
• Forward with Potential Return
– 15% or better?
• Realized + Unrealized with AIRR
– Improving?
– 15% or better
– Compared to market?
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BETTERINVESTING – PUGET SOUND CHAPTER
1. History (Realized Gains)
Are we making money
when we sell?
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BETTERINVESTING – PUGET SOUND CHAPTER
1. History (Realized Gains)
For the last 12 months:
• What percent of sells (by block) > 0%
• What percent of sells (by block) > 15% CAR
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BETTERINVESTING – PUGET SOUND CHAPTER
1. History (Realized Gains)
Are we making money when we
sell?
Yes, 67% are positive! (above 0)
14.8% made more that 15%!
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Potential Return
Is our portfolio positioned to
continue making money?
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Potential Return
Toolkit Portfolio Report Card provides …
• [Potential %] Total Return = 14.1%
• Projected Average Return = 8.9%
• Upside/Downside Ratio = 2.8
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BETTERINVESTING – PUGET SOUND CHAPTER
2. Potential Return
Is our portfolio positions to continue
making money? YES!
POTENTIAL Total Return of 14.1%
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BETTERINVESTING – PUGET SOUND CHAPTER
3. Realized + Unrealized
(AIRR)
Is our Realized + Unrealized
performance improving over time?
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3. Realized + Unrealized
(AIRR)
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BETTERINVESTING – PUGET SOUND CHAPTER
3. Realized + Unrealized
(AIRR)
Is our Realized + Unrealized
performance improving over time?
YES!
-0.1% since inception
13% for last 5 years
16.7% for last twelve months
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BETTERINVESTING – PUGET SOUND CHAPTER
Performance Summary
• What is the purpose of tracking your performance?
• Determine if you are achieving goals and/or
improving.
• What is the difference between realized and
unrealized gains?
• Realized is history. Unrealized is potential if sold
today.
• What is AIRR? Realized or Unrealized
• Annualized Internal Rate of Return. Both real and
unrealized. Balance at start date, all real cash in and
out during period. Assumes selling all assets at end
date.
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BETTERINVESTING – PUGET SOUND CHAPTER
Practice
Future
Past Year
Past + Current
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BETTERINVESTING – PUGET SOUND CHAPTER
Review Summary
• Manage diversity to minimize risk and
optimize growth
• Monitor quality and adjust expectations
in accordance with each company’s
business cycle
• Monitor value as anticipated by
business cycle – buy low for potential
• Sell high to achieve performance goals
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BETTERINVESTING – PUGET SOUND CHAPTER
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BETTERINVESTING – PUGET SOUND CHAPTER
Make A Difference In
Someone’s Life
If you have benefited from
BETTERINVESTING,
please pick up some
BETTERINVESTING
materials
and introduce others to this
opportunity.
BETTERINVESTING – PUGET SOUND CHAPTER
Questions?
[email protected]
BETTERINVESTING – PUGET SOUND CHAPTER
APPENDIX
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BETTERINVESTING – PUGET SOUND CHAPTER
Size
• Small <= $500 million
– >=15% growth
• Large >= $5 billion
– >= 7% growth
• Medium = between
– >= 10% growth
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BETTERINVESTING – PUGET SOUND CHAPTER
Tools Illustrated
• Toolkit 6
– PERT (slide 12, Value)
– Portfolio Report Card (slide 13, Value)
• Bivio Club Accounting
– Capital Gains (slide 7)
– Performance Benchmark (slide 37,
Performance)
• Excel and Word
– Portfolio Review Spreadsheet (slides 6,7)
– Portfolio Review Form (slide 5)
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