Model Portfolio
Description
The Model Portfolio is where everything we do comes
together. Detailed and thorough research is put to work in a
collection of investments that will achieve our return objective.
The Model Portfolio is a high income portfolio. It
achieves a sustainable income level several times higher than the
income available from the stock market. The return objective of this
portfolio is 15% a year, consisting of 10% in income and 5% in
capital appreciation.
This portfolio will hold 10 equally weighted
investments. The portfolio is both diversified and concentrated. The
Model Portfolio started on May 1, 2009 with a deposit of $100,000.
Rules
The importance of rules and following our rules as
we manage our portfolios can not be over empathized. Disciplined and
strict adherence to our rules will assure us of achieving our return
objective.
Rule 1. 10 investments
Rule 2. Equally weighted positions
Rule 3. Adding one more investment requires one must be sold.
Rule 4. Portfolio is fully invested unless extreme conditions
exist
Rule 5. All investments must contribute to return objective.
Rule 6. Buy investments with
minimum yield of 7%.
Rule 7. Portfolio must be diversified.
Current Portfolio
The Model Portfolio is actively managed and changes
frequently. To get the latest high income investment
recommendations, the current portfolio allocation, and the latest
changes in investment strategy and portfolio transactions click HERE.
ALL CONTENTS
OF THIS REPORT ARE COPYRIGHT 2010 BY PANHANDLE PORTFOLIOS INC. ALL
RIGHTS RESERVED: REPRODUCING ANY PART OF THIS DOCUMENT IS PROHIBITED
WITHOUT THE EXPRESS WRITTEN CONSENT OF PANHANDLE PORTFOLIOS INC.
Model
Portfolio Update
November 1, 2010
The “Republican Rally” I talked about in last
month’s update is still on. The S&P 500 Stock Index moved 3.8%
higher for the month, bringing year-to-date performance to 7.8%. The
rally continues to be broad based with about 80% of the S&P stocks
moving higher during the month.
The Panhandle Portfolios Model Portfolio was up
1.6% for October, underperforming the Index for the second month in
a row. We will normally underperform in strong, broad–based up
markets, like this “Republican Rally”.
However we have still strongly outperformed the
S&P Index year-to-date. The Model Portfolio is up 20.7% versus
the Index up 7.8%.
As I have said before, I am reluctant to buy in
this kind of environment, and have not made any new recommendations
again this month. One of our holdings moved higher, driving its
yield to 4.9%, below our minimum of 5%. We sold on October 26 for
$35.50, giving us a total return of 82.6% in 18 months.
The recession is officially over, but I am not
sure that tells us very much. The trends I identified at the
beginning of this year, slow economic growth, low inflation and high
unemployment, are still very much in play. Despite this broad based
rally, I still believe we are in for a volatile market.
The following schedule shows the monthly
performance of the Model Portfolio compared to the S&P Index since
inception.
Investment
Performance
|
|
Model Portfolio |
S+P 500 Index |
|
2009 |
Period Return |
Cumulative Return |
Period Return |
Cumulative Return |
|
May |
1.9% |
1.9% |
5.6% |
5.6% |
|
June |
1.4% |
3.3% |
0.2% |
5.8% |
|
|
|
|
|
|
|
July |
5.2% |
8.6% |
7.6% |
13.9% |
|
August |
5.4% |
14.5% |
3.6% |
17.9% |
|
September |
3.3% |
18.3% |
3.7% |
22.3% |
|
3rd Quarter |
14.5% |
18.3% |
15.6% |
22.3% |
|
|
|
|
|
|
|
October |
-3.7% |
13.9% |
-1.9% |
20.0% |
|
November |
1.8% |
16.0% |
6.0% |
27.2% |
|
December |
4.2% |
20.8% |
1.9% |
29.6% |
|
4th Quarter |
2.1% |
20.8% |
6.0% |
29.6% |
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
January |
2.2% |
23.4% |
-3.6% |
25.0% |
|
February |
0.8% |
24.4% |
3.1% |
28.8% |
|
March |
6.5% |
32.6% |
6.0% |
36.6% |
|
1st Quarter |
9.8% |
32.6% |
5.4% |
36.6% |
|
|
|
|
|
|
|
April |
2.6% |
36.1% |
1.6% |
38.8% |
|
May |
-4.7% |
29.7% |
-8.0% |
27.7% |
|
June |
-1.1% |
28.3% |
-5.2% |
21.0% |
|
2nd Quarter |
-3.2% |
28.3% |
-11.4% |
21.0% |
|
1st Half |
6.2% |
28.3% |
-6.7% |
21.0% |
|
|
|
|
|
|
|
July |
4.7% |
34.4% |
7.0% |
29.5% |
|
August |
1.8% |
36.8% |
-4.5% |
23.6% |
|
September |
4.9% |
43.5% |
8.9% |
34.7% |
|
3rd Quarter |
11.9% |
43.5% |
11.4% |
34.7% |
|
|
|
|
|
|
|
October |
1.6% |
45.8% |
3.8% |
39.8% |
|
Year-to-Date |
20.7% |
N/A |
7.8% |
N/A |
Despite our short term
underperformance, I continue to be pleased with our investment
performance. The Model Portfolio is generating strong cash flow
which allows us to rebalance and reallocate on a regular basis.
Model
Portfolio Update
September 1, 2010
The Panhandle Portfolios High Income Model
Portfolio was up in a down market… again. Our portfolio was
UP 1.3% in August while the S&P 500 Stock Index was DOWN
4.5%. So far this year, the Model Portfolio is UP 12.7%.
This is spectacular performance versus the S&P Index DOWN 4.6%.
This highly volatile stock market is an
environment where a focused, high income investment approach will
really shine. And the Model Portfolio is clearly demonstrating this.
Six out of our eight holdings paid us this past month, giving us a
solid boost to performance.
Given the erratic stock market, I have held off
on adding new investments. Instead, I have added to existing
positions when prices are weak. I will also be adding to another
position to bring it more into line with our average holding size.
We still have too much cash and I will be
putting it to work soon. We are coming into the traditional weak
part of the year (September and October) so I am not being
aggressive about committing our cash. We will wait for prices to
come to us.
In last month’s update I promised you another
investment. The price ran up over 10% and I am still waiting for it
to come back down. In addition, we may be adding more bonds to our
portfolio this month, which will complete our holdings.
The following schedule shows the performance
of the Model Portfolio compared to the S&P Index since inception.
Investment Performance
|
|
Model Portfolio |
S+P 500 Index |
|
2009 |
Period Return |
Cumulative Return |
Period Return |
Cumulative Return |
|
May |
1.9% |
1.9% |
5.6% |
5.6% |
|
June |
1.4% |
3.3% |
0.2% |
5.8% |
|
|
|
|
|
|
|
July |
5.2% |
8.6% |
7.6% |
13.9% |
|
August |
5.4% |
14.5% |
3.6% |
17.9% |
|
September |
3.3% |
18.3% |
3.7% |
22.3% |
|
3rd Quarter |
14.5% |
18.3% |
15.6% |
22.3% |
|
|
|
|
|
|
|
October |
-3.7% |
13.9% |
-1.9% |
20.0% |
|
November |
1.8% |
16.0% |
6.0% |
27.2% |
|
December |
4.2% |
20.8% |
1.9% |
29.6% |
|
4th Quarter |
2.1% |
20.8% |
6.0% |
29.6% |
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
January |
2.2% |
23.4% |
-3.6% |
25.0% |
|
February |
0.8% |
24.4% |
3.1% |
28.8% |
|
March |
6.5% |
32.6% |
6.0% |
36.6% |
|
1st Quarter |
9.8% |
32.6% |
5.4% |
36.6% |
|
|
|
|
|
|
|
April |
2.6% |
36.1% |
1.6% |
38.8% |
|
May |
-4.7% |
29.7% |
-8.0% |
27.7% |
|
June |
-1.1% |
28.3% |
-5.2% |
21.0% |
|
2nd Quarter |
-3.2% |
28.3% |
-11.4% |
21.0% |
|
1st Half |
6.2% |
28.3% |
-6.7% |
21.0% |
|
|
|
|
|
|
|
July |
4.7% |
34.4% |
7.0% |
29.5% |
|
August |
1.3% |
36.1% |
-4.5% |
23.6% |
The performance of the Model Portfolio is
nothing short of spectacular. Remember, at the start of this year we
were significantly behind the benchmark. We have steadily pulled
ahead of the market, and that is where I expect us to stay. The long
term importance of earning something from your investments every day
cannot be over empathized.
I am repeating my outlook comments from last
month. I expect the rest of this year to be volatile. General
economic news will continue to be poor. Economic growth is slowing,
consumption is flat, and all loans are declining. We still have 18%
underemployment.
I forecast in January we would see
differentiation this year especially from company’s with exposure to
the fast growing emerging markets countries. That’s what happened
in July.
Market volatility and stock differentiation is
not over. The general backdrop is poor. But I am not changing my
full year forecast for the stock market, up around 10%. That means a
15% improvement from here as we go into this weak period.
I think the probability is improving for a
strong rally after the November elections. We will continue to add
to our portfolio as I identify companies that can produce strong and
sustainable dividend or interest income.
Model Portfolio Update
August 2, 2010
Our portfolio was UP 4.7% for the month
bringing our year-to-date performance UP 11.3%. We
underperformed our benchmark for the month but are still way ahead
of the market this year.
The S&P500 Stock Index was up 7.0% for the
month but is still down 0.1% so far this year. The major drivers of
the S&P Index performance for the month were the double digit price
increases in many of America’s largest multinational manufacturers;
companies such as Textron, Weyerhaeuser, Monsanto, Ford, Cummins,
Eaton, Deere, DuPont, Dow Chemical, US Steel, and Caterpillar. Many
of these very fine companies pay no dividend and none pay a dividend
higher than the S&P average, which is a paltry 2.0%.
We will never own these types of companies. And
as a result we will always underperform in this type of market
environment. That’s Ok. We will just keep collecting our dividends.
The following schedule shows
the performance of the Model Portfolio compared to the S&P Index
since inception.
|
|
Model Portfolio |
S+P 500 Index |
|
2009 |
Period Return |
Cumulative Return |
Period Return |
Cumulative Return |
|
May |
1.9% |
1.9% |
5.6% |
5.6% |
|
June |
1.4% |
3.3% |
0.2% |
5.8% |
|
|
|
|
|
|
|
July |
5.2% |
8.6% |
7.6% |
13.9% |
|
August |
5.4% |
14.5% |
3.6% |
17.9% |
|
September |
3.3% |
18.3% |
3.7% |
22.3% |
|
3rd Quarter |
14.5% |
18.3% |
15.6% |
22.3% |
|
|
|
|
|
|
|
October |
-3.7% |
13.9% |
-1.9% |
20.0% |
|
November |
1.8% |
16.0% |
6.0% |
27.2% |
|
December |
4.2% |
20.8% |
1.9% |
29.6% |
|
4th Quarter |
2.1% |
20.8% |
6.0% |
29.6% |
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
January |
2.2% |
23.4% |
-3.6% |
25.0% |
|
February |
0.8% |
24.4% |
3.1% |
28.8% |
|
March |
6.5% |
32.6% |
6.0% |
36.6% |
|
1st Quarter |
9.8% |
32.6% |
5.4% |
36.6% |
|
|
|
|
|
|
|
April |
2.6% |
36.1% |
1.6% |
38.8% |
|
May |
-4.7% |
29.7% |
-8.0% |
27.7% |
|
June |
-1.1% |
28.3% |
-5.2% |
21.0% |
|
2nd Quarter |
-3.2% |
28.3% |
-11.4% |
21.0% |
|
1st Half |
6.2% |
28.3% |
-6.7% |
21.0% |
|
|
|
|
|
|
|
July |
4.7% |
34.4% |
7.0% |
29.5% |
I am pleased with the Model
Portfolio’s performance this year. We have steadily pulled ahead
of the market, and that is where I expect us to stay. The long
term importance of earning something from your investments every
day cannot be over empathized. This coming month illustrates the
fruits of this investment strategy. Six out of our eight
holdings will pay us a dividend.
I expect the rest of this year
to be volatile. General economic news will continue to be poor.
Economic growth is slowing, consumption is flat, and all loans
are declining. We still have 18% underemployment. In July we saw
strong earnings reports from many of America’s multinationals,
such as the one I listed above. This was part of my January
forecast; we would see differentiation this year especially from
company’s with exposure to the fast growing emerging markets
countries. That’s what happened in July.
My point is this market correction and stock
differentiation is not over. The general backdrop is poor. We
will continue to add to our portfolio as I identify companies
that can produce strong and sustainable dividend income.
The Model Portfolio is performing as designed.
It is generating strong cash flow which allows us to rebalance
and reallocate on a regular basis.
Model Portfolio Update
July 2, 2010
The Panhandle Portfolios High Income Model
Portfolio has enjoyed a spectacular first half. The Model
Portfolio’s performance is positive in a negative stock market
environment as the following schedule illustrates:
|
2010 |
Model Portfolio |
S&P 500 Stock Index |
|
1st Quarter |
9.6% |
5.4% |
|
2nd Quarter |
-3.2% |
-11.4% |
|
1st Half |
6.2% |
-6.7% |
The Model Portfolio is UP 6.2% versus
the S&P DOWN 6.7%. This is an outstanding performance result
and confirms the importance of a high income investment approach.
The stock market has been in a significant and
broad-based correction since late April. The S&P 500 Stock Index is
off about 15.6% from its high in April and is still in a strong
downtrend.
In January I forecast 1% to 2% economic growth,
low inflation, and the S&P 500 Stock Index up about 10% for the
year. My outlook is unchanged. I also said there was a 20%
correction out there somewhere. We are in it.
I forecast strong earnings in some sectors and
poor earnings in others. That also has not changed. Broad–based
price declines in strong earnings sectors give us a valuable buying
opportunity. We will be adding several positions to our model
portfolio in July.
Remember, Panhandle Portfolios is an income
investor. We and all other income investors greet normal corrections
as opportunities rather than risks. The stocks we have bought and
are focused on produce strong and sustainable dividend income. We
are buying in this correction and we thank those panicked investors
willing to sell us valuable investments at lower prices than two
months ago.
The following schedule shows the performance
of the Model Portfolio compared to the S&P Index since inception.
Investment Performance
|
|
Model Portfolio |
S+P 500 Index |
|
2009 |
Period Return |
Cumulative Return |
Period Return |
Cumulative Return |
|
May |
1.9% |
1.9% |
5.6% |
5.6% |
|
June |
1.4% |
3.3% |
0.2% |
5.8% |
|
|
|
|
|
|
|
July |
5.2% |
8.6% |
7.6% |
13.9% |
|
August |
5.4% |
14.5% |
3.6% |
17.9% |
|
September |
3.3% |
18.3% |
3.7% |
22.3% |
|
3rd Quarter |
14.5% |
18.3% |
15.6% |
22.3% |
|
|
|
|
|
|
|
October |
-3.7% |
13.9% |
-1.9% |
20.0% |
|
November |
1.8% |
16.0% |
6.0% |
27.2% |
|
December |
4.2% |
20.8% |
1.9% |
29.6% |
|
4th Quarter |
2.1% |
20.8% |
6.0% |
29.6% |
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
January |
2.2% |
23.4% |
-3.6% |
25.0% |
|
February |
0.8% |
24.4% |
3.1% |
28.8% |
|
March |
6.4% |
32.4% |
6.0% |
36.6% |
|
1st Quarter |
9.6% |
32.4% |
5.4% |
36.6% |
|
|
|
|
|
|
|
April |
2.6% |
35.9% |
1.6% |
38.8% |
|
May |
-4.7% |
29.6% |
-8.0% |
27.7% |
|
June |
-1.1% |
28.3% |
-5.2% |
21.0% |
|
2nd Quarter |
-3.2% |
28.3% |
-11.4% |
21.0% |
|
1st Half |
6.2% |
28.3% |
-6.7% |
21.0% |
Year to date, our portfolio is up 6.2% which
compares very favorably with the S&P Index down 6.7%. You will note
we have solidly pulled ahead of the S&P Index in since inception
performance (28.3% versus 21.1%).
I am especially pleased about the Model
Portfolio’s performance in this correction. Our performance for the
quarter was off 3.2% but is small compared to the decline in the S&P
Index down 11.4%.
As I have said before this clearly illustrates
the critical importance of income. I will continue to focus on high
income investments that generate dependable and sustainable
distributions.
I have been waiting, now for two months, for
this correction phase to unfold. We are in a solid market downtrend.
The prices of all of our holdings and prospects are down. We hold a
much higher cash position than desired, but this is a short term
consequence of waiting for the correction phase to present better
buying opportunities.
Nobody knows where the bottom of this
correction is, but we have already experienced a significant decline
(15.6%) and the prices of our income stocks are now attractive so we
can add to existing positions and establish new positions.
We added a new position today (Yes! We are
buying in this market that is dropping like a stone). In
addition, I have added to an existing position that is nothing short
of a gift from panicked investors.
And next week, I will be adding another new
position to the portfolio. This is a “bond in drag” that will pay us
12% issued by one of the largest telecommunications equipment
companies in the world.
You won’t want to miss these investing
opportunities. Stop worrying and start beating the pants off the
stock market.
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