Shadow Stock Portfolio Up 14.9% in 2010
The Model Shadow Stock Portfolio still has not reached its pre-2008 high but it has moved up 14.9% year to date (May 31, 2010). That is significantly better than the S&P 500, which is down 1.5% so far this year (as measured by the Vanguard 500 Index fund). Complete performance data can be viewed in Figure 1 and Table 3.
Volatility remains high with all the dramatic news in the eurozone and our own Gulf of Mexico oil disaster. As I write this in early June, the market has had several very weak days and it looks like volatility may remain high well into the summer.
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Table 1 lists the current holdings and Table 2 explains the rules for the portfolio. As shown in Figure 2 on page 33, the number of stocks passing the initial screen increased slightly to 16. Most of those passing were already in the portfolio and we made our final selection based on liquidity and lower price-to-book ratios.
One of the differences between a theoretical portfolio and a real one, in addition to transaction costs, is that in the real world investors make errors and I have made a number over the years. At
the end of last March, MedCath MDTH should have been sold but I missed the negative
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