Riding Herd Over My Model’s Lineup Yields Gains

Author: Bob Freedland

Covestor model: Buy and Hold Value

The Buy and Hold model had a good month in February, maintaining a slight edge over the S&P 500 index for the month.  Since its inception nearly 3 years ago, I have ridden herd over the holdings in this model, striving to maintain consistent performance and limit losses.

Virtually each trading day, I examine the two- year chart of each holding, review the latest news and decide whether each holding deserves to continue in this portfolio.  Unfortunately, this has resulted in greater turnover than I would like as my patience with underperforming stocks is limited and they are quickly cut from the model.  At the same time I continue to look for stocks that appear to be steadily moving higher with underlying fundamentals that validate these moves.

Earnings reports are reviewed and stocks that fail to meet expectations and experience subsequent stock price weakness are high on my list of stocks to be sold.  Those stocks that do quite well and outperform the rest of the portfolio are also candidates for partial sales as I am happy to often lock in a little of the large gains a particular holding may have produced.

Over this last year this intense examination of each of the holdings has resulted in a performance that has rivaled the S&P.  Certainly one of my own experiences has been the reality of the large challenge that matching or exceeding general indices like the S&P represent for the individual investor.

Healthcare: The past month in the Healthcare model has reversed a generalized correction in this portfolio as I worked to expand the holdings and identify stronger stocks in the biotech and healthcare management fields.

If we can consider two large trends in healthcare, they would involve new technologies to address formerly difficult or expensive problems in medicine, innovative surgical devices including robotic surgery, new drugs and therapies revolving around genetic engineering, and generalized healthcare delivery including managed care and pharmacy benefit management.

I have broadened the holdings and shall work them to develop a strong portfolio–hanging on to the strongest healthcare stocks and dropping those that underperform the market.  I hope this continues to strengthen the performance of this model.