Chowder

Explicación de CÓMO CONSTRUIR CARTERA

"I’m working on a portfolio now as I type, of a person around 40 who has built out the portfolio to 68 positions, and is now ready for the next step which is to build the portfolio up in value.

Young folks, this is for you! What I am going to suggest to this person is the exact same thing I do for my 32 year old son.

We are going to establish a full position at $4k each, now that the positions have been built out by investing small. I want that person to select about 15 companies out of the 68 they own, that they would be comfortable owning regardless of size, companies that do not get trimmed, companies that are considered what I call Core holdings based on my definition of core. Core is decided before the companies are built up in size.

The objective first is to reinvest all dividends back into Core holdings only in this portfolio, all others dividends are to be collected in cash and used to build positions. All Core holdings are to be built up to full position first and then set on automatic pilot with dividends reinvested while the dividends collected in cash, and the monthly cash contributions are used to bring all non-core positions up to 1/2 size minimum. Most of you saw me do that with my son this year.

Once all core are full positions with dividends reinvested, and all other positions are at least 1/2 a full position with dividends collected in cash, we will then raise the value of a full position to $6k and a 1/2 sized position to $3k and get them all weighted properly one at a time.

As the portfolio grows, the value of a full position rises, and the process is repeated over and over until the retirement objective is met."

Lo que tiene sentido es promediar al alza pero con valoraciones razonables. Si por una casualidad de la vida acertamos a comprar un empreson que cada año gana mas lo normal es que cada año cotice mas alto y con el paso de los años ya nunca sera posible volver a comprarla al precio inicial lo cual no quiere decir que no podamos seguir comprando mas y mas acciones siempre que su valoracion sea razonable.

Lo que no tiene sentido es promediar al alza sin tener en cuenta las valoraciones porque podemos terminar promediando en Coca Cola en 1997 cuando cotizaba al mismo precio que hoy dia 20 años despues.

Hola Vash, muchas gracias por comentar.

El promediar al alza, entiendo que es el primer punto que dices. Espera a resultados de empresas y en función de ellos elige las compras.

El segundo punto, creo que también lo aplica a sus core. Compra independientemente del precio (y quizá resultados). Según creo por lo que voy leyendo, una vez elegida una empresa “core” va a todas con ella.

“I don’t play the 100% correct game, if I’m successful on just 80% of my positions I’ll exceed our goals.
Too many people focus on what’s not working and I look at what is working and add some more. I am not going to eliminate mistakes no matter how hard I try, I’m not that smart.”

Un saludo.

Intento contestar a las cuestiones con lo que le he ido leyendo este tiempo.

En primer lugar chowder escoge las empresas por lo que se dedican. Le interesa captar los dólares de los consumidores sin importar el ciclo. El caso es que una de estas empresas que elige va a estar más arriba en 5 y 10 años (eso cree, claro).

Después, se basa en los precios obtenidos de varias firmas de analistas para saber si está cara o no. Si es una empresa de calidad y no está más de un 10% sobrevalorada (normalmente), añade también cuando superan expectativas, porque eso indica que en el futuro va a valer más.

Su estrategia depende también del momento de mercado, no es lo mismo uno alcista como ahora que uno bajista.

En 1999 no usaba esta estrategia, le costó pasar dos crisis para pergeñarla al ver cómo respondían algunas empresas que llevaba. El caso es que no lleva apenas tecnológicas salvo en cefs, con lo que le hubiera afectado menos que a la mayoría. Y seguiría recibiendo los dividendos crecientes, que es de lo que se trata.

Tenéis que tener en cuenta también que la estrategia funciona porque a la gente le cuesta ver el rojo en sus carteras.

La otra parte de la estrategia es entrar en buenas empresas que están con dudas e iniciar hasta media posición. Luego ir construyendo en la recuperación, con lo que vas añadiendo cuando superan expectativas y tu posición estará en verde a partir de ahí.

El suele hablar para jóvenes inversores. Que no hagan caso del ruido y elijan bien las empresas. Para eso él muestra las suyas y las acciones que sigue en tiempo real.

“You can talk about price all you want, it’s just not a focus for me and many, many people who read these comments.
I continue to review portfolios where price was a concern and those folks are now even more concerned because the income is falling short, and I have reviewed quite a few portfolios over the past few weeks from people who read these comments.
Every single one of them was falling short on income and most of them near or at retirement age. It’s why I have been pounding the table for people to build the income first and then when they have more than they need they can buy all the GOOGL, AMZN and other stuff they want. They can worry about price and what they pay going forward after their safety needs are met first.
Many of the people we have read comments from, Buy & Hold, Crosetti, AS and others changed their approach after their income needs were met. They didn’t accumulate what they have by managing their portfolios the way they do now. They may have had various degrees of doing so, but now that their needs are met they can do other things.
I just want to balance what folks who discuss price and discount valuations have to say by keeping folks focused on the primary objective which is income.
Many folks here don’t have positions as large as they want because they were too focused on pricing and not focused enough on how the company was doing. We celebrate these 10% dividend growth announcements but in my case they are coming off full and overweight positions where others only have 1/2 sized positions or there abouts. We hear people all the time saying, I wish I owned more. It’s their view on pricing, and lack of a forward looking vision that kept their positions smaller than they’d like them to be.
Price may be more important to some, so important that they would rather lose out on owning something if they can’t get their price. I figure the market could care less what my price is so I focus on building companies that are profitable for me and don’t worry about pricing. If the market corrects, I promise you, I will be adding more, but I’m going to add more even if the market continues to rise. To me, it’s all about how much income my assets are generating for me to live comfortably in retirement where I don’t have to worry about inflation or market conditions.
Others are free to discuss price, I’m staying focused on adding shares and building income/cash flows.”

For young investors only investing $1k to $2k at a time, it doesn’t matter. We’ve already covered that in previous comment streams. Anything they buy today, the price they pay, will be irrelevant 20, 30, 40 years from now.
I am not going to do any value appraisals because I saw too many young people passing on good companies because the group convinced them the valuations were too high and for them it doesn’t make a difference when investing small.
Take a look at MMM. … Back on 7-28-17 fair value for MMM was $169. It never came down to $169 and today sits at $234. It was selling at $197 at the time.
If one was investing their $1k at the time they could have purchased 5 shares @ $197. If they got their $169 FV price, which never did hit, they still only got 5 shares.
I don’t want young investors doing all or nothing, my price or no price. I want them to open small positions in good companies and build their portfolio out in numbers. Once they reach their number, whether it be 20 companies, 30 companies, 40 companies or more, by then you know who is profitable and who isn’t and you start building those who are profitable.
Again I will reiterate, if a company you select today is going to be successful going forward, then it’s going to outgrow any valuation you attach to it today. Valuation becomes irrelevant."

Y ahora viene la parte en la que no estoy de acuerdo.

“You know what happens when you teach new investors about valuations? They load up on CVS, GILD, TGT, GE and a slew of other under-performers because that’s where the value is when you are in a momentum type market. I don’t want them loading up on under-performers, I want them owning companies that are doing well, and to do that you have to ignore the valuations.
It all has to do with the condition of the market and the market is not, and has not rewarded value for the last couple of years. We need a market correction for value to come back into play and then we’ll adjust the metrics once again.”

Al parecer, considera que tal y como está el mercado, comprar empresas con problemas o disminución de la cotización puede ser contraproducente.

Para mí, si una empresa te gusta, mejor que ahora esté a precios bajos. Más podré cargar. La apuesta es a largo plazo y ya he visto el rojo (muy rojo) en mi cartera. No me asusta que la empresa se estanque mientras siga con dividendos crecientes. El día que cumpla expectativas o las supere (véase GWW), subirá como la espuma.

Y para enfatizar mi opinión, aquí va otro comentario suyo:

“I’m not sure it matters. It holds too many people back, looking too much for perfection as opposed to simply buying good companies.
A year and a half ago people were selling DE, worried about dividend growth, worried about revenue growth, worried about valuations, worried, worried, worried, and I was questioned on my purchase of DE.
People wanted to wait for the metrics to confirm it was time to buy and I kept saying I just want to own good companies. I’ve also stated that if people wait and wait and wait for things to line up, they won’t pay for the company when it does what it is they wanted it to do before buying.
DE is up 71% in a year and a half, and for a young person building a portfolio, that’s a nice confidence boost.
The numbers finally support the valuations for DE as they beat on earnings and revenue but it has already moved 71% and I doubt it grows another 71% over the next year and a half.
The valuations for me are basically worthless. First of all, I’m not selling shares so it doesn’t matter what I pay. My focus is income and what does matter is how many shares I add. I’m not going to worry about, I could have added a few more shares by waiting, I’m going to buy more anyway if prices drop, I’m going to buy more if prices rise, no need to worry about value. Good companies will outgrow any valuation you look at today, and if it’s going to outgrow it, why should it matter?
Worrying about valuations kept me from adding more shares of outperforming companies, not aid me.”

“I constantly hear from folks afraid of putting money to work under current market conditions. I hear from folks who are afraid their portfolios won’t grow as much as they prefer. I hear from folks who fear their capital gains being taken away. I hear from folks who fear dividend cuts. And most important, I hear from people who are afraid they are paying too much for quality companies.
In teaching my kids how to overcome fear, I told them that the brain is not always subject to logic, but the brain is always subject to action. I asked my daughter what her greatest fear was and she said jumping out of a plane. I had her jump out of a plane and now she feels like she can do anything. Action is what overcomes fear, but it’s got to be good action.
People seem to think that if they buy a company at a discount that if a correction comes it won’t drop as much as the market. It seems logical that it may soothe some nerves but what difference does it really make whether something is down 35% or 50%? The only difference I see is that if it’s down, I don’t lock those losses in, and that if it’s down, it’s capable of rebounding. That’s all that matters to me, that it rebounds.
My KO position wasn’t down nearly as much as my O position during the Great Recession, but I had no intentions of selling either one, so what difference does it make that O was down so much more? It actually came back much more stronger than KO did.
My portfolio value, what some of you refer to as principal, dropped 35% from peak to valley while the S&P 500 dropped 57% in value. So? What difference did it make? I didn’t sell my index fund in the 401k and I didn’t sell my assets in the brokerage accounts and I actually added to my assets in both accounts and my income kept rising during the Great Recession. … Now think about that concept for a minute. … Portfolio value (principal) was dropping day after day, week after week, and my income kept rising. I stayed 100% invested in equities through the worst recession since pre WWII. … How bout that!
How did I manage my fears? I put together a plan of action that had me owning high quality (BBB+ or better) companies with most of them being in the defensive sector. I prefer a portfolio that is at least 50% defensive and that includes consumer staples, utilities and healthcare.
As I applied my strategy, the thing that gave me hope and strength was watching the income grow each quarter. When I clicked on to my brokerage account I was going straight to transactions to check on those dividends and all I saw was green, green, green. And here’s what I learned.
If you have a $1 million portfolio generating income currently, and the market has a correction where your portfolio value drops to $600k, that $600k portfolio is still generating the income of a $1 million portfolio as long as you don’t sell your assets, and to prevent you from the temptation of selling your assets, own high quality companies you are confident will survive, thrive, and head back up once the correction is over.
When the market corrects, it only adjusts your share prices, it doesn’t take away ownership shares, and dividends are based on ownership shares, so your income continues to flow, and it’s that income that is providing for my retirement. I never bought into the concept of selling 4% of my equities each year to generate cash. Needing to sell assets in a declining market was the one thing I wanted to avoid.
Think smart, act smart. Manage your fears by putting together a plan of action centered around safety and simply follow through.”

Pues yo como tu, para nada de acuerdo en toda esa segunda parte. ¿Pero vamos a largo plazo o quiere controlar el market timing y piensa solo en que va a marcar la cotización en los próximos 4 meses? Porque en esa segunda parte, como idea principal tenemos que hay que comprar las compañías que van muy bien y que baten earnings en cada nuevo anuncio de resultados, porque así para alguien que comienza, va a ver su cartera en verde. ¿Mentalidad cortoplacista no?

Si confías en el negocio de CVS, TGT, GE o GIS, ahora puede ser un buen momento de comprarlas, no cuando estaban a 110$, 80$, 30$ o 70$. ¿Que las ves en rojo? ¿Y? Si vas a largo plazo y no las vas a vender, ¿que mas da lo que marquen durante el próximo año? Y ya lo de que las valoraciones no valen de nada, ya para mear y no echar gota. Claro, la locura humana hace algunas veces que las valoraciones no se ajusten y no sirvan, ¿pero como no van a valer de nada?

No es market timing. Se trata de que si solo añades a empresas perdedoras, no estás comprando las que lo están haciendo bien. Que por eso están caras y por eso suben casi siempre, porque son buenas empresas, bien gestionadas y con un buen negocio. Todas estas que nombra, no es que esté en contra de comprarlas cuando pasan dificultades, de hecho ha recomendado comprarlas (y GIS es una core para él y no para de recomendar comprar), pero no puedes llenar tu cartera de ellas porque te perderás las otras. Es decir, hay que comprarlas pero solo la mitad de la posición y tener un número reducido de turnaround stories (como las llama él). No solo porque evitas las que lo están haciendo bien, sino porque también hay más riesgo de recorte de dividendo.

Además, si os fijáis, dice para la gente que empieza. ¿Creéis que están preparados para ver una posición muy en rojo durante un tiempo prolongado? ¿Y de verla -50% o más si llega un crash? Pues eso.

Lo que dice siempre no es que las valoraciones no valgan para nada. No valen para nada a la hora de lo que recibes porque no vas a venderlas. Y si no vas a vender qué más te da lo que suba en precio, solo te impedirá comprar más cromos a menos precio. Cuando las compras sí que hay que tener en cuenta los precios objetivos.

Gracias @investing.saints y @Luis G. por ir recopilando los comentarios de Chowder, muy instructivo.

Alguno de vosotros conoce el listado de empresas que compone su cartera? Y de ellas cuales considera core?

Cuando esté delante del pc amplío porque la cartera que voy a poner es para quien se acerca a la jubilación, pero mientras pongo uno de los últimos comentarios en el que habla de core:

I wish I had never mentioned the word core, so in describing my holdings, nothing has a label, it is what it is.

Now as to the “circle the wagons” approach, when I was approaching the distribution phase I sold nearly all positions that could have been considered non-core if I was still labeling them as such. I’m not going to discuss core and non-core anymore because I’m worn out from answering the many, many questions I get and I like Cole’s response. It’s just a frame of mind.

For you older folks in retirement that would like to see what a “circle the wagons” portfolio looks like, keep in mind the goal is a high percentage of defensive companies, and the safety of the dividend. The circle of the wagons was a defensive tactic against the charging Indians back in the wagon train days.

There is no focus on dividend growth, we’ll take what we get. Here is an example of one the “circle the wagons” accounts.

CVX … D … DUK … GIS … GPC … JNJ … KHC … KMB … KO … MCD … MO … O … PG … PM … SO … T … UTG … VZ

I try to equally weight them as best as I can and whenever a purchase is made I use the “next man up” concept where the least weighted position by market value gets added to.

Based on current weightings, this portfolio has a yield of 3.85%.

This portfolio is so easy to manage the average 7th grade student could do it. I don’t get into a lot of the market crap some of you allow to enter your thought process. We don’t even monitor earnings reports for this account. We don’t try to determine who will perform better than someone else. We simply add to each position when it’s their turn and we do it regardless of what is going on in the market.

Como comentario final, casi todas estas empresas las lleva el como core (tengo dudas con MCD, DUK y UTG). Creo que MO dejó de ser core hace poco.

En realidad no añade independientemente de lo que hace el mercado, ya que va balanceando en cierta medida al estilo de una estrategia con fondos indexados.

Sería curioso ver el resultado de esta estrategia a lo largo de varios años en comparación con el sp500, aumentando cada mes una cantidad fija y cada 6 meses las que peor lo hayan hecho…

Creo que este no está puesto y es para leer y releer varias veces cada año:

Today I want to talk to you about ego. The first thing you need to understand is that you aren’t the guru you think you are when things are going good, and you aren’t the failure you think you are when companies turn against you. You had nothing to do with price movement, so get over yourselves.

I see far too much concern over the colors red and green. You can have a great company, a company that met all of your requirements, provided you did proper due diligence instead of simply following the herd or acting on someone else’s recommendation, and still be in the red. It happens and it doesn’t matter if you pay up for quality or bought at a discount, they all don’t turn green right away.

You see people who invested in TGT when they thought TGT was a great growth company and then TGT developed some issues, the Canadian market failure, the credit card breach, the threat of AMZN and their positions turned south. They have a legitimate beef, but for those of us who made purchases “AFTER” all of that, and bought because we thought it might be a good turnaround story, then we need to ignore their protestations and focus on the turnaround. They will take every opportunity to show how TGT is not keeping up with the market, price falls every time it tries to rally, but that’s what is supposed to happen with turnaround stories. All of those who were wrong with their reason for buying are sitting there praying to the stock gods for price to come up to their entry point so they can sell and get out with a small profit and then show how wonderful they are not to have shown a loss. … Those of you who bought for the turnaround have to ignore all of that. … Those praying to god people are what is called overhead supply waiting to come to market and if there isn’t enough demand to overcome that supply, then price is going to retreat, form another base, and start to rise once again. At some point that overhead supply will get taken out and then the real turnaround occurs with share price. Until then, focus on the company.

The recent earnings reports showed improvement in quite a few areas but those who are impatient wanted it bigger and better. Improvement may be slow but improvement is what you want with turnarounds. You have to be patient until all of the praying people up above sell their shares and breathe a sigh of relief. … Ha!

You have to understand the reasons you buy a company and forget about the colors red and green. Investment psychologists tell us that the person who buys a company isn’t the same person that manages the company. We allow price movement to distract us, to cause us to change our views, to allow us to make exceptions, forces us to wander off the reservation. … Think about it!

You have to focus on the company operations, are they showing improvement or not? What do they have planned for 2018? Are the moves they are making conducive to them having long-term success?

Your portfolio, and focus on the colors red and green either manage you or you manage your portfolio.

I’m not suggesting others buy or sell TGT, I could care less either way, I’m looking to share ideas on how you manage your positions once you own them. I learned this very valuable lesson as a trader when everyone was given the same company, same number of shares, now manage your position. You would be shocked at the wide range of results based on how the position was managed, and that’s what I’m trying to bring to the table here, portfolio management, not whether you should own KO or PEP, T or VZ, PG or CL. You can get that anywhere on SA, but try to get portfolio management techniques elsewhere and let me know what you find.

I spoke about ego. I see too many people protecting their ego when it comes to results as opposed to protecting their portfolios. In managing my ego, and trust me, I have one, I have to put my faith in the process or my ego takes over. It’s the process that protects our portfolios and it’s the process that allows me to put the ego on the back burner and ignore the red. It doesn’t matter what color I see, the process tells me to manage it and that’s what I have been trying to share in these blogs.

A mí me parece un error no querer hablar de core porque la gente lo malinterpreta. También lo hacen con su estrategia y sigue explicándola sin cambiar.

En cualquier caso y como no lo puede evitar, explica una vez más qué es core para él (y efectivamente, MO no es core).

Okay, okay! I’ll try this one last time.

To me, a Core holding is one that does not have any restrictions on how large the position gets. I will continue to keep adding more shares. If it’s 10% of the portfolio value, I don’t mind taking it up to 20%. Who do you own that you are willing to do that with?
Some of you know Crosetti and his position in KO was what I would call a Core position. He held it for years and years, didn’t trim, kept adding to it and it became his largest position by far. That’s what I would consider a Core type holding and if you are not willing to do that, you don’t have any Core holdings.

Some of you also know DVK and his public portfolio. He has a rule of not letting a position grow to more than 10% of the portfolio value. He says he has no Core holdings and he’s right. He’ll trim back any company that gets too large for its britches. Thus he doesn’t own anything I would call a Core holding.

I want a few companies like Crosetti’s KO and Buffett’s top holdings where they represent most of the portfolio value. Who do you own are willing to do that with? I wasn’t with LMT or MO, but they are still some of the largest positions in my son’s portfolio, but I have no intention of throwing more money at them. They can continue to grow on their own.

I’m willing to build D and KO to positions of size to where they are considerably larger than anything else owned, and thus I considered them Core.

So again, if you aren’t willing to do that, you don’t need to be concerned about holding core positions and life just got easier for you. … Ha!

Sinceramente yo no le compro este concepto de comprar el siguiente valor de la lista independientemente de su cotización. En ese sentido estoy más en la línea de David Crosetti y el concepto de “dividend yield metric” que explica en alguno de sus artículos en SA. Dejo un pequeño fragmento muy interesante del último que publico hace un par de días

https://seekingalpha.com/instablog/874941-david-crosetti/5075441-finding-value-rising-stock-market-part-2

Miguel Lorca:

Dave, I love the yield metric concept and it’s one that figures heavily in my stock decision process. Whenever investors say they don’t chase yield, I often think “that’s exactly what I do!” Of course, they are referring to chasing unsustainable high yields whereas I’m referring to chasing after blue-chip stocks that are temporary offering up an unusual yield, one that is unlikely to last for long as the stock rebounds.On one blog that I follow, the discussion seems to center around buying stocks at 52 week highs that have “beat and raised”. This is a tactic that works well for trading and I know it works because I’ve used it many times in the past for no-yield or low yield stocks that I invest in specifically for the capital gains. It helps to have a confirmed catalyst before buying a stocks at a 52 wk high. Overall, though, I find investing in stocks on a good pull back using the yield metric the best way to build an income stream. By definition you will get a yield that will have the most favorable impact on your income stream.

David Crosetti:

Miguel, Agreed. This is not “chasing yields” but is looking for one statistical anomaly I believe (opinion) that the reason you don’t have a company like Coca-Cola, yielding 8%, even though they have continued to increase the dividend year after year, is because of that anomaly. Stock prices go up and down. Dividends generally speaking remain dollar constant. It is the dividend yield that changes, in reaction to the price that the market has put on the stock. So, when a company like KO is yielding a 3.5-3.75% dividend YIELD, it is worth looking at as a buy.

The key to this metric lies in the consistency of the dividend increase, year over year. A company like KO, PG, JNJ, CL, KMB have dividend increase pictures that look like stair steps. Other companies do not have that same stair step phenomena, but instead have a kind of herky jerky picture. I’ve found the stair step companies to benefit me the most with this metric. That being said, the 52 week high and low are not as big an issue for me, as the stock having a current yield that is greater than the 5 year average dividend yield is going to generally be down in price by some multiple to its “mean” number. It’s a fun metric to use, but key is to look at the other fundamentals in coming to a conclusion.

There is little doubt in my mind that the metric is more of a capital gain indicator and the proof is in the numbers that these stocks have generated in the 12 month time frame. With IBM and a few of the others, I should have considered selling when the charts indicated that the stock was in the overvalued window.Having that discipline would have earned a 29.2% gain on IBM, a 21.9% gain on ADM, a 38.2% gain on QCOM, and a 30.3% gain on HOG.But it’s difficult for a DGI to sell without a real strong reason

Con Chowder pasa una cosa curiosa. He leído todo lo que ha escrito el último año, he hecho resúmenes que acumulan un tamaño similar a este post, y aun así sigo sin entender al 100% algunos de sus planteamientos. Creo que entiendo los conceptos y, de repente, en el enésimo comentario sobre el mismo tema termino de comprenderlo. Y nunca era exáctamente como lo había entendido al principio.

Siento admiración por este tío y siento necesidad de seguir leyéndolo. Tiene las ideas muy claras y se esfuerza mucho en intentar transmitirlas. Pero hay que reconocer que es un mal comunicador o profesor. Y no es cosa de la diferencia de idioma. En los comentarios de seeking alpha salen seguidores suyos de años que son americanos y que también le comentan que tardaron años leyéndole para pillar bien los matices de algunas de las ideas. Aun así hay que reconocerle que se esfuerza erre que erre repitiendo lo mismo de formas distintas para que la gente lo entienda.

Nuevo post de Chowder:

https://seekingalpha.com/instablog/728729-chowder/5079588-index-investing-pfft

En contra de la indexación y pone de ejemplo la cartera de su hijo. Tiene una hija y nunca habla de ella?.

Avanza el objetivo de inversión de 2018:

“My son is 32 and his portfolio is just approaching $200k. When I post his portfolio breakdown next month, showing his weightings, I will be making some adjustments. A full position is currently $4k and a 1/2 sized position $2k. He has quite a few overweight positions so I will be raising a full position to $6k and a 1/2 sized position to $3k in 2018.”

Me parece curioso que MO no la considere CORE y PM, sí.
También me parece curioso que dos empresas como CL, HRL y MMM no esten dentro de su CORE.

Porque MO solo es USA y la otra el resto del mundo.

CL y MMM sí son core en muchas carteras que lleva. De hecho, MMM es la única industrial que considera core. En la cartera de su hijo las core que tengo apuntadas:

Core holdings for my son, age 32.
CL … GIS … KHC … KMB … KO … MKC … PEP … PM … PG … SO … D … VZ … T … JNJ … BDX … VFC … ADP … MMM … XOM … O

Si se tuviera que quedar con un portfolio de 7:
D, JNJ, O, KHC/GID, PG/CL, VZ/T, MMM/XOM.

Más acerca de las core:

The way I go about deciding who is Core is that I look at their product line or service. I need to know what they do for a living. If I like what they do for a living and I think they represent the best recession proof protection, I determine it a Core holding the moment I make my first purchase.

In industrial’s I only consider MMM a Core holding because it does have consumer spending protection with part of their product line. LMT is 5 times as large as MMM but I don’t consider LMT a Core holding because it depends on government spending and isn’t recession proof. Although MMM is currently a smaller position than LMT, I wll be adding to it soon.

In Energy I only consider XOM as Core. I think they are the leader in the energy sector.

In discretionary, I do prefer the clothing line of VFC to other companies and have declared them Core. I could force myself to make GPC a Core due to their Napa store business. I know others might declare NKE as Core and I wouldn’t argue with it, but I only want a couple of discretionary considered Core.

In healthcare it’s JNJ and ABT. JNJ is an obvious selection but with the St Jude merger I really like the medical supply business of ABT. Although I may invest in biotech or pill companies, I don’t want them as buy and hold forever. Every portfolio I help manage has a full position in JNJ or is overweight. When I start a new portfolio for folks and we pick 5 Core holdings to start and then a few Supportive positions, JNJ is always, always one of the original 5.

Other than that, about 80% of our Core holdings are in the consumer staples and utilities, businesses that are considered recession resistant.
I expect that income to flow in all market conditions and that includes during recessions, and the staples and utilities are going to get access to that consumer dollar no matter how squeezed the consumer is.

Now, what makes a Core position? … The answer to that will vary from person to person. And this is important, just because I don’t consider MCD or SBUX or WBA a Core position, it doesn’t mean I can’t have a large position.

For me, a Core position would be as close to a “picks and shovels” company as you can get. I hope folks know the gold mining story where it was the people who sold the picks and shovels to the prospectors that made the money.

A Core company for me is the “supplier” of goods and services. If I own WBA, I only have access to the consumer dollars spent at WBA. But if I own JNJ, I have access to all consumer dollars, in all establishments that sell JNJ products. I own the supplier. The supplier is my Core!

When I look at the product line of VFC, and the number of ways they can market their product line, it provides what I think is the best access to the consumer discretionary dollar. VFC is the supplier.

MCD is not a supplier. SBUX is not a supplier. SYY is and SYY could qualify for Core with me, but I wanted to limit the number of Core positions.
Everything I focus on with the Core centers around maximum exposure to the consumer dollar, not business dollar (for the most part), not government dollar, the consumer dollar.

If someone wishes to have HRL as Core, or MCD as Core over VFC, I’m not going to suggest they’re wrong for doing so. It depends on their expectations. … What … do … you … want?

But, here’s the other aspect of what I consider Core, the most important part. Once the portfolio is established with the companies I wish to own, and every portfolio I manage is at that point now, I do not use Core positions as a source of generating cash. Trimming a Core is the most egregious of errors, so select wisely.

I don’t care how over-sized a Core gets, it won’t get trimmed. I don’t care how over-sized a Core gets, I will continue to add more.
If I have a need to generate cash for any reason, I’ll trim LMT, MCD, MSFT, SBUX, etc. but I won’t trim MO* or KO.

  • Ahora MO ya no la considera core.

A Core for me, is a company I wouldn’t think twice about adding to if it drops 40% in value and wouldn’t think twice about adding to it if it’s 20% overvalued. It makes no difference because Core shares are not for sale which is why the number is small in comparison to the portfolio, so choose wisely.

There are a lot of good companies that can qualify as Core, and managed the way I am managing ours, but you don’t want to have too many of them. Shoot, 20 might even be too many for all I know, but when I decided to use this concept, I took the idea from Focus Funds. Most Focus Funds limit their holdings to around 20 Core companies. Buffett has a fewer number, but I’m no Buffett, so 20 seemed reasonable to me.

Es curioso ver las acciones de la cartera de su hijo que han tenido peor rendimiento que el S&P 500 en los últimos 20 años. Auténticas vacas sagradas de la inversión DGI (T, VZ, PG, IBM, ADP, KO). En mi opinión otra prueba irrefutable de la importancia de invertir cuando cotizan a su precio justo o con descuento. Sigue sin convencerme sus teorías del “next man up” o del “equal weight portfolio”…