I wanted to start a thread that asked readers to comment on portfolio performance with respect to concentrated bets they have made. FAIRX has been talked about of late and is a concentrated bet (banking/RE). There are plenty of other sectors under performing right now. Interestingly enough, FAIRX is not my biggest dog. As part of my investing strategy I try to select and hold concentrated bets. I also monitor the percentage of these "potential high fliers", keeping their allocation small in comparison to my overall portfolio. At my age (low 50's) I try to keep these "Alpha Dogs" low...10-15% of my portfolio. A younger investor might be more aggressive. Finally, I position these investments in my Roth account or in a Roth conversion account. My hope here is that the extra risk will eventually equate to extra return that (hopefully) will not be impacted by the drag of additional taxes.
I consider an asset class or mutual fund strategy high risk when it has a historical performance of losing 25% or more of its value in periodic hard times. Some of my emerging market, precious metals, and energy funds have easily achieved this...I call it:"the ability to provide me with a great sleepless night". They have also returned very high positive returns in good times. If I believe in these investments over the long haul I try to be opportunistic. I add to them when they are temporarily out of favor and I try to take profits when they are over performing. Over performance in my portfolio is a personal return of 10% or more. Taking these profits requires that I have a cash position that can be deployed at a moments notice or over periodic time frames. I try to determine what to buy based on what sectors look like they are on sale. Remember, I am doing this opportunistic buying and selling with a very small portion of my portfolio. I still have to look at the overall portfolio on a less frequent basis to be sure my overall allocations make sense for the market conditions (risk on / risk off) and my age (young/middle age/ retired), and long term goals.
It is always nice to buy (risk on) these types of investments during one of there under performing phases. All of us wish we bought gold at $200/oz. or Apple at $7 ten years ago. I say "ten years ago" because ten years is about the time frame most investors need to base the success of their portfolio performance on, not this week or this year. I personally bought RIMM after it dropped 12% to $57/share in March. Not such a great buy. The Yatckman fund (YACKX) bought a lot more shares of RIMM at $22/share. I still own both but recently I decided to let fund managers make my buy/sell decisions of individual securities. I will decide if the manager is adding value or if I have to find other managers who will.
I believe buying, selling, or holding FAIRX, for example, is as much about the sector (banking and real estate) as it is about the manager. In 10 years the banking and real estate sector (and FAIRX) will improve, but are these the sectors that hold the greatest potential for return? I do believe Bruce is the man to find the hidden gems in the market. I believe he will lick his wounds and survive...maybe even over perform again. Do I have enough time to hang around? These are the decisions I will try to make. Once I have made my sector decisions I will try to constantly try to find managers in those sectors who manage well run mutual funds.
As investors we need to remember to give ourselves and our managers the breathing room to let the dust settle. In the short term I'm not happy with the performance of a lot of my holdings. Right now FAIRX is competing with CAMAX (down 26%), VWO (down 22%) and USAGX (up 15% and now down 18%).
At some point I will re-deploy cash (gains) I have made from other profitable bets such as PRPFX, GASFX, EDV, VGENX, USAGX, PRMTX, PRJPX, TGBAX, PONDX, and others. Where I place this new money is the work. The biggest role I play in achieving a successful portfolio is to try and buy things on sale, realize the gains of periodic winners, keep an eye on manager risk, and give long term bets/trends the opportunity to play out.
Comments
So my Asia total comes to 37.8% of total portfolio holdings. As I recall, I opened my MAPIX account about three years ago, and M* shows that particular fund to be UP almost 20% over that time-frame. I reinvest cap gains and dividends. (The original amount I put into MAPIX was a switch-over: lock, stock, and barrel, from TAVIX, after 2 years or so of disappointing under-performance there. I'd been in TAVIX for a long time.)
The other side of the barbell is my PREMX stake. Since I got into it a little more than a year ago, it is just above the break-even point. (per M*.) My PREMX= 41.57% of my total.
In addition, I have PFE Pfizer stock which is an inheritance I just came into this summer: 14.61% of my total holdings. The share price is down right now. It was above $20/share in the early summer. There was a .20 cents/share div. in Sept....And finally: my only other holding right now is a foreign gov't bond---in US dollars--- which comes to just over 6% of my total.
I expect to be able to diversify further , which is my intention--- before too long, with some "new" money. If my positions look risky in terms of their proportion to one another, I'm certainly aware. I just don't want to go in and rearrange right now, when I know I'll be doing that before too long, again. "Seldom" is really and truly the way I prefer to "play" with my portfolio.
Interesting question. I'll be watching for other responses, too.
You are indeed a "busy bee" with your efforts in digging around for info; and thank you for all of the intersting links you post.
As to equity holdings, the following are the most concentrated:
FRIFX Fidelity Real Estate Income (bond/equity mix)
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
The real estate holding is an equity fund acting like a bond fund and/or a bond fund acting like an equity fund. A kinda get paid a bit with the yield awaiting a possible bump in the equity portion.
The global commodty is a mix of energy, agriculture and metals; which also ties into the metals equity fund, too. Although the Fed has primed the pump a lot, most of the monies have not yet circulated through the economy (consumer loans and related) but there sure is a lot of water (money) behind the dam; awaiting to flow.
The leisure fund is a mix of consumer spending in various areas. The "eating" side involves McD's, Starbucks, Yum brands and Darden; which offers a wide mix in this area; and aside from consumer spending being weak in some areas, we find most of the restaurants to remain busy in old Michigan. Gambling is also a fairly large holding area of this fund; and folks are still at the casinos, too.
With our funds boat mix of bonds; one will find concentrations in these, too; at least in the broadest sense of sectors.
Looking forward to slow growth; and yes, there could be a big rally for some reason or other from "fixes" in Europe, we would likely place more monies today into the FDLSX fund.
We, too; held CAMAX and it appears this is a really fair weather and friendly markets fund and not very happy with uncertain times. We misjudged the ability of this fund to move a bit more positive and/or stay more neutral with market swings. We also held Fido auto, and this may still play out positive; but the sector in general, although there are special stock plays within this sector that did not support other holdings in the fund caused a continued weakning.
Hey, we all miss some going in both directions, eh???
Take care,
Catch