May 2011 bring you happiness and prosperity!

2010 is ending on a low note, as last week's very sharp fall in the dollar (-2.81%) has weighed heavily on the market. performance of our portfolio. We have fallen to -7.23%, while the SMI has fallen to -1.78% (since the launch of our portfolio on 03.02.2010). The dollar doesn't excuse everything, however. Over the same period, the S&P 500 gained 14.18%, while the dollar lost 11.74%, giving a final gain in CHF of 2.44%.

The market has outperformed our portfolio since February 3, 2010. While we were beating it until October, we fell behind from that date onwards. We did better when the S&P was bearish (April to August). From September onwards, the S&P rose sharply and finally caught up with us. This is the problem with defensive stocks: they lose ground to the market when the latter is doing well. We knew in advance: our strategy means we're starting out a long way behind the market. That's not a problem in the sense that we're not trying to beat it, but only to gain a competitive edge. performance with less volatility. What's more disturbing, however, is that our results are negative, even if the time horizon is still short (10 months). Remember that we invest for a minimum period of five years.

The "good news", even if it has to be put into perspective, comes from the portfolio's progress in euro. Profitability since February 3, 2010 is 7.54% versus 0.28% for the CAC40. I say put it into perspective because this is achieved at the cost of a depreciation of the single currencynot ideal. The other good news is the portfolio's low volatility, achieved by taking into account the risk of the stocks selected. This prevents us from focusing too much on share prices, to the detriment of their dividend yield. A final source of satisfaction is our dividend income, which rose from CHF 409.50 in the 3rd quarter to CHF 464.20 in the final quarter.

When we talked about the importance of diversificationwe specified that it was it is essential to protect against a fall in the dollar by complementing US positions with other investments in EUR or CHF. We mentioned a number of low-volatility investment funds that could do the trick. It is also possible to subscribe to commodity funds, but these are unfortunately much more nervous. On the other hand, so far we haven't been able to find a solution to make our portfolio work with European or Swiss stocks. Our algorithm lacks some of the raw data it needs.

2010 will have had the merit of raising awareness of the importance of the diversification. Our resolution for 2011 is to find a way to add non-US positions to our portfolio.

Happy New Year to all, and happy trading,

chrome

PS:

Two important changes are to be noted in our portfolio. First of all, Sunoco Logistics (NYSE:SXL) has been upgraded from "Sell" to "Hold". The stock remains highly volatile, but offers an attractive long-term dividend yield. On the contrary, Automatic Data Processing (NASDAQ:ADP) competitor Paychex (NASDAQ:PAYX) is downgraded from "hold" to "sell". Long-term yields are decent (3.60%) , but dividend growth is weak, especially as they remained at the status quo in 2010. For this reason, PAYX will be withdrawn from our portfolio in the next few days.