May 2011 bring you happiness and prosperity!

Happy New Year
Image: luigi diamanti / FreeDigitalPhotos.net

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%.

Portfolio vs marché
Portfolio/market differential

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 voisine, avec moins de volatility.  Ce qui est plus gênant par contre, c'est que nos résultats sont négatifs, même si l'horizon temporel est encore court pour en juger (10 mois). Rappelons que nous investissons pour une période minimale de cinq ans.

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 currency, donc pas idéal. L'autre bonne nouvelle provient de la volatilité basse du portefeuille qui est obtenue grâce à une prise en compte du risque des titres sélectionnés. Cela évite que nous nous focalisions trop sur les cours des actions, au détriment de leur dividend yield. Les revenus obtenus constituent d'ailleurs une dernière source de satisfaction puisque nous sommes passés de 409.50 CHF au 3e trimestre à 464.20 CHF au dernier trimestre.

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,

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PS:

Two important changes are to be noted in our portfolio. Tout d'abord, Sunoco Logistics (NYSE:SXL) est passé de "Sell" à "Hold". Le titre demeure toujours très volatile, mais il offre un rendement en dividendes à long terme intéressant. Au contraire, Paychex (NASDAQ:PAYX), concurrent d'Automatic Data Processing (NASDAQ:ADP) est rétrogradé de "hold" à "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.


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