Skip to Content
Stock Strategist

Ultimate Stock-Picker's Portfolio: Performance Update

Our model portfolio continues to outperform the market.

Since managers' first-quarter holdings are just starting to be released, and I'll soon be compiling a new watch list based on our list of 20 managers' most recent filings, I thought it would be a good time to update you on the overall performance of the Ultimate Stock-Picker's Portfolio.

I'm happy to report that since inception on Sept. 7, 2006, the model portfolio has earned a raw total return (including dividends) of 17.55% through April 30, a very pleasing result. Even better, though, you'll notice in the table below that the portfolio is still outpacing the S&P 500 Index by almost 300 basis points, as the S&P 500 appreciated by 14.56% during the same measurement period.

This is even more impressive when you consider that the S&P has recently made a very nice run since I last reported performance to you in early March. While I continue to be pleased with these results, I will also note that the portfolio will not likely have this type of growth over every reporting period. That said, I do think that this solid start continues to indicate that my approach has merit, and I continue to believe that over the long run--think three- to five-year periods--the portfolio has the potential to do very well.

 Ultimate Stock-Picker's Portfolio: Performance Update
  Shares Net
Cost ($)
Val ($)
Tot Raw
Ret (%)
Tyco  380 9984.15 114.00 12,399.40 25.33
Wal-Mart (WMT) 219 9986.21 84.97 10,494.48 5.94
Dell  459 9987.02 -- 11,571.39 15.86
Berkshire (BRK.B) 3 9615.95 -- 10,884.00 13.19
Time Warner  595 9985.15 65.45 12,274.85 23.59
Expedia (EXPE) 599 9992.29 -- 14,148.38 41.59
American Exp (AXP) 174 9965.75 26.10 10,556.58 6.19
Anheuser (BUD) 211 9999.58 124.49 10,647.06 7.72
J&J (JNJ) 157 9976.17 117.75 10,082.54 2.25
Sprint Nextel  602 9994.11 30.10 12,058.06 20.95
Pulte (PHM) 346 9981.21 41.52 9,307.40 -6.33
Total   109,467.59 604.38 124,424.14    
Cash Balance       4,880.81    
Portfolio Value*   110,000.00   129,304.95 17.55  
S&P 500 Return         14.56  
Outperformance         2.99  
* Beginning portfolio value as of 09-07-06; ending portfolio value as of 04-30-07
** As of 05-15-07

In order to capture total portfolio growth, I've assumed that almost $10,000 was invested in each of our initial positions on Sept. 7, for a starting total portfolio value of $110,000. In order to avoid fractional share counts and to account for trading commissions, all but about $500 of the initial portfolio was fully invested in the initial 11 stocks. I've also assumed that each of our transactions costs us $12.95, a standard online commission rate. As of now, I haven't included the impact of income or capital gains taxes into my analysis, but after the portfolio reaches its one-year anniversary in the next few months, I plan to incorporate an estimate for the tax implications as well. You'll notice in the table above that as of April 30, the portfolio's ending market value was $129,304.95, with a cash balance of almost $5,000.

Sources of Performance
The main sources of the market-value gains have been the stellar performance of  Expedia (EXPE),  Time Warner , and  Tyco . Now that Tyco is rated 3 stars based on my colleague Eric Landry's fair value estimate, it has become a candidate for sale in the portfolio. After examining my new watch list, I may decide to recycle the capital presently in Tyco into a higher-expected-return stock, or I may keep Tyco for a bit longer until an even more attractively priced security presents itself.

 Pulte Homes (PHM) continues to be the laggard in the portfolio, given the extreme negative sentiment presently attached to almost all homebuilders. That said, after sitting down with Eric--also the analyst of the homebuilders--for an interview last month, I came away even more comforted with what I think is the somewhat limited downside risk in the stock, as well as the upside potential presently available to owners. Those of you who subscribe to my free e-mail alerts already read my interview on Pulte, but for those of you who haven't signed up yet, I encourage you to subscribe now.

The sources of the growth in the cash balance are twofold: The portfolio continues to collect dividends, and I made a transaction in late March that produced a sizable realized gain. Make no mistake, the dividend yield of the portfolio is fairly low, so the bigger impact to the cash balance was from the sale of  IAC/InterActiveCorp. (IACI) on March 26, which climbed by almost 40% during its holding period. I recycled some of this capital into a new position,  American Express (AXP), but have held off on the remainder, as I like the flexibility this excess cash provides. Put simply, this additional liquidity will allow me to either add to some of our existing positions should they become even more attractively priced, or allow me to take a "placeholder" position in a potential 12th name, should the market offer up another truly great investment idea at a very attractive price. Stay tuned for more on this front.

This and That
I hope that you enjoyed my recent video interview with Larry Coats of the  Oak Value Fund . I cannot thank Larry enough for taking the time to provide a few of his thoughts on some of our mutually held names, and I think the passion Larry has for these stocks and the investment management business was highly evident in our interview. Keep an eye out for part two of my interview with Larry, where we chat about a few stocks on each of our watch lists.

I also hope that you saw my coverage of this year's  Berkshire Hathaway (BRK.B) annual meeting, where Chairman and CEO Warren Buffett and his partner Charlie Munger annually opine on Berkshire, investing, the economy, and life in general.

At this year's meeting, I identified two especially interesting investing nuggets that Buffett and Munger offered to Berkshire's shareholders which can help each of us become better investors. They said that investing is a process of continuous learning, and we should read everything we can get our hands on in order to fill our minds with competing ideas and viewpoints.

Buffett and Munger's second point--and this is very important--was that while accumulating this knowledge, it is always crucial to think about what "makes sense" over time when analyzing a potential investment. To me, this indicates that having the right temperament and being rational about forecasting businesses are paramount when weighing potential investment choices. Please be rest assured that I strive to follow each of these tenets in managing this portfolio and communicating my investment viewpoints. As a friend recently said to me, there's nothing like learning from two of the best investment minds of our time, which I hope to do for years to come.

Please be on the lookout for more of my manager interviews, a new watch list, additional portfolio and stock commentary, and much, much more in the coming months. Together, I believe, we can continue to learn and profit from the ideas of some of the best investment minds around.

Justin Fuller has a position in the following securities mentioned above: AXP, DELL, PHM. Find out about Morningstar’s editorial policies.