Gad Winning Value Portfolio Update

 | Feb 28, 2013 | 1:00 PM EST  | Comments
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Stock quotes in this article:

tecua

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dell

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gm

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mpaa

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gntx

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dva

By popular request, it's time for another status update on the 2013 Gad Winning Value Portfolio.

Starting in 2012, at the beginning of each year, I unveil a portfolio of 10 equally-weighted stocks that I believe will outperform the overall stock market for the year. The portfolio is held for the entire year without any changes unless something fraudulent occurred or the company is acquired. Last's year portfolio bested the S&P by more than 5%, successfully meeting my objective of beating the market by three or more percentage points.

For the first two months of 2013, Mr. Market has picked up right where he left off, heading to new highs. Here's where we stack up so far in 2013.

So far so good in 2013, but those who read my columns can guess as to what I'm going to say next. Two months is just that, two months. I'm thrilled that the portfolio has more than tripled the return of the S&P and the Gad Portfolio -- dare I say -- is probably besting many of the best actively-managed hedge funds. But it's the long term that matters.

I do believe that names like Tecumseh (TECUA) and Dell (DELL) may be close to their ceiling prices. Dell is trying to go private at $13.65, but some powerful shareholders are doing whatever they can to prevent that from happening, arguing the takeout price is far too low. These shareholder efforts, for now, probably put a floor on Dell's shares, but how much higher it will go, only time will tell. But Dell was my No. 1 pick in 2013 and I am sticking with it.

Tecumseh's advance was due its severe equity undervaluation at the beginning of year, along with some potential hopes for asset monetizations in the near future.

Our laggard, Motorcar Parts of America (MPAA), continues to struggle, but I like the long-term fundamentals of the auto parts industry. General Motors (GM) and Gentex (GNTX) are both names that further concentrate my bet on a resurging auto market. Medical dialysis maker DaVita (DVA) may be the most fundamentally sound business with a long-term path to consistent profitable growth and price appreciation.

I'm quite confident that 10 months from now this portfolio will again hold its own against Mr. Market. One need's no more than 10 to 20 stocks to be fully diversified.  More than 30 and the diversification can start to actually dilute returns.

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