The Winning Value Portfolio Proves Resilient

 | Aug 01, 2014 | 1:00 PM EDT  | Comments
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Thursday was a very interesting day for the stock market. The Dow Jones Industrial Average fell more than 300 points, and as a result, July registered the first monthly decline for U.S. stocks in the past six months.

Since I started this winning value portfolio in 2012, I have repeated one statement over and over again: It's performance during the bad times that matters most. In 2012, the Gad Winning Value portfolio was up 16.4%, compared with 11.2% for the S&P 500. In 2013, the Value Portfolio was up 56.6%, compared with 26.4% for the S&P and 27% for the Wilshire 5000. Those two years were very bullish for the stock market.

So far in 2014, the market has been a bit more cautious, although the S&P 500 is still holding positive territory (after Thursday's drop, the Dow is officially down for 2014). And the Winning Value Portfolio is holding its own.

As of July 31, the Winning Value Portfolio was up about 2.2%, compared with a positive 5.6% for the S&P 500 and 4.5% for the Wilshire 5000.

Despite the underperformance so far, I believe the portfolio is in great shape to outperform over the long run. Two of the laggards, Bank of America (BAC) and General Motors (GM), remain very undervalued in my view. Earlier in the week, I described my thoughts on why Bank of America could be worth more than double its current stock price in the next couple of years.

General Motors continues to suffer through its product recall situation, and I believe the headlines are having an exaggerated effect on company's valuation. I have chosen to invest in General Motors via the Class B warrants.

Apple (AAPL) continued climbing higher, as the market seems to have gained enthusiasm over the coming new iPhone generation. Commodity giants Chesapeake Energy (CHK) and Potash (POT) pulled back a little but continued to perform well, and it's likely those two names will finish the year better than where they are now.

The 2014 market year will be over in five months, and investors are starting to realize that the low-interest-rate environment we have been treated to is coming closer to an end. Investing will once again require an unwavering degree of discipline. 

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