A Solid Advance in My 'Winning' Portfolio

 | Sep 03, 2014 | 3:00 PM EDT
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Since our last update a month ago, the Gad Winning Value Portfolio has added nearly 4 percentage points to its year-to-date gains, on par with the S&P 500's July performance. While the portfolio is still trailing the S&P overall, the results are satisfactory to me.

One very unique attribute of the Winning Value Portfolio is that it's a portfolio with virtually no expense structure. In other words, the returns you see below would actually be the net returns to the investor after all associated expenses -- and, in today's investment-management world, that's not a meaningless point. At the beginning of each year, 10 securities are selected and equally weighted in the portfolio, and no further trades are made during the year unless a business becomes affected by a legal malfeasance, a regulatory issue or something similar. So the total expense of the portfolio essentially comprises the commissions incurred in buying the securities and in selling them at year-end.

As of Tuesday's close, the Winning Value Portfolio was up approximately 6.5% for 2014, as compared with a positive 9.7% for the S&P 500 and 8.8% for the Wilshire 5000.

In the last update I said I believed that two of the laggards, Bank of America (BAC) and General Motors (GM), remained undervalued. Well, during the quarter, BofA climbed by more than 6 percentage points. Last month the bank announced a historic settlement agreement that will ultimately close the book on the company's legal issues as a result of the 2008-to-2009 financial crisis.

General Motors shares remained flat during the quarter, so the warrants still remain deeply under water for the year.

Meanwhile, Apple (AAPL) has again become a tech darling, having "quietly" advanced by more than 30% so far in 2014. Anticipation over a new iPhone product, perhaps with a bigger screen, is being viewed favorably by the market. The company has authorized big stock buybacks, as well, and that has certainly made for a very smart capital-allocation decision.  

But, so far this year, small-cap name Iridium Communications (IRDM) is the big winner: Operating results have been very good, and that has been pushing the shares higher. At the stock's current price of $9.30, or 13x trailing earnings, the rest of 2014 should bode well for this name.

Overall, I think this collection of stocks offers a very sound degree of diversity and concentration to finish the year in fine shape.

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