A couple of weeks ago, I unveiled the 2016 Winning Value Portfolio: 10 stocks. Equally weighted. Held for the entire year, unless a company commits fraud or something unethical. No frictional trading costs, nothing. You can find the first five here and the remaining five here.
After releasing the 10 picks, I began the natural process of revaluating and making sure the 10 chosen were the best securities that I felt would outperform the market. One of the selections, Delta Airlines (DAL), was a contrarian pick of sorts. Ultimately, I decided to remove DAL. Initially, Action Alerts PLUS portfolio holding Alphabet (GOOGL) was going to be the replacement, but I decided to go with boring instead -- IBM (IBM).
Trading at 10x earnings and yielding 4%, IBM is a classic case of the baby being thrown out with the bath water. Mr. Market is enamored with the hot tech issues of the day -- Facebook (FB), Growth Seeker portfolio name Amazon.com (AMZN), Netflix (NFLX), and Google -- so IBM is being left to wilt on the vine. After falling 15% in 2015, we like the total return potential here.
So, in no order of preference, here is the 2016 portfolio:
- Towne Bank (TOWN)
- Phillips 66 (PSX)
- General Motors Class B Warrant (GM-WTB)
- Alcoa (AA)
- Cheniere Energy (LNG)
- Sanchez Energy Corp (SN)
- Seritage Growth Properties (SRG)
- IBM (IBM)
- Meritage Hospitality (MHGU)
- Kindred Biosciences (KIN)
We will report how this group is starting off at the end of January. Overall, this is a strong, high-quality group of businesses. More so, in 10 stocks, I believe the diversification is more than ample here. A bank, a restaurant, a biotech, and a tech company have very little correlation. Also, if 2016 is the year that U.S. markets pull back, this group should weather the storm.