This commentary was originally sent to Action Alerts PLUS subscribers at 11:05 a.m. ET on Dec. 01, 2015.
In our view, the value of being an Action Alerts PLUS subscriber goes beyond merely having access to our individual trades and stock-specific analysis.
With the honeymoon period of stocks having come to a halt (no more 14%, 32% and 16% annual returns, respectively over the past three years) we find it crucial to also educate our subscribers in a manner that is thoughtful, conceptual and original. To this end, we want to take a beginning-of-December look back at our portfolio through the lens of capital preservation rather than capital gains. In other words, while the vast majority of analysis -- ours included -- across Wall Street focuses on buying low and selling high, we believe it is equally important to protect the portfolio, even when it means selling a particular stock at a loss.
We would like to first preface this by emphasizing we are by no means perfect and have made mistakes along the way, particularly within several investments in the energy sector and boutique medical devices company Halyard Health (HYH). In both cases we misjudged certain aspects of the overarching pastiche. For energy, we misjudged the severity of the decline and in respect to Halyard we misjudged management's ability to execute as well as the complexities involved when it comes to spinoff stories.
That said, we have also honed in on protecting our portfolio -- and subsequently subscribers -- from losing money on existing positions. Instead of digging in our heels when the facts changed, we have taken the approach of proactively exiting positions when we believe the fundamentals, technicals and/or secular direction have cracked.
As evident in the chart below, in the past nine months we have closed out more than a dozen names that have since underperformed the S&P 500, six of which by double digits and two of which by over 20% and 40%.
Our commitment to subscribers is that we will continue to actively, passionately and thoughtfully monitor our existing holdings and dynamically shift our portfolio construction based on the ever-evolving market and company-specific environment.
