For My Portfolio, 2023 Has Been Quite 'Dandy'

Readers have been asking about how well my top personal holdings were performing in the first month of the new year. Here is my original list, dated Jan. 4, and the closing prices that day. Holdings were sorted from largest to smallest among my most favored dozen stocks early in 2023. Now that January is in the books, I put together a new list of those same holdings without resorting for changes in relative position sizes. That occurred via both market action and trading moves made during the month. I am proud to say that 100% of my top positions were in positive territory even without accounting for any dividend income. Berry Global barely eked out a gain, but all the others were solidly ahead. An equally weighted portfolio would have earned a fine 13.49% plus dividends from Jan. 4 through Jan. 31. How did I do vs. the major indexes? My stocks outperformed the Dow Jones industrial average by 66.8%. I beat the S&P 500 by 139%. My value stocks even bested the highly touted Nasdaq Composite by 33.3%. Most stocks benefited from the January Effect. That is defined as the tendency of beaten-up stocks that were subject to tax-selling and portfolio window dressing near year-end to bounce back faster and harder than shares which held up relatively well in the prior year. What is portfolio window dressing? Professional money managers hate to show big losers on their end of quarter and end of year reports. You can get fired for having lots of doggy stocks on your books as people rightfully ask why you owned them. Selling out horrible names just before Dec. 31 purges your published lists and avoids that embarrassment. Many of the smarter managers buy back those same shares early in the new year when they will have three full months to see them recover. That gives the chance to recoup and be heroes without the need to 'fess up to owning them in 2023. Regular readers of my columns know I love selling puts on shares I like as well as owning them outright. The extra leverage that comes from that makes bad markets even worse. You always need to respect that in the short run anything can happen, including seeing incredibly cheap stocks get even cheaper. That is why it is critical to keep excess buying power in reserve to handle significant drawdowns. Once the markets turn upward, however, the leverage becomes an exceptionally good thing. Margin-type accounts with short put option exposure can show unbelievably good results as prices rebound. In January my two put option writing accounts were up by a staggering 31.20% and 36.83%. Ironically, selling puts on extremely beaten-up stocks is one of the lowest risk trades you can do. You simply have to force yourself to act opposite all normal human emotions. When you can least stand to even look at your account balances is the best time to buy shares and/or short put options. IRA and other retirement accounts cannot employ leverage other than through purchase of call options. Buying calls is not my thing. I only do that on rare occasions when upside appears huge, and premiums are relatively cheap. My four unlevered IRAs (two traditional and two Roth) obtained the following total returns last month. IRA Accounts: + 13.08%, +16.04%, +16.41%, + 14.03% Those were very much in line with what my top twelve largest holdings did as those stocks composed the bulk of my IRAs, as well. I am an avid seller of out-of-the-money covered calls when the premiums available appear generous vs. the risk of missing even bigger gains if things go extra well. That is the bird in the hand theory of investing that I live by. Money collected from covered call writing when stocks are cheap provide other people's money (OPM) to buy stocks with that would otherwise be impossible. I have been averaging over $50,000 per year inside my IRAs for years from that outside source. The IRS limits how much a person can contribute each year but there is no limit to how much option premium can be brought in. A decade of $50,000 average annual covered call money collected turned into half a million dollars of new shares, which then allowed for even more call writing and dividend collection. I will not share my complete IRA values with you, but I can say I expect to live comfortably on them until I die. The beauty of deferred gratification early in life cannot be overstated. See my earlier article about Who Wants to Be a Millionaire, 2023 Edition for full details on how you, also can have everything that money can buy if you practice a few easy steps to prepare for it. I plan to follow up on this Dandy Dozen list periodically throughout 2023. Stay tuned for future updates.

For My Portfolio, 2023 Has Been Quite 'Dandy'

How has my 'Dandy Dozen' list performed so far? Let's look at the results and my strategy behind them.

Columnist Conversation

This Weekend on Real Money

This Could Get Messy

Latest AAP Podcast With Helene Meisler!

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.