• Volume I, Issue 4

LGR Financial Newsletter

Volume I, Issue 4 (Released On February 13, 2014)


Simulated Stock Portfolio:

I recently started a new project, which I plan to continue over my next four years in college. Since the beginning of the calendar year, I have been managing a “simulated” stock portfolio (which just means that I use fake money to invest in the stock market) that uses live market data, which allows me to track my positions in real time. I am taking this project very seriously, and treating it as though I was investing real money, because this I believe that it is the best way to gain real portfolio management experience. I ran prior simulated portfolios while at St. Paul’s, and have a small “real” portfolio as well, and have found the experiences invaluable.

This time I set many “guidelines” for myself on what types of stocks I am allowed to invest in, how much money I am allowed to have in any position, and many other factors. My portfolio is “long only” (meaning I only buy and sell stocks I don’t open short positions) and I have committed to holding every position I enter for at least a year before I close it. I am also using a variety of risk management techniques, which I learned either in school or on my own, to manage the money in my portfolio and I am trying to be as professional as possible. My portfolio started with a balance of $1,000,000.00, and currently (at the market close today) my portfolio has a balance of $1,037,770.97 (+3.78% since the beginning of the year). The money in my portfolio is spread across nine different sectors, and I currently have 26 positions including money in both bonds and gold. My portfolio has significantly outperformed the S&P 500 so far this year (which is down 1% year to date), which is great seeing as currently I only have 84.71% of my portfolio invested in the market, and the current average return of a stock in my portfolio is 3.975% with my best return so far being 24.51% (Michael Kors) and my worst return so far being -3.70% (Smith & Wesson Holding Company).

I have been tracking my portfolio’s performance in an Excel spreadsheet, which includes a full break down of each position I hold and my portfolio as a whole, and I update the spreadsheet every weekend. If anyone would like a more in-depth look into how my portfolio is doing, and what positions I have in my portfolio, just ask me and I can either send you my portfolio’s weekly breakdown in an Excel spreadsheet or tell you in words how things are going.

So much has happened since my last newsletter that is impossible for me to make up for it in just one email, so I have laid out the pieces of information, which I find to be either interesting or significant, to try and summarize some of the major things that have happened over the last two weeks.


Summarized Market Update (for last two weeks):

U.S. stock markets continue to be concerned with emerging markets, which fell last week and then recovered its losses this week. The S&P 500 reached a short-term bottom last week, with an intraday low of 1,737.92 on February 5th, and then the market has significantly recovered since then today it closed at 1,829.83 (up 32.81 points or 1.83% so far this week).

The billionaire, Carl Icahn, was campaigning to get Apple to increase the size of its stock repurchase program, after Apple’s stock price dropped more than 8% after its most recent earnings report, but he recently ended his campaign “after an influential proxy-advisory firm rejected his proposal” (From WSJ). Carl Icahn has a roughly $4 billion stake in Apple, which has earned him a return of over $400 million so far.

Apple’s CEO, Tim Cook, said in an interview that Apple repurchased a total of roughly $14 billion worth of its shares in only two weeks, following the 8% drop in Apple’s share price. This gives indication that Apple executives believe that Apple’s share price could be undervalued. Apple’s share price has gone up 8.13% from its closing price on the day of the drop.

The recent survey of the Institute for Supply Management on February 3rd showed that while the manufacturing industry for the U.S. expanded over the previous month, it expanded at a much lower rate than expected (ISM Manufacturing PMI reading of 51.3 vs. 56.2 expected). That report, along with a weaker than expected Core Durable Goods Orders (m/m) report and Pending Home Sales (m/m) report is an indication that the U.S. economy is not improving quite as well as expected. Although many government reports indicate that the recent cold weather might have caused some of the poor economic reports over the past month.

The Congressional Budget Office now estimates that the Affordable Care Act will “lead to the eventual loss of about 2.5 million full-time jobs” (NBC).

There were many more important headlines over the past two weeks but for the sake of brevity I include only the most important….


Janet Yellen Takes Control Of The Fed:

Janet Yellen was sworn in as the new head of the Federal Reserve (the Washington Post refers to the position as the “steward of the nation’s economy”) on Monday, February 03, 2014. She had her first official public appearance in her new position on February 11th when she spoke at a hearing, referred to as a “marathon” hearing because of how long it lasted, on Capitol Hill. Her report was considered “dovish” (Investopedia defines dovish as a term describing “statements that suggest that inflation will have a minimal impact” and doves as people “who prefer low interest rates as a means of encouraging growth”) by investors when she declared that the Fed would not make an attempt to stray away from the current monetary easing policies (QE) that were put in place by her predecessor, Ben Bernanke. She also made the “dovish” statement that interest rates would remain at their current level (extremely low) well after the unemployment rate in the U.S. drops to 6.5%, which the Fed said as recently as last year would be the level when interest rates would begin to rise. The most recent unemployment rate came in at 6.6% on February 7th, and it was initially predicted that the unemployment rate wouldn’t drop to 6.5% until 2015. Janet Yellen made many remarks upon the recent huge drop in the unemployment rate, and the fact that the recent additions of new jobs do not seem to support the drop, and she “called the recovery in the labor market ‘far from complete,’ emphasizing the high numbers of long-term unemployed and part-time workers” (Washington Post). None of her remarks came as much of a surprise seeing as many people already knew that she would continue Ben Bernanke’s monetary policies, however, the S&P 500 rallied 1.1% throughout the day as traders reacted positively to the news that loose monetary policies would continue.

If you have any questions about this Issue of my Financial Newsletter please fill out the form below. I also appreciate receiving any comments you might have about what you just read, and I encourage you to send me ideas for topics that you would like to see me write about in the future. Thank you for reading!

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