The packed actions this week and what we sent out yesterday about portfolio management disciplines have demonstrated why being an active manager of your portfolio brings greater advantage than passive investing. Here's how we describe ourselves in the introduction: "We are long-term by nature, owning stocks for more than 1 month (usually 6 or more months). However, this is not to be confused with "buy and forget" investing. Our style is to have some trading sensitivity with a long-term outlook. What this means is we analyze our holdings (technically and fundamentally) on a daily basis and take action as necessary—take a little off the table, add to positions and trim losers." In the past few months since our subscription service went live, we hope to have successfully demonstrated what we do to you. In today's post, let's review how effective our strategy is, and compare that to a passive investing strategy.

Tracking Our Portfolio's Performance

First of all, let us remind you that you can always track the performance of our portfolio live here. At the top of the Excel sheet, there are details about how much our portfolio is up for the year, versus how much the benchmark S&P500 is up for the year.

While our portfolio's strong performance could be contributed to the successful trading of options (high leverage - recommended only for experienced traders), a lot of the work was done by individual stocks in our portfolio. Most notable was the gain of Ford (F), which is up 12.4% this year. Next up was the gain in the financials, namely Wells Fargo (WFC) which is up 5.7% YTD. We also successfully traded an energy play - Devon Energy (DVN). Lastly, we successfully traded Nucor (NUE), and despite the stock is only up 3.5% YTD, we sold our trading position when it was up 8%. These gains came amid large drawdowns in the technology sector of our portfolio. Advanced Micro Devices (AMD) is down 9% YTD, Salesforce (CRM) is down 10.3% YTD, but the losses in those names have come unnoticed. The advantage for us now is, we can realize some gains from the winning group, and add into the losing group, with discipline. 

There Are Many Opportunities In Individual Stocks For Active Managers

It is true that if one does not have ample time to do the homework necessary to own individual stocks, we recommend that they own exchange-traded funds (ETF) that mirror those indices, such as the SPDR S&P500 ETF (SPY), or the Invesco QQQ Trust (QQQ) that tracks the top 100 stocks in the Nasdaq. Anyone who's interested in ETFs can contact us for more details. 

However, the point we're trying to make here is, there are more opportunities if you do the homework and own individual stocks. Individual stocks fluctuate greater than the averages, offering you more opportunities if you try to build your cost basis accordingly. Let's take the star of our portfolio, Ford (F) and compare to the S&P500 ETF (SPY). You may have an investment discipline of buying on dips, sure, and you want to buy when the SPY corrects 10%. If that was your strategy, you didn't get any in 2021; the SPY had 5% corrections from top to bottom for 4 times. However, underneath the surface, you always had stocks that are greater than 20% below their 52-week highs. We loaded Ford (F) at the end of September 2021, when it was ~23% below its 52-week high, and since then it has moved up ~90%, compared to 10% for the SPY. So you see, being stock pickers and active managers allow us to identify, strategize and capitalize on these incredible individual opportunities.

Bottom Line: You can argue against trying to actively manage a portfolio, arguing for a passive ETF, by looking at the underperformance of stocks like Disney (DIS) and Boeing (BA) compared to the S&P500. We believe that experience and hard-work is required to deliver alpha (outperformance). That's what we're trying to do here, we only take actions when we have a strong reason, we are able to write about it to you. Once in a while we'd like to review those decisions. In addition to active managers, we're active learners.