My personal portfolio

Today I finally wanted to get to discussing my investment portfolio and some of the reasons behind my allocation decisions. I think its better to see actual ideas being implemented rather than just talk about generalities. Lets get right to it then. You can see the bulk of my portfolio on how it is performing at tickerspy here.

In general, I run a highly concentrated portfolio. I don’t buy into much of the standard efficient market and asset allocation dogma. I don’t own stock mutual funds or stock ETFs. Also, my asset class selection is driven in a large part by my macro outlook which I’ve discussed before. Currently, my asset allocation is;

• Stocks: 45%
• Commodities/Gold/Currencies: 23%
• Real Estate: 17%
• Cash: 15%

Stocks: I am a big believer in the power of dividends, especially in recession resilient sectors like energy and tobacco. In particular I’m a big fan of the MLP sector considering its tax deffered advantages combined with good yields. I have positions in EPD, KMP, and ETP. I also hold the UK/US utility NGG. MO is my tobacco holding and I think is still the best performing stock of all time in the US (no, I’m not kidding). Next, I have some very high yield holdings in the mortgage REIT sector; NLY and CIM. And finally, rounding out my stock portfolio is a position in the Berkshire of Cananda, Fairfax Holdings (FFH.TO). Most of these holdings I’ve had for a long time, my yield on cost is well over 10% and I’m quite content to continue to compound these returns.

Commodities: including gold and some currency holdings. The allocation to the commodity sector is a play on emerging market growth, a hedge against inflation, and a hedge against dollar devaluation. I also own these holdings in a unique way, through several structured products. Basically, the structured product exposes me to all the upside in the commodity sector for a period of time and at the same time protects my principal 100 percent (and is FDIC insured). I’ll explain structured products in a later post but they are a combination of options and bonds into one investment vehicle. I consider these investments like restricted cash since I have no downside.

Real estate: this is one property that is 100% paid for and receive enough income in the year from it that there is zero out of pocket costs for me. Even post the real estate crash it has been a great investment – it was purchased in 1992. It is also an inflation hedge.

Cash: rounding out my portfolio are my cash holdings. As I said in my post on the gov’t being after your savings leaving this cash in idle investments like money market funds or CDs is a losing proposition at this point in time. I manage this cash very actively, more than any other part of my portfolio, and use it to generate income with conservative option strategies. My goal is to generate 10% annual returns or more on this cash. So far, so good.

That rounds out the major chunks of my portfolio and asset allocation. You can follow the stock and commodity holding performance at the Tickerspy link I gave above although it is not adjusted for  the time of the investment or position size.