Tin Cup Model Portfolio
Model Portfolio, by Mark Robertson, Managing Partner February 1st, 2016
Sell SWI, Accumulate ILMN & Add Proto Labs (PRLB)
“I would be a bum on the street corner with a tin cup if markets were efficient.” — Warren Buffett
This demonstration portfolio invests the maximum allowable 401(k) in stocks. Total assets reached $1,000,000 in 17 years. Tin Cup has outperformed the total stock market since inception (1995) and the annualized total return is now 17.1% vs. 8.8% for the Wilshire 5000.
Total assets are $1,338,126 (1/31/16) and the net asset value is $285.17. The model portfolio declined -2.24% during January 2016. The Wilshire 5000 checked in at -5.90% for the month. The total return for the trailing year for Tin Cup is -1.6% versus -2.7% for the Wilshire 5000 (VTSMX).
Tin Cup Dashboard: February 1, 2016. Ranked by PAR (Descending) This month, we sell Solar Winds (SWI) and accumulate Illumina (ILMN) and add Proto Labs (PRLB). http://www.manifestinvesting.com/dashboards/public/tin-cup
Portfolio Design & Management: StockSearch Edition. We’re replacing a stock with a return forecast of 17.9% (!), a quality ranking of 94 and a growth forecast of 21.2%. Using those three settings as minimums in the stock screener yields the two — and only two — companies shown here.
Portfolio Characteristics
With MIPAR at 9.0%, our target for the minimum overall portfolio PAR is at least 14.0%. The overall portfolio PAR is 13.2% on 1/31/2016. Quality and financial strength are sufficient at the current levels of 93 (Excellent) and 89%. EPS Stability is 78 for the portfolio. The overall (average) sales growth forecast is 10.3%. The sales growth forecast target is approximately 11%.
Performance & Decisions
With the average Groundhogger dragging in at a trailing 12-month total return of -9.7% and the average Wilshire 5000 stock down -5.8%, we’re a bit grateful and relieved for -1.6% from Tin Cup.
Tin Cup could use a little boost in overall return forecast but we’ll defer to next month for a traditional challenge. This month, we’ll address an opportunity with SolarWinds (SWI) being taken private at $60. Our advice is generally to take the money during one of these cases — citing the reality that deals that disintegrate often destroy stock prices. The price support for the stock disappears and will often retreat to levels seen before the transaction became public knowledge. A fairly recent example would be Staples (SPLS). This case is a little different. The purchase price usually delivers a PAR at or near zero. In this case, our opinion would be that SWI is being sold at a discounted price (and elevated PAR). But we’ll still do some portfolio fine tuning.
Using the StockSearch, we set minimum conditions for PAR, quality and growth forecast equal to the current forecasts for SWI. In other words, we’d like to replace the holding with something better from those three perspectives. In this case, the only two qualifying companies (see accompanying image) are Illumina (ILMN) at 3% of total assets for Tin Cup and Proto Labs* (PRLB) a company that’s been featured at Manifest Investing. Welcome both to Tin Cup.
Mark Robertson
Mark Robertson is founder and managing partner of Manifest Investing, a source for research and portfolio management focusing on strategic long term investors.