My permanent portfolio with individual stocks

[stone]

ngcpa, I entirely concure. Just because going from 5 stocks to 10 reduces risk does not mean that risk continues to fall as you get hundreds of stocks.

[stone]

Apparently the FTSE100 is now 1/3 natural resources stocks:- 18% oil and gas and 15% mining. That is nothing to do with the UK economy or HB's economic conditions. Kazakastan, Australian and Mexican based miners selling products predominately to China are listed in London. I guess the banks and pharma companies etc that actually operate from the UK have slumped so much.

http://www.ft.com/cms/s/0/9637d43a-1c2f ... z1dQ59ECAt

It also makes me wonder about the idea of just having "domestic stocks" in the PP. The FTSE doesn't look very domestic.

A bit off topic but I've also pondered on whether, for a US investor wedded to index funds, a Russel2000 index might give better exposure to US "prosperity" than a US total stock market index.

[ngcpa]

It has been about 3 months since I started my 3x (no cash) Permanent Portfolio.  At least I started the 14 stocks on 10/7/11.  I bought the gold (GTU) and treasuries over the next month, and completed it all by 11/15/11.  Here are the results so far (as of 1/7/12):

Stocks (reinvested dividends and ROST split 2:1):
-------- 
ARLP + 26.71%    AZO +  4.39    BCPC + 5.44      BLL  + 20.00      CHRW  - 1.39      FAST + 36.16    KMP  + 21.07
NKE  + 14.96      ROL  + 14.67    ROST + 20.69    RYN + 21.56      SJI      + 9.35    SKT  + 13.57    SRCL  -  4.82
  Total stocks +14.48%      VTSMX (Vanguard's total stock market index) was up 11.5% for the same period with dividend reinvested)

LTT (1/7 TLT & 2/7 each treasury) bought at different times & reinvested TLT dividends:
----
TLT + 16.29%  30-yr -2.06  29-yr + .33  28-yr  +.37
  Total treasuries + 2.03%

Gold (GTU) - 8.01%

PP overall + 2.03%

[ngcpa]

For what it's worth, in my last post I should have said my Permanent Portfolio was up 2.83% overall not 2.03 as I posted by mistake.
Norm

[MachineGhost]

        The important columns are the average losses and average gains.  Notice that the gold, long term treasuries and even both the PP’s  have bigger average gains than losses.  So in a year period that has a gain, it is generally twice as big as losses sustained (on average).  Notice the stocks (VTSMX) has average losses as big as gains.  Fortunately stocks (like all the others) have more gains than losses.  It seems to me, that if I could find a group of stocks that have larger average gains than losses (like the other components), the results would improve dramatically.

It sounds like you've stumbled upon the concept of the Upside Potential Ratio to select your stocks.  I would encourage you to use the actual formula as it weights downside risk and would let you easily rank and screen the entire stock universe.  For example, the top 15 with MAR set to 90-day TBills and measuring back a year:

Ticker Date/Time Name UPRDD
DLTR 02/24/2012 Dollar Tree Inc. 0.92
LGF 02/24/2012 Lions Gate Entert 0.88
MDVN 02/24/2012 Medivation Inc. 0.88
CBST 02/24/2012 Cubist Pharmaceut 0.87
ORLY 02/24/2012 O'Reilly Automoti 0.86
SUG 02/24/2012 Southern Union Co 0.83
ACFN 02/24/2012 Acorn Energy Inc 0.83
PCYC 02/24/2012 Pharmacyclics In 0.83
AKRX 02/24/2012 Akorn Inc. 0.83
V 02/24/2012 Visa Inc. Visa In 0.83
QCOR 02/24/2012 Questcor Pharmace 0.83
ALXN 02/24/2012 Alexion Pharmaceu 0.82
AZO 02/24/2012 AutoZone Inc. Co 0.82
RGR 02/24/2012 Sturm Ruger & Co 0.81
PKT 02/24/2012 Procera Networks 0.81
ROST 02/24/2012 Ross Stores Inc. 0.81
SWI 02/24/2012 Solarwinds Inc. 0.81
BIIB 02/24/2012 Biogen Idec Inc 0.81

Or measuring back 10 years:

Ticker Date/Time Name UPRDD
TSCO 02/24/2012 Tractor Supply Co 0.68
ROST 02/24/2012 Ross Stores Inc. 0.66
SHOO 02/24/2012 Steven Madden Lt 0.66
AAPL 02/24/2012 Apple Inc. 0.66
MNRO 02/24/2012 Monro Muffler Bra 0.66
COH 02/24/2012 Coach Inc. Commo 0.66
ODFL 02/24/2012 Old Dominion Frei 0.65
BJRI 02/24/2012 BJ's Restaurants 0.65
JBHT 02/24/2012 J.B. Hunt Transpo 0.65
ORLY 02/24/2012 O'Reilly Automoti 0.64
ASNA 02/24/2012 Ascena Retail Gro 0.64
BBBY 02/24/2012 Bed Bath & Beyond 0.64
TOL 02/24/2012 Toll Brothers Inc 0.64
QCOR 02/24/2012 Questcor Pharmace 0.63
PANL 02/24/2012 Universal Display 0.63

MG

[ngcpa]

Interesting!  I never heard of that.  I'll have to investigate it.  Of the stocks you mention, I have chosen 1 (ROSS) and almost chosen 2 others, but picked other stocks in similar businesses.  These are AZO instead of MNRO and CHRW instead of JBHT, although I did look closely at MNRO & JBHT (and have data from them).  I also looked at ALXN & SHOO as well, but after I had already chosen my 14 stocks.  I have continued to look for candidates, as I am thinking of picking 6 more and adding more $ to my PP later this year.
Norm

[ngcpa]

This morning I rebalanced my stocks (only stocks not gold or LTT) as FAST was above the 40% band.  Actually one of my other 14 stocks was very close to the lower band (BCPC).  BCPC had a FLAT quarter (not a loss or even below the previous year) and the stock dropped about 30%.  I listened to their conference call and trust the management that things are still OK so I kept it.  I had briefly considered replacing it (as I was rebalancing anyway) with HWKN which is another chemical company.  I decided to just stick with the plan.
Norm

[ngcpa]

Another qtrly update:
 
It has now been about 6 months since I started my PP with stocks.  The total PP has not done as well as I hoped.  It us now up only 2.72% which is slightly less than 3 months ago (2.83%).  However the stocks are still doing very well.  I rebalanced just them on 3/5 (as mentioned in a previous post) and they are now up a combined 15.56% (including reinvested dividends).  VTSMX is only up 9.8% during this same 6 month period (again with reinvested dividends).  My gold (100% GTU) is now down 6.2% and my group of treasuries (actual bonds & TLT) are down 1.16%.  The rebalancing seems to have been timely as the stock that declined the most (BCPC) has improved dramatically right after the rebalance (luck is always helpful).  Now I am troubled by ARLP which is a coal producer.  There has been a lot of bad press surrounding new coal related regulations and this one has really tanked.  I am hanging on to it, but am not real excited about future prospects. When it is time to rebalance again or if I do add more $ to my PP in October, I may well substitute for this one.  It depends upon how things look by then, as I think China is still fueling a large demand for coal.
Norm

[stone]

ngcpa, There is something about  the rebalancing bonus effect with individual stocks in the pdf that can be downloaded from:
http://ssrn.com/abstract=1787045

The higher alpha of the equal-weighted portfolio arises from the monthly rebalancing required to maintain equal weights, which is a contrarian strategy that exploits reversal in stock returns; thus, alpha depends only on the monthly rebalancing and not on the choice of initial weights.

Cheers, Stone.

[ngcpa]

The higher alpha of the equal-weighted portfolio arises from the monthly rebalancing required to maintain equal weights, which is a contrarian strategy that exploits reversal in stock returns; thus, alpha depends only on the monthly rebalancing and not on the choice of initial weights

Thanks Stone:
I'll check it out. 
Norm