A Portfolio With 21 Gainers and 0 Losers

As of Friday's close, the real-money Inflation-Protected Income Growth portfolio had reached something of a remarkable milestone: All 21 selected stocks were showing gains since their date of purchase. That achievement looks all the more remarkable when you realize that just last week, one pick was showing a loss of roughly 2.3%.

Is this a fluke of a rapidly rising market or proof of a well-thought-out investing strategy? Perhaps it's a bit of both.

The iPIG portfolio is built around the fairly defensive investing principles of dividends, balance sheet strength, valuation, and diversification. The one-two combination of those qualities and a rapidly rising market has helped the portfolio attain the status of having no losers. While that achievement may well turn out to be fleeting, it's still valuable to consider what's behind it in an attempt to figure out how to keep that sort of track record alive.

When bad news is good enough
It's earnings season again, and just like in every other earnings season, not every company meets Wall Street's expectations. To a real-world investor, though, what really matters isn't whether a company met Wall Street's quarterly expectations as much as whether the company is on track for long-term objectives. This quarter was no different for many of the picks in the iPIG portfolio.

Kinder Morgan (NYSE: KMI  ) , the pipeline giant that was showing that 2.3% loss just a week ago, had been punished for not meeting expectations for the third quarter. Still, Kinder Morgan's story now is one of aggressive expansion, with a proclaimed $13 billion in opportunities. As Wall Street digests the short-term pain of an earnings miss and starts looking toward the future cash-flow-generating prospects of Kinder Morgan's expansion plan, chances are reasonable that the stock can continue to recover.

Speaking of missing expectations, safety equipment manufacturer Mine Safety Appliances (NYSE: MSA  ) was the iPIG portfolio's largest loser on the week, down nearly 11% on some poor earnings numbers. Mine Safety Appliances blamed the results on weak global mining conditions, sequester-related delays in new product certifications, and a reduction in large order shipments. 

While some of those decreases could be considered one-time effects, much of the drop looks like it could be part of inherent cyclicality in the mining and construction industries that Mine Safety Appliances supports. Still, when originally selected, Mine Safety Appliances was trading at a market cap of about $1.5 billion versus a $1.7 billion fair-value estimate. Even after this past week's drop, Mine Safety Appliances is trading above that $1.5 billion dollar level, showcasing the importance of looking for reasonable prices.

Likewise, while semiconductor giant Texas Instruments (NASDAQ: TXN  ) reported earnings that were largely in line with expectations, the market did get spooked by its downbeat forecast. That led Texas Instruments to rank among the iPIG portfolio's losers for the week.

Still, a big chunk of that downbeat forecast is driven by the aftereffects of Texas Instruments' previously announced winding-down of its wireless business. That plan was well known at the time Texas Instruments became an iPIG selection, and as a result its impact shouldn't really have been much of a surprise. Indeed, despite a bad week, Texas Instruments is up nearly 25% since it was purchased for this portfolio, because the remaining business is still solid and growing.

And good news is awesome
On the flip side, toy maker Hasbro (NASDAQ: HAS  ) reported surprisingly strong earnings on better-than-expected overseas sales. That, combined with optimism for the all-important holiday quarter, catapulted Hasbro's stock upward by more than 10% on the week. Since being selected for the iPIG portfolio, Hasbro has been a strong performer, but the true test will be how the company captures sales during this shopping season.

Regardless of how any week goes -- even a week full of earnings news -- what matters to investors is a company's ability to improve its business over time. An improving business, combined with stronger direct rewards to shareholders in the form of increasing dividends, provides the type of long-term rewards that the iPIG portfolio is looking to receive.

Sitting on 21 gainers and zero losers could be an artifact of the rapidly rising market, as the iPIG portfolio was launched last December. Or it could be the result of a carefully selected group of stocks picked specifically for their track records of providing those increasing returns to their owners. As the iPIG portfolio's manager, I'll be the first to admit that there's likely some of each factor at play, but I'll still gladly pocket the dividends the companies are generating as a result of their solid operations.

Looking across the iPIG portfolio reveals the types of companies that can be found when searching for investments that directly reward their owners as the companies succeed. The snapshot table below shows those companies as of Friday's close and their potentially temporary state of 21 gainers and no losers:

Company Name

Purchase Date

Total Investment (including commissions)

Value
as of Oct. 25, 2013

Yield
as of Oct. 25, 2013

United Technologies (NYSE: UTX  )

Dec. 10, 2012

$1,464.82

$1,935.36

2.19%

Teva Pharmaceutical (NYSE: TEVA  )

Dec. 12, 2012

$1,519.40

$1,584.60

2.88%

J. M. Smucker (NYSE: SJM  )

Dec. 13, 2012

$1,483.45

$1,876.12

2.10%

Genuine Parts (NYSE: GPC  )

Dec. 21, 2012

$1,476.47

$1,819.07

2.72%

Mine Safety Appliances (NYSE: MSA  )

Dec. 21, 2012

$1,504.96

$1,727.64

2.50%

Microsoft (NASDAQ: MSFT  )

Dec. 26, 2012

$1,499.15

$1,965.15

3.13%

Hasbro (NASDAQ: HAS  )

Dec. 28, 2012

$1,520.60

$2,238.15

3.07%

NV Energy (NYSE: NVE  )

Dec. 31, 2012

$1,504.72

$1,997.52

3.20%

United Parcel Service (NYSE: UPS  )

Jan. 2, 2013

$1,524.00

$1,912.20

2.59%

Walgreen (NYSE: WAG  )

Jan. 4, 2013

$1,501.80

$2,367.60

2.13%

Texas Instruments (NASDAQ: TXN  )

Jan. 7, 2013

$1,515.70

$1,890.81

2.98%

Union Pacific (NYSE: UNP  )

Jan. 22, 2013

$805.42

$914.16

2.07%

CSX (NYSE: CSX  )

Jan. 22, 2013

$712.50

$904.74

2.25%

McDonald's (NYSE: MCD  )

Jan. 24, 2013

$1,499.64

$1,516.48

3.42%

Becton, Dickinson (NYSE: BDX  )

Jan. 31, 2013

$1,518.64

$1,899.90

1.88%

Aflac (NYSE: AFL  )

Feb. 5, 2013

$1,466.35

$1,790.10

2.11%

Air Products & Chemicals (NYSE: APD  )

Feb. 11, 2013

$1,510.99

$1,899.41

2.54%

Raytheon (NYSE: RTN  )

Feb. 22, 2013

$1,473.91

$2,158.92

2.75%

Emerson Electric (NYSE: EMR  )

April 3, 2013

$1,548.12

$1,882.16

2.44%

Wells Fargo  (NYSE: WFC  )

May 30, 2013

$1,525.48

$1,585.82

2.80%

Kinder Morgan (NYSE: KMI  )

June 21, 2013

$1,518.37

$1,532.58

4.49%

Cash

   

$514.85

 

Total Portfolio

   

$37,913.34

 

Data from the iPIG portfolio brokerage account, as of Oct. 25, 2013.

To follow the iPIG portfolio as buy and sell decisions are made, watch Chuck's article feed by clicking here. To join The Motley Fool's free discussion board dedicated to the iPIG portfolio, simply click here.

More Stocks That Pay You to Own Them
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of highflying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of their quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts identified nine rock-solid dividend stocks in this free report. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2701938, ~/Articles/ArticleHandler.aspx, 12/19/2014 8:15:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement