Since 1980, Charles Allmon has thrashed his stock-picking rivals -- and for the past 20 years, he's done so with a portfolio mostly devoted to cash.

According to Mark Hulbert's records of investment advisors' performance, Allmon's Growth Stock Outlook newsletter has beaten all its peers since the era of Ronald Reagan, Kramer vs. Kramer, and $0.15 first-class stamps. But while playing it safe with mostly cash holdings kept Allmon from losing too much money, it may not have helped him make much money, either.

Not impressed
Hulbert didn't provide Allmon's exact performance over the years, simply noting that Allmon's returns beat the market. Before you rush to emulate Allmon, keep in mind that if you're mostly in cash, you're only earning something like money market rates. Over many years, those measly returns often have trouble just keeping up with inflation.

True, Allmon outperformed all his rivals, but perhaps that simply means many of them were lackluster. Note that Allmon didn't beat out all advisories that have existed in the past 30 years -- only those that have been around for the entire 30 years he's been in business.

A simple investment in the S&P 500 would have given you an average 8.2% annual gain over the past 20 years. That's not too shabby, given our recent dreadful decade. Over 30 years, that investment would have averaged 11.3%. I'd be curious to see how Allmon's average returns compare to those figures.

No confidence?
Recently, Hulbert reports that Allmon's kept 80% of his portfolio in cash, with the remaining 20% allocated to just four stocks. Every now and then, it's reasonable to keep a cash hoard handy while you wait for tempting bargains. But the past three decades have offered many standout companies that grew like gangbusters. Allmon even recommended some of them along the way, including the following longtime holdings from his portfolio:

  • Automatic Data Processing (Nasdaq: ADP) takes care of payroll and other services for many big companies. It's averaged an 11% return over the past 20 years, and lots of investors are still bullish on its prospects. But ADP isn't the only automation game in town. Paychex (Nasdaq: PAYX) also offers similar outsourcing services, and has fans excited about its use of float. Oracle's database systems also help companies manage their data. Over the past 20 years, both of these alternatives have averaged annual gains of more than 20%.
  • Stryker (NYSE: SYK) was another smart choice for Allmon, earning an annual average return of 18% over the past 20 years while making orthopedic implants and surgical equipment. Those who saw the great growth that lay ahead for medical equipment companies might also have looked into Medtronic (NYSE: MDT) (averaging 15% over 20 years) and St. Jude Medical (10%). Even less confident investors could have hedged their bets a little with Johnson & Johnson (NYSE: JNJ), which is deeply involved not only in medical equipment and devices, but also in pharmaceuticals and consumer products.

Sadly, it looks like Allmon's Growth Stock Outlook over the past decades has been a grim one; apparently, he never saw many growth stocks he liked. Or perhaps he didn't have enough confidence in them to grant them a large percentage of his model portfolio.

Still, Allmon did many things well. He beat the market, didn't lose money, and recommended many strong dividend payers along the way.

The latter approach is clearly a great way to turbocharge your portfolio's performance. According to Hulbert, Allmon holds Altria (NYSE: MO), which recently yielded nearly 7%, as well as its globally focused cousin, Philip Morris International (NYSE: PM).

I simply wonder what Allmon's returns might have been if he'd had greater faith in more of his picks.

Buying great stocks is just one part of investing; you've also got to resist the temptation to sell them. Here are stocks you may want to keep.