It’s the first time in many years where I’m revealing my live money portfolio.
More importantly, this is my market beating 2017 Action Score portfolio.
But at the same time, I’m in the middle of liquidating a couple of accounts.
No, it’s not because of I’m afraid of what the economy will do, and it’s not because the picks are doing so bad that I’m selling out. I do not plan to sulk in the corner.
First, if you’re new to Old School Value and my story, I came to the U.S. in 2006 on my own (technically 2005, but I consider 2006 to be the official start) with nothing. After 11 years of hard work, saving, investing and running a couple of businesses, my wife and I are thankful to have bought our first home. It was unexpected as the plan was to wait a couple more years. The proceeds from our investment account will help pay for the home.
Reminds me of the story when Susan Buffett bought the first home for the Buffett’s in 1958 for $31,500.
That was a big deal for Buffett. Buffett was mega cheap back in his early days. In sports you talk about the athlete’s prime. For Buffett, he was in his cheapness prime.
Buffett balked at the price of the home, but went along withe home purchase anyways. Good move.
I’m also value, and wanted something on the lower end, but that didn’t sit well with the missus.
At least with low 30 year rates, I’m confident that we’ll come out on top as the years roll by.
In any case, to pay the down deposit and all the costs that come with first home ownership, I’m liquidating our non-retirement accounts.
I have the same holdings across my retirement accounts, but in good spirit, here’s my Action Score portfolio I built over January and February. This way you’ll be able to see how I utilize the Action Scores to pick stocks and try it yourself.
First, an IMPORTANT Point
A very common question I receive is this:
- “What is the annual performance of Old School Value?” or
- “How much can I expect to make using Old School Value?”
Old School Value is NOT a stock picking newsletter or advisory service.
We do not not provide stock recommendations like a newsletter. The purpose of Old School Value is to empower you with the tools to pick the best value stocks on your own.
To put it into perspective, it would be like asking the Yahoo Finance department, what type of returns to expect using their site.
Some people have generated 20+% with OSV.
Some have made 10+% with OSV.
Heck, some people lost money after 2 weeks and canceled.
It comes down to how you use it. You are in the driver’s seat. What we provide are the tools and systems.
Having made that clear, let’s move on.
My 2017 Action Score Stock Picks
I own all these stocks across my retirement and non-retirement accounts.
There are a few I did not include, as they were not part of the Action Score picks.
The rule is to keep them all for one year for tax purposes. But transferring the investment money into the house is more important at this stage. I’ll have to bite the taxes.
For the data, I’ve included my average purchase prices as I either crept into some positions, or couldn’t buy the full position in one swoop due to reasons explained later on.
Some took a couple of weeks to buy, while others I ended very underweight.
You will see that I have a total of 26 stocks and the allocation is not equal as I just mentioned. I’ll discuss my reasoning in the following sections. Lots to go through.
I also doubt I’ll publicly reveal my entire Action Score portfolio like this again for simple reason.
- I won’t be liquidating my accounts like this again. Only able to show this as I am locking in the following gains and losses.
- I don’t want to defend any position to the general public
- I regularly test little things that don’t fall into any rules of thumb that could seem contradictory to the info I provide OSV Insiders
General Overview of How to Pick Action Score Stocks
The backtested performances of the Action Scores I’ve published are based on a simple strategy. Buy at the beginning of the year and sell after one year.
By the end of 2016, the backtest portfolio was looking like this.
No OTC, Financials, Miners, Utilities in Backtest
The strategy is to pick the top 20 and then hold for one year.
With my personal portfolio, I mixed it up a little.
One of the golden general rules with quant investing is to strictly follow the process. No human meddling.
For OSV Insiders, I send a tutorial of how to pick stocks based on your activity profile.
If you’re a passive investor, there’s a simple portfolio method for that, and for the investors who like to get their hands dirty, I show another method.
And because I’ve been self-picking stocks for so long, it’s excruciatingly hard to knowingly buy some of the retail stocks that showed up on the list this year.
Companies like ASNA, GPS and AEO.
These are the rules of thumb I share for passive investors:
- spread your bets with at least 20 stocks. Can be 25 or more.
- equal weighted positions
- don’t chase stocks
- 2 companies in the same industry max
- stay away from complicated sectors like financials, miners, resource, utilities (leave it to the active investors who can dig in)
How I Picked My Action Score Stocks
My stock picks and the ratings of each stock at the start of the year were not all A rated.
- 9 out of the 26 stocks are B rated Action stocks
- 1 is a C stock
- 16 are A stocks
In terms of performance and in the short 5 months, 6 stocks are negative, with 4 out of the 6 being B stocks to begin with.
Also important to note that the stock ratings change throughout the year. See the various paths of movement a stock can take.
Paths an Action Score can Flow – Click to Enlarge
I downloaded the Stock Database CSV, started with the A stocks and spent some time to filter it down further.
- Removed industries I didn’t like
- Deleted stocks with little history
- Limited the number of stocks from the same industry
Here’s what I ended up with.
However, this is a total of 16 companies.
I wanted a minimum of 20, but wanted to get to 25 holdings.
So I went fishing in the B rank pool.
The B ranked stocks are very good selections. Based on the data below, fishing for stocks in the A and B pools are profitable.
A and B rated stocks are highly profitable
A ranked stocks are easier because they get great scores for all three Quality, Value and Growth.
When you come to the B’s, you only get 2 out of the 3.
This is where I mixed it up for the next 10 stocks.