James Roberts, Fortune's Most Admired Companies Investment Model
Author: James Roberts
The Most Admired Companies portfolio is approximately 97% invested in 19 different companies. We will have a full complement of 20 different positions within the next month or so. We made quite a few changes during February.
We initiated a position in Apple (AAPL), Bed Bath & Beyond (BBBY), Comcast (CMCSA), Mastercard (MA), PepsiCo (PE), Qualcomm (QCOM), and TJ Maxx (TJX). We sold but one stock during February: IBM (IBM). This level of activity is unusually heavy for the model, and I would not draw the conclusion that this model will trade very frequently.
The most admired company list published by various business publications like Fortune and Barron's becomes available every March. There are nearly 300 companies that are among the most admired. If one of our approximately 20 stocks were not to be included for the coming year, it would be replaced. I doubt there will be more than a couple of changes in the portfolio when the new list is released.
Another feature of the portfolio that is intended to reduce the level of trading is to include some companies that are long term values. PepsiCo is an example of a long term value. PepsiCo has a relatively high dividend yield, but its North American operations are not growing as well as Coke. In what appears to be a move to accent international operations, PepsiCo announced some management changes today.
Some investors are growing weary of the poor stock performance that PepsiCo has delivered over the last several years. It would not be surprising to see the CEO retire in 2012 or 2013 to make room for a new CEO. In the meanwhile, PepsiCo has announced an increase in its advertising budget. Nevertheless, PepsiCo will be eliminated from the portfolio if it is not included among this year's most admired companies.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.