(By Jonathan Wee) This was my first year as a portfolio manager with Covestor, and my Macroeconomics and Secular Trends model ended up unchanged in December. As of December 5, my portfolio has slightly underperformed the S&P 500 Index (SPX) since its inception on March 15 of this year.
There were, however, a few notable ups and downs. On the plus side, I did correctly anticipate that Apple's (AAPL) iPhone and iPad releases this year would be the company's last hurrah for awhile. Making customers pay a premium in price and time for minor to moderate upgrades of a flagship device may have pushed consumers into the hands of competitors. Apple is now down more than 100 points from its 52-week high.
My major loss was with Chipotle Mexican Grill (CMG). Even though I love going to Chipotle now as much as I did my very first time, the growth rate is no longer stellar and the cost of food is expected to rise. Chipolte's spinoff Shophouse Southeast Asian Kitchen did not open its second location in Washington DC as expected, and is still under construction. However, Chipotle did announce a third location to open in Los Angeles early in 2013. Perhaps there were some kinks that needed ironing out.
Taco Bell (YUM) is bringing the heat with its new Cantina Bell menu and may eat away at some of Chipotle's cost conscious consumers. Unfortunately, not everyone holds the same opinion about Chipotle as I do, as I am still confident in its future and will be watching the Shophouse Asian Kitchen space closely. The share price performance of Terra Nitrogen (TNH) has been steady since I bought it. The company's high dividend is also a plus as is its master limited partnership structure that keeps Uncle Sam's hands out of the cookie jar for now.
I've taken a hands-off approach to the fiscal cliff, and have already initiated some precautionary measures with Verizon (VZ) and Clorox (CLX). These are strong earnings performers regardless of economic swings and offer strong dividends to boot. It will be interesting to see how the performance of these stocks compare to my other ones as we enter the new year.
Finally, it feels like inflows to securities with tax advantages will be on the rise. MLPs, municipal bonds (given their tax exemption holds), and even treasury bonds are good places to hide from the volatility of politics. There may also be a spread of selling into the new year.
Increased taxes could make investors sell their profits this year for lower taxes on their 2012 gains. The complement to this would be investors holding onto their losses to sell next year to offset any 2013 gains. Either way, it's going to be a bumpy ride, so brace yourselves.
Performance discussed is net of advisory fees, and includes reinvestment of dividends or other earnings.
The investments discussed are held in client accounts as of December 5. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
Any index comparisons provided in the blogs are for informational purposes only and should not be used as the basis for making an investment decision. There are significant differences between client accounts and the indices referenced including, but not limited to, risk profile, liquidity, volatility and asset composition. The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry, among other factors.
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