Sample Portfolio of 40 Stocks

The following list of forty (40) stocks was suggested by a reader for Quantext Portfolio Planner (QPP) analysis.  Long time readers of ITA know that QPP is a software program developed by Geoff Considine, author of a blog, The Portfolioist.

QPP Analysis:  The following list of 40 stocks results in a well-diversified portfolio as indicated by the Diversification Metric.  Anything over 40% is considered excellent and this portfolio generates a 42% value.  The S&P 500 is assumed a growth rate of 7.0% over the next six to twelve months and this portfolio is projected to generate a 7.5% return with only a 12% standard deviation.  This gives rise to a projected Return/Risk ratio of 0.63.  Anything over 0.6 is highly valued.

Check the Historical Data below and see how this group of stocks performed compared to the S&P 500.  What is particularly impressive is the difference in portfolio volatility.  This portfolio was 6.6% points lower than the S&P 500, a huge difference.

QPP Analysis

Correlation Matrix:  The QPP software considers 80% or higher to be highly correlated and anything below 50% to be low.  Most of the stocks in this combination are either moderately correlated or fall into the low correlated bracket.

At a later date I will run an optimization-momentum analysis of this portfolio.  Keep checking in for that analysis.

Correlation Matrix

 

 

 

About Lowell

Retired physics teacher. My hobbies are photography, reading and classical music. And my latest hobby - taking care of my dog, Kipling.

Comments

  1. Lowell,

    For larger portfolios ($5 million+), would you recommend purchasing a portfolio of stocks like this post rather than paying the equity ETF expense ratios? With an overall average ETF expense ratio of 0.45%, that’s $22,500 in annual expenses.

    Ryan

  2. Ryan,

    Excellent point. On the flip side of the argument, can one select individual stocks that will consistently outperform the broad market? The evidence is not strong that this can be accomplished over a lifetime of investing. The above list of 40 certainly did well over the last five years and stands a good chance of doing well in the future.

    With a 5 million dollar portfolio and a 3.5% yield, one can live on this portfolio in some comfort. One last comment. It is possible to build an ETF oriented portfolio with an expense ratio less than 0.45%.

    Lowell

  3. Richard Yalmokas says:

    One additional feature of that 40-stock portfolio that should be noted:
    This port. is similar to what folks on “Seeking Alpha” call a “Dividend Growth” port.
    What that means is that, in addition to looking at current yields, the 5-year dividend growth rate is also considered.
    This port. averages around 8% dividend growth year-over-year.
    Dick

  4. Dick,

    It is a most interesting portfolio and one I want to run additional analysis.

    Lowell

  5. Richard Yalmokas says:

    Thanks Lowell. I can’t wait to see the fruit of your additional analysis. Also, thank you for all you do for your subscribers. I am most grateful.
    Dick

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