Performance Review: One Year, Five Year, and 10 Year Comparisons

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The performance of the Stock Market Advantage (SMA) Portfolio was particularly fortuitous in 2011 as the investment returns trumped the indexes and the vast majority of professional money managers.

This sort of outperformance is probably achievable only once every 10 years.  It can largely by attributed to luck with a small dose of experience/skill, and the unusual efficacy of the Tactical Timing System.

The successful timing signals added about four percentage points to the return. There were four timing signals generated in the past year as shown below:

A review of the holdings in the portfolio sheds some light on the surprising superiority of the SMA Portfolio which outperformed the S&P 500 by a factor of nearly five (10.04% versus 2.11%).

Outside of the bond holdings there were 11 positions held for the entire year (see below).   Of these, Pfizer was the strongest contributor with a total return (including dividends) of 27.5%.  Marathon Oil, which split into two companies, was a close second at 25%.  Other top performers included Exxon Mobil (18.7%) and Wal-Mart (13.1%).

It would nice to replicate this outperformance every year, but that, I guarantee you, is highly improbable given the tendency of markets to revert to the mean.  However, it appears that high-quality U. S. large-cap equities have been gaining momentum.  The SMA portfolio has a substantial tilt towards this sector which may allow it to generate good relative performance in the coming months.

For historical reference, last year’s performance was sub-par in absolute terms (link), but was good on a risk-adjusted basis, given the portfolio’s heavy concentration in short-term bonds.

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