Monday, September 23, 2013

My Wife's Portfolio Is Up 32%

By Michael Hooper
My wife is a better investor than me.
My wife added nothing to her individual retirement account this year yet it's up 32.1% year-to-date, outperforming the S&P 500 index's 21% year-to-date return through Sept. 18. She beat my IRA's 23.4% year-to-date performance.
Stocks like Berkshire Hathaway (NYSE: BRK-B), PepsiCo. (NYSE: PEP), Johnson & Johnson (NYSE: JNJ), and Boston Beer (NYSE: SAM)  have made outstanding returns for her portfolio this year.
She opened her IRA 20 years ago. Some stocks like Berkshire have been in the portfolio for more than 10 years. The portfolio was modified in 2009-2010. Disclosure:  I picked most of the stocks in her IRA; she bought them.
Her portfolio proves that it is possible for six-to-12 stocks to outperform the S&P 500. I believe such portfolios require winning stocks only. My wife's portfolio has no losers.
The female mystique
Studies show women take fewer risks than men. They buy and hold and use self-control in a market correction. Men tend to trade more often and sometimes borrow money to leverage their returns.
One thing that impressed me about my wife was her vigilance in holding and even buying more stock during the financial crisis of 2008-2009. Some investors panicked and sold out -- missing out on huge gains since then.
The following chart shows my wife's IRA holdings, their percentage of the portfolio, their year-to-date returns, plus dividend yield.
Name% of PortfolioYTD Return to 9/18/13Dividend Yield
Berkshire Hathaway55.15%30.10%n/a
Boston Beer10.74%82.58%n/a
Canadian National Railway2.97%11.91%1.7%
Dominion Resources9.24%22.37%3.7%
Johnson & Johnson7.86%28.26%3%
Source: Charles Schwab Research and Yahoo! Finance
The heavyweights
Berkshire Hathaway is clearly the big heavyweight, representing 55% of her portfolio. There are good reasons. My wife is from Nebraska, she grew up admiring Warren Buffett, and she wanted to buy his stock. Berkshire Hathaway remains a great investment today because it owns more than 80 companies that are generating larger amounts of cash annually.
Living in Kansas now, we see trucks of corn, potatoes, and wheat go into PepsiCo's Frito-Lay plant in Topeka, Kan. and haul out Doritos, Lays and SunChips. After reading PepsiCo's annual reports, we bought stock in PepsiCo for both of our IRAs at $48 per share several years ago. Frito-Lay North America represents about 20% of PepsiCo's total revenue; it's one of PepsiCo's top profit centers, adding diversity away from its beverage business.
Johnson & Johnson is a dominant leader in the health care industry, selling products like Band-Aid, Tylenol and Listerine. The stock's 28.3% year-to-date return is exceptional. The stock remained flat in some years. I expect Johnson & Johnson to continue advancing its health care business to meet the needs of a growing world population.
Dividends are held in a money market fund until they build up to $1,000 for a trade. One time, she bought 10 more shares of Boston Beer at $98 per share. That stock's 82.6% year-to-date return really boosted my wife's portfolio. Boston Beer is a highly priced stock right now. But I would not sell it. Boston Beer is growing sales 15% to 20% annually and has no debt.
Women have a great disposition for investing. They don't take too many risks. They buy top-quality stocks and hold onto them. They use self-control in a downturn. All of these qualities are worth emulating if you want to become a successful long-term investor.

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