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Friday, December 18, 2015


Seeks capital appreciation with focus on absolute returns, irrespective of any benchmarks, but comparative to Utilities Sector of S&P500 (XLU).

Investing in utilities industry in USA, using common stocks, long only, no margin.
Investing in companies principally engaged in utility operations emphasizing power and gas, generally not including telephone and telecommunications utilities. No out-of-index positions allowed.

Within the utilities sector, we believe buying companies with rising share prices and above average dividends can make a boat-load of money over time.
There are about 100 American utility companies currently trading in USA. Half of them are active tradeable stocks, profitable and with dividends. 40 of them are 'electric' and 'diversified', with some discrepancy as how to classify some. For simplicity I will use Finviz's sector designation, but  generally following XLU index allocation.

Finviz Utilities screen (link)
Utilities Select Sector SPDR Fund (XLU) from State Street (link)

Utility Portfolio will consist of 6 stocks, selected on basis of dividend yield, market cap and share price performance. Our investment approach focuses on stocks with reasonable valuations and proven track record, as such we lean towards companies included in S&P500 index and generally avoid recent IPO's. In interest of diversification and with objective of consistently meaningful portfolio impact, we allocate equal standard position size to 3 electric, 1 multi, 1 gas, 1 water, with understanding that substitution is permitted at times.

The value of portfolio investments will vary from day to day... just because..., and money can be lost!
In order to mitigate an impact of chaotic price fluctuations we deploy risk containment measures designed to sell losers and let the winners run, with goal to be near-100% invested on any 30-day rolling period, unless a bear market strikes and all stocks go to shit.

Portfolio is allowed 12 re-balancing per year (200% turnover) or one switch per month on average, for about 1.2% in expenses of first $20,000. Every effort is made to minimize cost, but keeping in mind that quarterly dividends needs to be re-invested as soon as possible, which requires at least 4 round-trips per year.
For ease of tracking purposes, initial allocation will be made on open of first trading day of new year.
Activities will be reviewed on quarterly basis or as need arises.

Diversified Utilities
Gas and Water

 A man always has two reasons for doing anything: a good reason and the real reason. - J.P.Morgan
In a previous post (link) I outlined my deep dissatisfaction with performance and management of one of my investments - Fidelity Select Utilities Fund FSUTX (link).
Adorable Mr. Simmons is a really nice guy, I would love to have a beer or two with him while slinging war-stories about dumb investors and gullible speculators ... and a wretched 15% loss in my investment (little less including dividends), while index is down only single digits. I tested my own utility portfolio, based on strategy outlined above. Out of six different runs there wasn't a single case of double-digit loss, with last iteration up 11% -  all during a period when XLU was flat to down.
I am looking forward to putting up some of my own money in a sensible, focused way. Surely it will give me a great pleasure to not only make some profit next year (*what a novel idea), but also at the same time Fuck Mr Simmons's Utilities Portfolio and half a million dollars he dumped on his useless college education...

This is end-of-2015 allocation.
January 4, 2016. Starting allocation:

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