Friday, December 16, 2011

Meet the Footsie


The setup

I was interested to see if I could put together a little portfolio that seemed reasonably safe. It's not a "beat the" portfolio, it's hopefully a "meet the" Footsie.

In this portfolio, I merely want to "not do too bad" against an All-Share index. I have ignored yield, and required that to be included it has a PER < 15 and PER >0. I have also insisted on a "Graham Gearing" ratio of at least 50%. For those not knowing what I'm talking about, in the words of Ben Graham: "I favor this simple rule: A company should own at least twice what it owes. An easy way to check on that is to look at the ratio of stockholders' equity to total assets, if the ratio is at least 50%, the company's financial condition can be considered sound."

The result

A year ago I chose VOD, BLT, MRW, KGF, SGE, 3IN, LRD, CWK, SBT to "meet the Footsie" with hopefully lower risk. They had PER < 15, and were chosen for low gearing according to Ben Graham's method. Here's how the shares did in percentage terms over the year:
VOD 4.1 BLT -26.4 MRW 18.2 KGF -6.3 SGE 1.5 3IN -1.7 LRD -10.5 CWK -13.3 SBT -46.0

That's a mean performance of -8.9%. The mean for the Footsie was -8.4%.

I was hoping for better. Some of this stuff is now pretty cheap, mind. SBT is on a PER of 5.8, for example.

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