This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Kass: The Model Portfolio

This blog post originally appeared on RealMoney Silver on April 20 at 10:08 a.m. EDT.

Beginning today, I plan to publish (probably on a regular monthly basis) the general construction of a model portfolio (long-only) with a six-month investment horizon.

Should there be a major change in market conditions or in market outlook, I will provide a timely update to the portfolio.

My hypothetical portfolio will embrace where I believe a long-term investment portfolio should be positioned relative to S&P 500 industry benchmarks and weightings.

Given the scope and duration of the recent market advance, I believe that the U.S. equity market is vulnerable to a short-term decline of 5% to 6%.

Advance/Decline Line 30-Day Moving Average
Capital Observer

Percentage of S&P Stocks Above 50-Day Moving Average
David Rolfe, Wedgewood Partners

Above-average cash positions should now be held in light of a possible market correction and in order to have excess reserves to capitalize on opportunities available in a volatile trading environment.

Given that credit has underperformed equity and that credit currently provides outsized yields vs. Treasuries, most portfolios should substantially overweight credit holdings, which are senior claims relative to equity.

S&P Weighting Recommended Weighting Rationale for Weighting
Technology 17% 10% Business spending will remain subdued
Energy 16% 14% Cheap relative to commodity price
Financials 14% 8% Elevated share prices, deleveraging and dilution risks
Health Care 12% 7% Government intervention threatens pricing
Industrials 11% 6% Shallow economic recovery a headwind
Consumer Staples 11% 5% Exposed to generic trade-down
Consumer Discretionary 8% 6% Cheap relative to expectations
Materials 4% 3% Shallow economic recovery a headwind
Utilities 4% 2% Limited value against rising interest rates
Telecom 3% 4% Secular prospects remain solid
Total equities 100% 65%
Credit 0% 20% Opportunistic
Total exposure 100% 85%
Cash 0% 15%

Finally, I have included a shopping list of over 50 individual stock candidates (by sector) that could be considered in the aforementioned model portfolio.

  • Technology: Apple (AAPL); Microsoft (MSFT); Dell (DELL); Cisco (CSCO); Qualcomm (QCOM); Research In Motion (RIMM); Oracle (ORCL)
  • Energy: Transocean (RIG); Schlumberger (SLB); BP (BP); ConocoPhillips (COP); Chevron (CVX); select MLPs
  • Financials: Bank of America (BAC); Berkshire Hathaway (BRK.A); Cohen & Steers (CNS); AllianceBernstein (AB); REITs, including Vornado (VNO), Boston Properties (BXP), Weingarten (WRI) and SL Green (SLG); Chubb (CB); Loews (L); National Financial Partners (NFP); Hatteras (HTS); Annaly (NLY); SLM (SLM); Visa (V)
  • Health Care: Abbott Labs (ABT); Gilead (GILD); Celgene (CELG)
  • Industrials: Emerson Electric (EMR); Ingersoll-Rand (IR); 3M (MMM); PPG (PPG); Union Pacific (UNP)
  • Consumer Staples: Procter & Gamble (PG); General Mills (GIS); Unilever (UN)
  • Consumer Discretionary: Home Depot (HD); Lowe's (LOW); Disney (DIS); Nike (NKE); Yum! Brands (YUM); Wal-Mart (WMT); eBay (EBAY); Starbucks (SBUX)
  • Materials: Freeport-McMoRan Copper & Gold (FCX); BHP Billiton (BHP)
  • Utilities: Duke Energy (DUK); Dominion Resources (D); PG&E (PCG)
  • Telecom: Verizon (VZ); AT&T (T)
  • Credit: putable converts (REITs); bank loans; high-yield debt

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.

Stock quotes in this article: MSFT, DELL, RIG, BAC, BRK.A, CNS, VNO, WRI, SLG, CB, L, NFP, HD, LOW, DIS, SBUX, FCX 
At the time of publication, Kass and/or his funds were long MSFT, DELL, RIG, BAC, BRK.A, CNS, VNO converts, WRI converts, SLG converts, CB, L, NFP converts, HD, LOW, DIS, SBUX and FCX, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Long/Short LP.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs