How to Play: Am I Diversified (Diversifying your Stock Portfolio)

How to Play: Am I Diversified (Diversifying your Stock Portfolio)
In Jim Cramer’s CNBC TV show, „Mad Money“, Jim Cramer has a segment where callers call in and mention their top five holdings. Jim Cramer then analyzes the stocks, and determines whether or not the caller’s portfolio is diversified. Many other people on the social networking site ask the same question. But is there a way to determine on your own whether your portfolio is diversified or not? Definitely!

Sector Diversification

The main focus of „Am I diversified?“ focuses on sector diversification. Many companies and analysts may have some variations, but there are around ten major sectors:
Basic Materials: These include gold, copper, composite material, chemicals, industrial metals, mining, forestry and paper companies such as FCX (Freeport McMoran), and ATI (Allegheny Technology).

Consumer Discretionary: Consists of General Retailers, Media, Travel and Leisure, Food and Drug Retailer companies such as TGT (Target), DIS (Disney), BBY (Best Buy), and SBUX (Starbucks).

Consumer Staples: Consists of Household Goods, Beverages, Food Producers, and Tobacco. Some others (such as those at ) would include Automobile Parts, and Leisure Goods. Examples include PEP (Pepsi), MO (Altria), PG (Procter and Gamble), and SLE (Sara-Lee)

Energy: Consists of Oil & Gas Producers, Oil Equipment and Services, Coal, and Alternative Energies (such as Solar). Stocks include XOM (Exxon-Mobil), SLB (Schlumberger), and BTU (Peabody Energy).

Financial Services: Consists of National and Regional Banks, General Financial companies, Brokerages, Exchanges, Nonlife Insurance, Real Estate, and Life Insurance Companies. Examples include WFC (Wells Fargo), GS (Goldman Sachs), NYX (New York Stock Exchange-Euronext), AMTD (Ameritrade), PGR (Progressive Corp).

Healthcare: Consists of Pharmaceutical, Biotechnology, Health Care Equipment and Services, Healthcare Insurers. Examples include PFE (Pfizer), JNJ (Johnson and Johnson), MDT (Medtronic), GILD (Gilead Biotech), UNH (United Health Group), ISRG (Intuitive Surgical)

Industrials: Consists of General Industrials, Aerospace and Defense, Support Services, Industrial Engineering, Industrial Transportation, Electronic and Electrical Equipment, Railroads, and Construction and Materials. Examples include GE (General Electric), BA (Boeing), CAT (Caterpillar), UPS (United Parcel Service), UNP (Union Pacific Corp), DE (Deere), WMI (Waste Management), FLR (Fluor Corp), MDR (McDermott), and TEX (Terex).

Technology: Consists of Hardware, Software, Semiconductor, Internet, Networking, and General Technology Companies. Examples include MSFT (Microsoft), CSCO (Cisco), GOOG (Google), AAPL (Apple), IBM (IBM), INTC (Intel), NOK (Nokia), and RIMM (Research in Motion).

Telecom: Consists of Fixed Line and Mobile Telecommunication Companies. Examples include T (AT&T) and VZ (Verizon Communications)

Utilities: Consists of Electricity, and Gas, Water and MultiUtilities. Examples include EXC (Exelon Corp), TXU (TXU Corp) and DUK (Duke Energy).

How to Sector Diversify

So what you can do is look at each stock in your portfolio, and categorize them into one of the sectors above. After you go through your entire portfolio, you may find that some stocks may be grouped into a single area. For example, you may hold NYX (New York Stock Exchange-Euronext) and GS (Goldman Sachs). While one is a Stock Exchange, and the other is a Broker, both are grouped in the Financial Services Sector.

There are some companies that may be difficult to pin down to any one sector. For example, AMZN (Amazon). Is it Consumer Discretionary or is it Technlogy? Use your best judgement. If you want, during your analysis, you can put 50% of Amazon under Consumer Discretionary, and 50% of Amazon under Technology.

Sector Diversification is the main form of diversification preached by Jim Cramer.

Other forms of Diversification

Sector Diversification is not the only form of diversification. There are many other forms of diversification.

Market Capitalization Diversification

Companies have different market capitalizations. Some are very large companies (large market capitalization) like GE (General Electric), while some others, are small or mid capitalization companies such as NTRI (NutriSystem). Stocks of different market capitalizations behave differently from each other.

Growth and Value Diversification

Some stocks are considered Growth Stocks. Investopedia defines a Growth Stock as one whose „Shares in a company whose earnings are expected to grow at an above-average rate relative to the market.“

Some other stocks are considered Value Stocks. According to Investopedia, a Value stock is „A stock that tends to trade at a lower price relative to it’s fundamentals (i.e. dividends, earnings, sales, etc.) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio.“

So within a portfolio, you can further diversify by holding different styles of stocks from growth to value.

Peter Lynch, in his Book, One Up On Wall Street, further groups stocks into six categories:

Slow Growers


Fast Growers



Asset Plays

International and US Diversification

Another way to diversify your portfolio is to hold stocks that are based in the United States, or based internationally. With international stocks, you can further group them into Developed International Markets such as Europe, Japan, and Australia, or into the Emerging International Markets such as Taiwan, Korea, China, Brazil, India, Eastern Europe, Africa, Middle East, and Russia.

Speculative and Non-Speculative

In his books (such as „Real Money: Sane Investing in an Insane World“) and his shows, Jim Cramer preaches that up to 20% of a (discretionary, not retirement) portfolio could be allocated to more speculative stocks. This is yet another form of diversification.


So in order to have a diverisfied portfolio, be sure to diversify across several industry sectors as mentioned above. You can also choose to diversify in other ways as well such as market capitalization, growth vs. value, speculative vs. non-speculative, US vs International Diversification.

Публикувано на 15 юни, 2012 в 5:00 pm | без коментар | bluechip, Dow Jones, FOREX, NASDAQ, S&P, основни моменти, Портфолио, правилата на играта, първи стъпки
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Стабилни акции по време на рецесия

Има ли рецесия или не, все още не е ясно. Предварителната подготовка, обаче, винаги е от полза. Кои акции са стабилни по време на рецесия? Тези на фирми с органичен растеж. Техните акции ще останат стабилни независимо от движението на пазара. Тук не става въпрос за икономически цикли, а за добре построена бизнес модел за икономически растеж. Тези компании се различават от другите по следните характеристики;

1. Семпла стратегия оперираща в стриктна дисциплина и фокус в приетия бизнес модел
2. Инвестиции във акциите от страна на самите служителите на фирмата
3. Използване на нови технологии за повишаване на ефективността
4. Локален лидерски екип, който са били с фирмата поне 10 г.
5. Нито една от тези фирми не влиза в категорията на мега-капс или блу чип.

Следното портфолио, съставено от фирми съчетаващи горните показатели, се е повишило 1,368% между 1996 и 2006 в сравнение  растежа от 130% на S&P.

American Eagl…AEGP0.0050–UNCH00
Avon Products…AVPRF2.0938–UNCH00
AptarGroup In…ATR35.47-0.31-0.87,178,800Best
BUY Co I…BBY40.030.16+0.43,931,910
Family Dollar…FDO19.240.44+2.341,217,807
Copart IncCPRT37.23011.8201+5.141,255,364
Brinker Inter…EAT16.820.27+1.63,591,450
Paccar IncPCAR41.92-0.24-0.571,243,815
Sysco CorpSYY27.890.07+0.251,437,530
Ross Stores I…ROST27.66-0.08-0.29,642,011
Omnicom Group…OMC43.49-0.52-1.181,244,689
Walgreen CoWAG35.42-0.11-0.311,739,423
NVR IncNVR519.26-8.99-1.734,000
Hormel Foods …HRL40.920.48+1.19,237,150
Coventry Heal…CVH49.540.29+0.59,553,842
Columbia Spor…COLM41.750.85+2.08,102,011
Lowe’s Compan…LOW21.78-0.62-2.777,672,659
Bed Bath &…BBBY27.06–UNCH01,916,457
Total System …TSS21.89-0.45-2.01,379,795
Express Scrip…ESRX59.060.55+0.941,374,357
TJX Companies…TJX31.330.08+0.261,960,225
Dollar Tree I…DLTR26.940.28+1.05,951,993
Lincare Holdi…LNCR29.93-0.37-1.22,920,067

Публикувано на 10 март, 2011 в 9:01 am | 5 коментара | bluechip, CEO, S&P, Wall Street, Портфолио
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Как да удържим вилнеещият пазар?

В последните години пазарът доказа, че може да изкара нервите и на най-стабилните хора. И все пак, толкова много трейдери успяват да ударът вилнеещият пазар. Как го правят? Ето три основни насоки:

1. Твърдо убеждение в дългосрочната сила и глобалния растеж на инвестициите. След всичко казано и писано за маркентиговата икономика, едно е ясно. Принципът на свободна икономика е валиден и рой мотивира нейния растеж. Според Schwab Center Research годишната възвращаемост на дадена дългосрочна инвестиция е около 10%, а дългосрочното инвестиране минимализира негативна възвращаемост. Например инвестиция в индекса S&P 500 гарантира годишен приход амплитудата от -27% до + 31.2%. Ако същата инвестиция трае в период от 20 години, амплитудата намалява значително от +3.1%  до +17.9%, което е гарантирана приходна възвращаемост.

2. Корекциите на маркета са временни. „Мечешки” маркет или движение на маркета надолу балансира непокриваемия му растеж. В резултат, намаляването на стойността на индексите по време на която акции търпят загуби е всъщност положително явление, което стабилизира маркета и гарантира дългосрочния му растеж. Корекциите на маркета са временни падини в дългосорния му растеж към нови финансови върхове.

3. Използването на технически анализи замества комарджийското инвестиране и минимализира риска от загуби. Добрият инвеститор не подлежи на емоционални сривове, а гарантира стабилността на инвестицията чрез системно анализиране на маркета. Маргинални приоритети, маркери на повторяемост, нива на издръжливост, обратно следствие на Фибоначи и множество други инструменти и концепции, които биха помогнали за анализирането и предвиждането на движенията на маркета. Така, вместо сляпо следване на пазарните индекси, инвеститорът е предупреден и въоръжен.

Публикувано на 25 февруари, 2011 в 9:00 am | без коментар | 101, bluechip, Dow Jones, FOREX, NASDAQ, S&P, основни моменти, Портфолио, правилата на играта, първи стъпки
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