Newspaper article Sarasota Herald Tribune

'Sleeping Soundly Portfolio' Does Its Job in Strong Market

Newspaper article Sarasota Herald Tribune

'Sleeping Soundly Portfolio' Does Its Job in Strong Market

Article excerpt

INVESTORS IN U.S. STOCKS HAD mixed feelings about first half of 2012's market performance. While the S&P 500 was up 9.5 percent (with dividends reinvested); it actually fell back from the record- setting 12.6 percent performance of the first quarter. Non-U.S. stocks markets were up only 3.6 percent.

At the close of 2009, I designed a 12- stock, equally dollar- weighted, $120,000 portfolio called the "Sleeping Soundly Portfolio."

It was constructed to have low price volatility and deliver total returns that might somewhat lag the S&P 500 when it rises but outperform when it falls. It had a minor change on Dec. 31, 2010, with the substitution of National Grid for Banco Santander (ticker: STD) and a year later with the substitution of American Capital Agency for Ventas (VTR).

Given the strong 2012 market performance, the portfolio has performed as expected.

Its value increased from its 2011 close of $140,037 by 8.2 percent to $151,489, which included $3,379 of 2012 dividends. It outperformed the S&P 500 in the second quarter, gaining 1.2 percentage points versus the S&P 500's 3.1 percentage point loss.

Let's review each stock.

Abbott Laboratories (ticker: ABT) participates in businesses related to pharmaceuticals, diagnostic systems, medical devices and nutritional products. Its purchase price was $53.99 and its first- half closing price was $64.46. Its indicated dividend is $2.04.

American Electric Power (AEP) engages in the generation and transmission of electric power. Its purchase price was $34.79 and its first-half closing price was $39.90. Its indicated dividend is $1.88.

Boardwalk Pipeline Partners LP (BWP) is a master limited partnership that is in the business of the transportation and storage of natural gas in the U.S. Its purchase price was $30.03 and its first-half closing price was $27.62. Its indicated distribution is $2.13.

Diamond Offshore Drilling (DO) provides deep water drilling rigs and expertise to oil companies exploring for oil in challenging venues. Its purchase price was $98.42 and its first-half closing price was $59.11. Its total annual dividend is expected to be $3. …

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