Long-time readers of The Rayno Report know that we have a tradition of creating a “model portfolio” for investing every year, in which we pick 12 growing and profitable companies with inexpensive valuations. This year, the portfolio is off to a roaring start, with a 19% return, year-to-date (YTD). In contrast, the S&P 500 Index is up only 2.7%.
This year’s crop of stocks includes many fast growers in areas such as mobile technology, healthcare, and electronics. Our leading picks for the year include pharmaceutical producer Lannett Company Inc. (NYSE: LCI), up 58%; Avago Technologies (Nasdaq: AVGO), a mobile chip play, which is up 34% YTD; and Skyworks Solutions (Nasdaq: SWKS), up 40% YTD. Skyworks is a holdover from last year’s portfolio, in which it gained 160%. Other notable peformers so far this year include Methode Electronics (Nasdaq: MEI), up 25%; and Spirit AeroSystems (NYSE: SPR), up 22%.
This puts us off to a great start, and I’m hoping we can follow up on last year’s market-beating return of 17.5%. For a recap of how I pick these stocks — which do not necessarily include only technology stocks — we outlined the methodology when we published this year’s picks at the beginning of the year.
With the markets close to hitting new “all-time highs” there is chatter of another bubble and comparisons to 2000. I don’t think such a comparison is valid, as the landscape is completely different, and none of these stocks have the sky-high P/E valuations that were characteristic of bubbles. Many of them still remain reasonable relative to their valuations. For example, Skyworks has PEG of .96, and AVGO is trading at PEG of .52.
I’ll provide a full analysis of the performace of the portfolio in a couple weeks at the end of Q1. For now, here’s a look at what’s happened so far:
| Avago Tech. | AVGO | 12 | $1,599.48 | 98.49 | $407.60 | 34.20% |
| Gilead Sciences | GILD | 12 | $1,227.48 | 96.79 | $56.00 | 4.78% |
| Lannett Inc. | LCI | 28 | $1,919.96 | 42.96 | $707.08 | 58.30% |
| Level 3 Comm. | LVLT | 25 | $1,385.00 | 48.57 | $160.75 | 13.13% |
| Methode Electronics | MEI | 33 | $1,503.81 | 36.11 | $302.18 | 25.15% |
| Phillips 66 | PSX | 18 | $1,419.48 | 67.92 | $186.92 | 15.17% |
| Silicon Motion Tech. | SIMO | 45 | $1,246.95 | 26.44 | $47.15 | 3.93% |
| Skyworks Solutions | SWKS | 17 | $1,734.85 | 72.12 | $498.81 | 40.36% |
| Spirit Aerosystems | SPR | 29 | $1,508.29 | 42.38 | $269.27 | 21.73% |
| Tata Motors | TTM | 28 | $1,313.20 | 43.07 | $97.24 | 8.00% |
| Time Warner | TWX | 15 | $1,318.35 | 83.24 | $59.75 | 4.75% |
| United Rentals | URI | 14 | $1,243.90 | 92.25 | ($57.60) | (4.43%) |
| Total | $17,420.75 | $2,735.15 | 18.62% |
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