Restocking
A Portfolio
A-Pick-Me-Up
From time to time a
portfolio manager must revamp a portfolio. This is
accomplished by selling a few winners and losers which no
longer represent value and by adding various, new
undervalued holdings. Honestly, this is never an easy
decision. It is, in effect, a two-stage process; once a
partial liquidation is carried out a manager is confronted
with the challenge of restocking a portfolio with the
resulting cash.
During the course of the
tedious research and analysis to restock a portfolio, a
manager often looks for a pick-me-up or two. Pick-me-ups
represent attractive stocks with solid potential which will
drive an invigorated portfolio to superior performance. A
pick-me-up portrays not only an appealing stock selection
for a portfolio but it is also an important psychological
booster to an investment manager who has previously made
some very tough asset sales. Simply put, by recalibrating a
portfolio this action will not only refresh a tired bunch of
old stocks toward improved performance but also reinvigorate
the manager, himself.
Over the past several
months we have, in fact, liquidated a number of holdings.
These include: Canada Bread, FPI Limited, Hudson Bay
Company, Inco and National Bank, in addition to a few
American stocks such as Ampco-Pittsburgh, Amrep, Griffon and
Tesoro. This was a judgment call as we sold stocks which
either had reached our sell targets or no longer fit our
investment strategy. We then set about to restock our
portfolios with new, enriched holdings. We subsequently
added a number of fresh selections including a few potential
pick-me-ups such as Danier Leather, Northbridge Financial
Corp, Sherritt International, JC Penney and Kaman Corp.
While in transition, from
a tired portfolio toward that of a revitalized new roster,
patience is all-important since tangible, positive results
can take a number of months. Moreover, while this period can
be extremely frustrating, I believe the end result is well
worth the wait.
Irwin A. Michael,
CFA
