Changes to The College Investor Portfolio

If you regularly follow my blog, you know that I follow a basket of stocks called The College Investor Portfolio, which I select using my Key Value Fundamentals for Screening Stocks as a guide. So far this year, The College Investor Portfolio has returned 13.89%, while the S&P500 has only returned 6.05%. We are almost double the S&P500!

However, as I continually assess the performance of these investments, I believe that many of the stocks in the portfolio have reached their current value, and as such, it is a good time to sell, lock in some gains, and roll the profits into other companies that I see as a value.

I was very happy with the performance of:The College Investor Stock Portfolio

Montpelier Re Holdings (It delivered a solid 31.09% return)
Safety Insurance Group (26.75% Return)
– Validus Holdings (20.76% Return)

I was slightly disappointed with the performance of both Transatlantic Holdings and Reinsurance Group of America, as both companies remained virtually flat. They did pay a nice dividend, but they really didn’t gain much value.

The two stocks that we are continuing to hold are:

American Financial Group
Protective Life Corp.

I like American Financial Group because it is a multi-line insurer that pays a nice dividend, and has great operating margins (one of the best in the industry).

I continue to like Protective Life because I still consider it to be very undervalued, it pays a nice dividend, and all technical indicators point to a long bullish trend in the near term. The company also has solid financials, and should continue to post solid growth.

To add to the portfolio, we have selected the following stocks:

Constellation Energy GroupNew College Investor Portfolio
– Lincoln National Corp
Prudential Financial
– The Travelers Company
Unum Group
American Capital Agency Corp

I like Constellation Energy Group because it is the largest power supplier in the United States. It has been hurt by a short-term weakness in the energy market, driven by the financial crisis. As the economy continues to recover, demand will once again rise, and wholesalers will be able to increase their prices.

I like Lincoln Financial Corp because it offers group insurance, life insurance, and services to affluent customers. All of these segments should continue to grow with open enrollment in 2011. Many individuals are getting re-employed, and even current employees are seeing more flexibility in their ability to purchase these items. Furthermore, the company’s financial health has significantly improved over the past few years, and it repayed its TARP obligations early. Lincoln Financial also pays a nice dividend.

Prudential has been bogged down over the past few years because of its asset management and holdings of real estate. However, many of these areas are strongly rebounding, and Prudential is poised to see strong earnings growth in the coming years. The company has also completed several acquisitions which should start to pay off in 2011. The company also has a yield over 2%, which is attractive.

Travelers is another company that is poised to see strong earnings in 2011. It has also completed several acquisitions which should pay off, and is currently expanding its presence in South America via more acquisitions. The company should see improvement in its insurance lines, as the economy continues to recover, and the company has continued to improve its internal operations to remain very competitive. The company also yields over 2.5%.

Unum is the largest provider of individual and group life and disability in the U.S. and U.K.. In recent years, it has been the subject of intense litigation surrounding some of its claims practices. However, the major battles have been settled, and major reforms have taken place, and this company continues to maintain a strong financial position. This company should post solid sales growth with the recovery, and it should be reflected in its share price. The company also yields 1.7%.

Finally, I really like American Capital Agency Corp. This REIT invests in government-backed mortgage paper, which is buys using debt that is incredibly cheap. It then profits from the spread between what the paper yields and what is pays its creditors. With QE2, the Fed has signaled that rates will stay low for a while. So, I don’t think there is a better time to capitalize on this spread. Furthermore, the company is paying out a great yield!

Please continue to follow the progress of The College Investor Portfolio on the Portfolio Page! The portfolio is also adjusted to reflect commission costs (like a regular investor), so that’s why it currently is down.

Check back soon!

– The College Investor

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