3Q ’07 Portfolio Review


The third quarter of 2007 turned out great thanks to a strong September. On the year, my compounded monthly return is 14% compared to 9% for the S&P 500. The portfolio includes about 8% in cash (high yield munis) and 8% in GLD. The balance is made up of 24 stocks and is allocated as follows:


It should be obvious why the portfolio did so well in September: when the Fed cut rates on September 18, it was a huge boost to stocks having anything to do with inflation and the “global boom.” This includes anything to do with metals, mining, agriculture, infrastructure, gold and emerging markets. My best performing stock this quarter was Companhia Vale Do Rio Doce (RIO), which is the big Brazilian mining concern.

It was also helpful that I have very little exposure to financials. Going into the fourth quarter, I am thinking of adding some more exposure to tech because a) I am very “underweight” relative to the S&P; and b) tech stocks often do very well in the fourth quarter.


The third quarter is a good time to calculate all of your realized gains and losses in taxable brokerage accounts. Given that there are still three months left in the year, there’s plenty of time to shuffle things around so cap gains taxes are minimized.

So far this year, I have a net long term capital gain and a net short-term capital loss. They are roughly the same amount which means the short term loss will go to offset the long term capital gain. This really is not an ideal situation because of the higher rate at which short term gains are taxed; it does not make sense to use valuable ST losses to offset LT gains. I will try to realize some ST gains before the end of the year so that I don’t waste the ST losses.

One Response to 3Q ’07 Portfolio Review

  1. […] I mentioned in my 3Q portfolio review, I have stayed clear of financial stocks this year. At some point, though, it will make sense to […]

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