If you’ve been following my work for any length of time, you probably know that I don’t just send out recommendations in a vacuum. Nor do I spout off big predictions merely for the sake of raising eyebrows.
Most of the forecasts I make … and indeed, many of the specific investment ideas I share … end up getting used by my own friends and family members right alongside tens of thousands of paying subscribers.
In fact, we specifically created a real-money portfolio for my monthly Income Superstars newsletter back in the summer of 2010 … one that was backed up by $100,000 of my own father’s retirement money.
Today, I want to give you an update on that retirement account. I’ll also tell you how our latest actions fit with my big-picture view of the stock market right now.
I was a little shocked to go back and look at where Dad’s real-money account started out last year …
The number — $130,017.15 — was a full $24,036.34 lower than it was through early trading on Dec. 15, the day I was working on my last Income Superstars issue of 2016.
This means Dad’s portfolio had earned a total return of 18.49% through the first eleven-and-a-half months of the year …
That’s about 50% better than the performance of the S&P 500 over the same time frame!
|Dad’s income portfolio was up 18.5%, compared to the S&P 500’s 10.2% advance, through mid-December.|
And since we were holding a huge portion of cash, if you merely compared the performance of our stock holdings, then the relative outperformance was much farther off the charts!
As I said at the time,
"I’m not one to look a gift horse in the mouth, especially so close to Christmas. So with Dad currently sitting on more than $54,000 in total portfolio gains, I think it’s time to preserve a good chunk of that money and catch our breath."
In fact, I decided to tell Dad to pull profits off the table so that we would get back down to a fresh $100,000 total investment portfolio on the first day of 2017 trading.
To understand why I suggested taking such a big step toward wealth preservation … rather than going for more wealth creation, you need only look at some of the individual positions Dad cashed out …
For example, I told him to sell all of his of Meredith Corp at the market.
I recommended this company on Dec. 24, 2015. And when Dad sold it on Dec. 20, 2016, he locked in a total return of 38.2%.
That’s a massive gain in less than a year!
So is Meredith still a great company with bright prospects? Sure. But I don’t want him to bet money that the stock can keep beating the market three times over this year.
Of course, Meredith wasn’t even the best winner last year.
I actually recommended another company called Southside Bancshares on Jan. 27 of last year.
Initially, I did so because the stock offered consistent income from three separate dividend streams.
But then SBSI’s stock went nuts in 2016 …
|Southside Bancshares surged about 100% in 2016.|
You can see how the shares almost doubled in a matter of months.
Prior to April 2013, SBSI had never even really traded higher than $20 a share. And here it was going toward $40.
Heck, even if someone had bought in as recently as November, they might have already been sitting on a 20% gain as the stock rallied after Donald Trump’s election victory!
Sometimes a stock just goes berserk, and you’re crazy if you don’t lock in the fast profits.
After all, it would take many years of the most generous dividends to make up for lost capital gains if the shares pulled back at any point.
Also, we’re talking about a regional bank here … not some little-known tech stock with unlimited growth potential.
So with SBSI trading at 20 times forward earnings, I didn’t want Dad to take a chance that he would see his massive gains evaporate.
Instead, he locked in a total return of 110.8% in roughly 11 months of holding time!
Of course, I also told him to grab profits in other longer-term positions, too — including blue-chip names like Berkshire Hathaway and Sysco. Why?
I’m a realist.
What I see right now are relatively high stock valuations, unbridled optimism, and plenty of unrecognized (or supremely discounted) risks on the horizon.
And I continue to believe that much of this is driven by unprecedented central bank money-printing and policy experimentation.
Am I saying we should sell everything and run for the hills? Absolutely not.
I’m still recommending lots of solid dividend-paying companies and other conservative investments in my newsletters and trading services.
Plus, my Dad still has $100,000 of his own money committed to many of those ideas, and we will look to come up with more new ones in the months ahead.
At the same time, I was happy to see him peel off $54,148 in total gains on his original $100,000 investment and place that money safely aside … especially after such a huge run-up in his portfolio during 2016.
If you’re also feeling flush right now, my message is the same one I gave to Dad … now is a great time to take another look at what you’re holding and maybe consider taking a few profits just for safety’s sake.