Magician, I see that you posted a comment about financeman's portfolio that is similar to
the comment you posted about mine. Based on the analysis that financeman did on his
holdings, this does appear to be a very low-risk approach. Like so many other successful
investors, this portfolio has a concentrated basket of stocks that are priced at a
fraction of their underlying value. As I said in response to your post about my
portfolio, you have failed to understand the difference between volatility and risk.
Standard deviations of returns have nothing to do with underlying value, or the price that
you must pay in relation to that value.

This is a well-diversified mix - average correlation of monthly returns over the last
three-and-a-half years is only 16% - but it is not remotely low-risk.

Awesome? Hardly.

The lowest risk portfolio over that time would have had a standard deviation of monthly
returns (sdmr) of nearly 22%, the lowest-risk portfolio returning 0% annually would have a
sdmr of over 26%, almost 28% sdmr if you wanted to achieve the risk-free rate (about 4.5%
annually), and almost 31% sdmr if you wanted to enjoy a 10% annual return.

This is a very high-risk mix of securities, far too much risk for any return it generates.

Last edited on: 03-12-2007 12:32 am

Awesome portfolio. Thanks for adding the reasons for picking as well. I also recently did
an analysis on HDL at http://pickyinvestor.blogspot.com

The intrinsic value I derived is pretty close to yours.