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Friday, December 18, 2009

Today's post is a bit different and what I've been working on lately.

I've extensively been backtesting the LMT Portfolio premises. I have composed 100 random portfolios in which the stocks composing them all would fit within LMT parameters. The data totally beat the S&P. Both buy and hold for S&P, as well as passive investing with S&P (buy and hold + adding 10% of equity into the market every year).

Both got crushed from LMT. All 5 year rolling periods are positive for LMT unlike S&P.

Here are both charts worth taking a look in my opinion. One might say that the portfolio took advantage of the roaring 90's. True, but even so, starting a portfolio under the same characteristics at 2000 top, while S&P managed to pretty much be flat, LMT would manage 16% per year and that's taking into consideration the bear market.

This first chart does not add 10% of new cash into S&P Buy and Hold. But they don't differ much... the dash green line is what ~I consider an excellent long term goal.

This pretty much sums to a 20-to-1 harsh beating of LMTP versus the market. Should we take a large margin of safety, I would say a 5-to-1 would still be excellent.

Don't forget to check then, December 26th some of our stocks will be replaced by newer ones.

I'm gonna need my sleep now.

BTW, last night I experienced my first earthquake ... a 6.1 Richter scale quake. It sure was daunting...
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