Tracking Scorecard

Tonight I will devote my blog to the monthly tracking portfolios I have been running since January 2006. These portfolios have almost entirely been 50 stocks at 101m or greater market cap. I did have one or two early that were just 25 and I did have several with smaller market caps. That should do it for the introduction, on to the scorecard!

First a graph showing the distribution of actual annual returns of stocks that have closed. This is about 775 stock years with an average return of 9.9% and standard deviation of 41%. To read this chart, it shows the midpoint of a return range and then the proportion of stock years in that range. So the 15% return really means 10 to 20% return and about 11% of the stock years are in that range.


Now this table shows stock year returns by market cap decile. This table shows that there is a strong correlation between market cap and return so far. Somewhat interestingly the standard deviation (ie "risk") seems fairly constant from decile to decile.

Size Decile	Gain	Max MC	Stdev
1	11%	212	57%
2	2%	329	31%
3	-2%	412	37%
4	-4%	573	40%
5	9%	805	32%
6	4%	1,012	42%
7	12%	1,686	43%
8	28%	3,211	33%
9	14%	5,957	37%
10	25%	117,016	39%
Overall	10%
Correlation	0.71

The final score card shows a distribution of results assuming random portfolios. So if you had held a portfolio of 30 stocks, you'd have a 9% chance of being under water. You'd have a 26% chance of being at a 5% gain or less... those good at math will realize that means the probability of being between 0% and 5% is 26% - 5% = 21%. What you will notice when reviewing the table is the more stocks you have held, the "tighter" the distribution, meaning you are more likely to be clumped about the mean of 10%. Clear as mud I am sure.

	10 Stocks	20 Stocks	30 Stocks
Losing Money	23%	14%	9%
Less than 5%	37%	30%	26%
Less Than 15%	67%	71%	76%
Less than 20%	33%	29%	24%
Less than 25%	88%	94%	97%
Less than 30%	93%	98%	99%
More than 30%	7%	2%	1%