Diversification of Upgrading
One Portfolio: 2000+ Stocks

Some subscribers wonder if Upgrading is adequately diversified or if it leads investors into concentrated portfolios consisting of just a handful of companies or sectors that are currently hot.

In fact, a great many sectors, nations, geographic regions and individual companies are represented within an Upgrading portfolio. Just look at the Monthly Upgrader Portfolio (MUP) on page 2. An analysis of the 20 funds and ETFs in the portfolio as of November 2009 reveals a multiplicity of individual holdings, representing a wide variety of industries and sectors.

Over 2,000 Individual Stocks

After accounting for overlap among the 20 funds in the portfolio, an impressive 2,348 companies were represented. The largest holding was Coca Cola, with about 0.84% of the total. In fact, the top 10 stocks make up just 7.1% of the total.

One of the more widely owned stocks was Hang Lung Group Ltd., owned by 5 of the 20 funds but totaling just 0.26% of the MUP. Some familiar names include Microsoft, Pepsi, Pfizer, ConocoPhilips and Toyota.

There was not a high level of repetition in the individual holdings; the funds tended to hold very different stocks. More than half of the names in the portfolio had no overlap; they were each owned by just one of the 20 funds.

Diversified by Region & Sectors

On a region and country level, the MUP was about half in foreign (non-US) equity investments in November 2009. Nearly 89% of the portfolio was invested in developed or mature economies, but emerging markets were also well represented at 11% of the total holdings. About 28% of the portfolio was in Europe, 20% in Asia and about 43% in the U.S.

The accompanying sector table also reveals variety among the funds held. All sectors were well represented, although compared with the S&P 500, the MUP was overweight in financial services and underweight in health care and energy.

The point to take away from all this is that even similar-sounding funds are not cookiecutter repeats of one another. They have risen to the top via many different paths and bring a surprising level of diversification to an Upgrader’s portfolio.