DJIA Analysis & Portfolios – 8-5-08

Each Tuesday, we will be posting an analysis of the Dow Jones Industrial Average (DJIA). In this analysis, we will show all components which pass our tests for the defensive and/or enterprising investor, our current valuation, and the previous day’s closing price on the company. We will also determine our current estimate of the total value of the DJIA as a whole, which will be compared to the actual level seen in the market.

Portfolio A will be a mock portfolio for the enterprising investor seeking to invest in companies of the DJIA which pass the test for the enterprising investor and are currently undervalued. The portfolio will be based on an initial deposit of $100,000, divided equally with each investment having a 10% maximum investment. Once a month we will review the allocations and adjust anything that is no longer within the range of 9-11% of the total portfolio, seeking to return it to 10%. Also, the portfolio will invest in any of the qualified components which drop to below 75% of their estimated value and divest any investments which rise to over 110% of their estimated value.

Portfolio B will be very similar but will also include some limited technical analysis. We theorize that while technical analysis should in no way be used as a sole investment method, it may be used to help time investments more profitably. We have often seen fundamentally sound investments drop in value in the short term, and we will be using this portfolio to test whether technical analysis can help eliminate this drop and maximize profit potential. Therefore, this portfolio will follow the guidelines of Portfolio A, but will only invest when a potential investment also has a bullish crossover of the 50-day and 200-day standard moving averages. The portfolio will divest when a bearish crossover occurs.

Now, on to the analysis and portfolios (by the way, I’m trying to use the closing prices from Monday):

Overal Valuation of DJIA: 14,872 (market is 75.87% of our valuation)
DJIA Analysis of Enterprising Companies:

Ticker Name Value Price %Value
MMM 3M $107 $69.75 65.38%
AA Alcoa $59 $31.04 52.51%
AIG American International Group $71 $26.69 37.39%
T AT&T $34 $30.17 89.34%
BAC Bank of America $36 $32.62 90.31%
BA Boeing Corp $86 $61.36 71.32%
CVX Chevron Corp $216 $82.80 38.32%
C Citigroup $18 $18.83 104.84%
KO Coca-Cola $43 $53.90 125.17%
XOM Exxon-Mobil $162 $76.60 47.20%
GE General Electric $30 $28.17 92.91%
HPQ Hewlett-Packard $54 $43.94 81.82%
HD Home Depot $47 $23.89 51.30%
INTC Intel Corp $21 $22.52 105.09%
JNJ Johnson & Johnson $69 $68.98 99.45%
MSFT Microsoft $35 $25.28 71.72%
PFE Pfizer $19 $18.98 99.68%
PG Proctor & Gamble $57 $65.82 116.50%
VZ Verizon $27 $33.83 125.48%
WMT Walmart $58 $58.43 101.37%
DIS Walt Disney $46 $30.37 65.71%

For comparison, the DJIA was at 11131.08 when the portfolio tracking started and is now at 11,284.15, for a gain of 0.14%.

Portfolio A

Week’s Gain:  0.20%
Overall Gain:  0.20%

Ticker Shares Cost Value Gain/Loss %Portfolio
MMM 143 $9,957.09 $9,974.25 0.17% 9.96%
AA 306 $9,993.96 $9,498.24 -4.96% 9.48%
AIG 417 $9,991.32 $11,129.73 11.39% 11.11%
CVX 121 $9,981.29 $10,018.80 0.38% 10.00%
XOM 123 $9,923.64 $9,421.80 -5.06% 9.41%
HD 431 $9,981.96 $10,296.59 3.15% 10.28%
MSFT 392 $9,996.00 $9,909.76 -0.86% 9.89%
DIS 327 $9,973.50 $9,973.50 -0.43% 9.96%
BA 159 $9,959.76 $9,959.76 -2.04% 9.94%
Cash     $10,241.48   10.22%
Total   $89,758.52 $100,177.88 0.20%  

Portfolio B

Since none of the equities have had a bullish crossover yet, this portfolio is currently not invested.  However, it is interesting to note that Disney (DIS) had a bearish crossover this week.

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Please note that the author of this post may have held a position in some of the companies listed. Nothing written on this site should be considered investment advice. Please take a moment to review our disclaimer.







2 responses to “DJIA Analysis & Portfolios – 8-5-08”

  1. da Avatar

    This may be a stupid question but did you think of setting up a defensive portfolio?

  2. Ben Avatar

    Well, I thought about it, but it probably wouldn’t get diversified enough – since we’re only looking at a pool of 30 companies to begin with, it makes it tough.

    For the record, the companies that would not be in the defensive portfolio (but are in the enterprising portfolio) are: 3M, Boeing, and Microsoft.

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