Disciplined and Regular Portfolio Review: A Best Practice

A regular review of holdings is an extremely important part of investment management.  While every manager follows daily news, it is a best practice to ask whether new candidates are better than current holdings.

In our portfolios we sell stocks when our original investment thesis breaks down or when the stock appreciates so much that it no longer meets our tests for potential return.  We also maintain a watch list of potential buys — stocks that might be preferred to our existing holdings, on a risk/reward basis.  Even when following this approach, it may be difficult to sell a stock that has not fulfilled its promise in favor of one that now has better potential.

Individual investors and traders alike can learn from the process described by David Merkel in his portfolio review series.  David is a long-time contributor to theStreet.com‘s RealMoney site, and he is one of our mandatory daily reads.  David has great skill and experience for insurance stocks, including names that many find challenging to evaluate on traditional metrics.  We have learned from his writings and expect to add some of his recommendations to our holdings very soon.

David has recently begun sharing his work with a broader audience through his excellent blog site, The Aleph Blog, now added to our list of recommended sites.

In particular, we recommend that readers look at his portfolio review process.  More generally, investors should set aside some weekend time and browse the entire site, which includes many of his best articles from RealMoney.

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  • David Merkel March 26, 2007  

    Thanks ever so much for the attention. For those who have a subscription to RealMoney.com, there will be one more piece on this matter in the next week, where I took my blog posts, tied them together and explained a few few of the matters that I was skimpy on a little better.
    There are also two more on the way on related topics — position sizing, and asset allocation. RealMoney is doing kind of a “spring cleaning” series, and these three articles are meant to give fundamental investors a way to adjust their portfolios to balance risk and return.

  • oldprof March 26, 2007  

    Hi David,
    Thanks for making this clear. Any investor with access could learn a lot from your regular review process. As you might guess, I love your stuff “in defense of cyclicals” but I have learned most from your posts on insurance.