The real-money Inflation-Protected Income Growth portfolio launched in early December 2012, with an initial $30,000 in capital. The portfolio's primary goal is investing in a way that produces an income stream that grows at least as fast as inflation over time.
That's easier said than done, especially in this era when money in the bank isn't necessarily safe anymore, and dividend cuts to preserve capital are often needed to assure a company's survival. The iPIG portfolio attempts to buffer itself against risks like that through paying attention to each pick's valuation and by investing with an eye towards diversification, as well as to each company's dividends.
The strategy is based on the writings of Benjamin Graham, the father of value investing and the man that taught investing to Warren Buffett, so there's hope that it'll work out over time. Still, it's fair to ask how those principles are holding up today, especially in light of the economic and market chaos emanating from Cyprus.
So, how is it going?
The table below shows every selection of the iPIG portfolio that has been successfully turned into a real-money investment. There's one additional pick that ran up before it could be purchased, but the iPIG portfolio has an open limit order in the hopes that it may fall back into the "buy" range.
# of Shares Owned
Total Cost (including commissions)
Dec. 10, 2012
Dec. 12, 2012
Dec. 13, 2012
Dec. 21, 2012
Mine Safety Appliances
Dec. 21, 2012
Dec. 26, 2012
Dec. 28, 2012
Dec. 31, 2012
United Parcel Service
Jan. 2, 2013
Jan. 4, 2013
Jan. 7, 2013
Jan. 22, 2013
Jan. 22, 2013
Jan. 24, 2013
Jan. 31, 2013
Feb. 5, 2013
Air Products & Chemicals
Feb. 11, 2013
Feb. 22, 2013
Data from the iPIG portfolio brokerage account, as of March 25, 2013.
The iPIG portfolio has been in existence for just over a quarter and has purchased 18 stocks, with two of those being half-size positions to build a national railroad network. The portfolio's total value is nearly 8.4% above its starting level, and several of the picks have already increased their dividends. While it's way too early to call the portfolio an overall success, the early news has been incredibly strong.
In-market results highlights and lowlight
Toy maker Hasbro has far surpassed expectations from a return-on-investment perspective, up an astounding 23.5% since being bought in late December. This is something of a surprise, especially since Hasbro missed expectations for the recent all-important winter holiday season. Still, Hasbro's stock was bought at such a discount to its intrinsic value estimate that it hasn't quite hit the sell range, yet. If it keeps climbing, though, it might earn the honor of being the first pick to be sold based on valuation.
Similarly, drugstore giant Walgreen has also risen an amazing 23% since being bought in early January. This gain was largely driven by the fact that Walgreen made peace with pharmacy benefit manager Express Scripts and can now again fill prescriptions for that benefit manager's clients. The most recently reported quarter was the first full quarter since the two companies ended their squabble, thus providing a return to more normal -- and likely more profitable -- operations.
The former war between Walgreen and Express Scripts illustrates the importance of diversification to the portfolio. The more closely two companies are linked -- such as a pharmacy and a pharmacy benefits manager -- the bigger the chances that a trip-up in one will affect the other.
On the downside, the only company that has dropped substantially since being purchased is supplemental insurer Aflac , which has lost about 5.1% of the portfolio's purchase price. Just after being purchased for the iPIG portfolio, Aflac announced earnings with lackluster expectations for the next year. As companies are priced based on their expectations, those low expectations knocked money out of Aflac's shares. Still, Aflac's shares don't look expensive, so they're remaining in the portfolio for now.
All told, a successful launch
With a little more than three months since its initial launch, the iPIG portfolio is off to a solid start. It takes time to cultivate a dividend-growth-oriented portfolio, though, and the work is far from over. To follow along as the portfolio evolves over time, click here to watch my article feed. To join the discussion, click here for the Fool's free discussion board dedicated to this real-money portfolio.
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The article Real Money, Meet Real Returns originally appeared on Fool.com.
Fool contributor Chuck Saletta owns shares of every stock mentioned in this article, except Express Scripts. The Motley Fool recommends Aflac, Becton Dickinson, Express Scripts, Hasbro, McDonald's, Mine Safety Appliances, and United Parcel Service. The Motley Fool owns shares of Express Scripts, Hasbro, McDonald's, Microsoft, and Raytheon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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