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Building an All-Weather Portfolio: How to Develop a Portfolio for Rain or Shine

May 30, 2011 2:14 pm
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In a volatile investment world, many investors want upside potential but want to minimize their downside risk. In other worlds they want to play both offense and defense.  That is where the All-Weather Strategy works best.  Think of it as your own personal “hedge fund”.  

Since 2009, the All-Weather strategy at Faith-Based Investor has made over 102% for those following the strategy.   Investors saw their profits increase by over 50% in 2009 followed by a nearly 30% return in 2010. How were these returns possible?

The All-Weather Portfolio is diversified with stocks and ETFs.  The portfolio uses a wide variety of asset classes including real estate, stocks, bonds, precious metals, commodities, inverse ETFs, and is not afraid to hold cash during the tough times.

During the market meltdown of 2007-2008, the first quarter of 2009 presented some interesting investment opportunities.  The All-Weather model identified that a new market wave was coming.  This wave was full of risk and reward potential.  The strategy is willing to take on risk when the time is appropriate and what better time when EVERYTHING was on sale. 

So In 2009, the All-Weather portfolio bought:


· F5 Networks (NASDAQ: FFIV) at $27 a share and sold it later at $91.01 (a 227% gain)

· America’s Cart-Mart  (NASDAQ: CRMT) at  $9.27 and sold it later at $25.48 (a 175% gain)

· Netgear (NASDAQ: NTGR) at $10.38 and sold later at $21.95 (a 111% gain)

· National Oilwell Varco (NYSE: NOV) at $26.83 and sold later at $62 (a 131% gain)

· Transglobe Energy (NYSE: TGA) at $2.60 and sold later at $13.39 (a 415% gain)

· Clicksoft (NASDAQ: CKSW) at $1.99 and sold later at $8.75 (a 339% Gain)


In fact since 2009, the All-Weather portfolio has recommended 85 picks and nearly 10% of those picks (8 to be exact) have soared over 100%!

Of the 85 picks, only 10 have been closed with a loss.  The greatest loss was 16% and the average loss was just 6%.  The strategy is designed to let winners run while cutting losses.


Playing Defense


By combining stocks, bonds, and alternative investments this portfolio is generally more defensive in nature.  However, when the All-Weather portfolio senses danger ahead, the names rotating into the portfolio are more defensive in nature – companies that pay higher dividends and  are in defensive industries like health care, energy, consumer staples, and utilities.

The portfolio also isn’t afraid to short stocks when the time is right like in January of 2009.  The All-Weather strategy recommended the Proshares Ultrashort  Dow 30 (NYSE: DXD) and pocketed nearly 20% while investors watched their portfolios decline in January and February of 2009.  In 2009, the All-Weather portfolio also sensed a rise in interest rates and recommended the Proshares Ultrashort 20+  Year Treasury (NYSE: TBT) and pocketed over 10% in just a few short months.

The Model also picked up silver (NYSE: SLV) at $18 in 2009 and sold for over $35 less than 2 years later.  The All-Weather portfolio still owns gold, inflation protected bonds, foreign currencies, and companies designed to survive the ups and downs of the market.   Though no strategy is perfect, the All-Weather strategy is one way you can diversify your risk, still have good upside potential but also some downside protection.  Talk about the best of both worlds!

Our Next Pick?

We believe we have identified a stock that could be our next  big pick to double in price over the next year.  This company is a specialty metals product maker who has been acquiring other companies in effort to expand its worldwide dominance.  With its products in high demand and highly specialized, it’s difficult for its loyal customers to take business elsewhere.   They have exclusive contracts in the aerospace industry and larger industrial markets.

This company is highly profitable and its financial results reflect its solid business model. Most recently, they released their earnings, which far exceeded analysts’ expectations as revenues soared nearly 37% from the previous year.  Because they are a diversified metals company and have several competitive advantages, they have a margin of safety and aren’t reliant on one product line. Additionally they have the ability to pass higher material costs onto their customers through “surcharges”.  This price protection will help the company weather the upcoming economic storm, we believe is brewing.

As the aerospace market continues its recovery, we believe demand for this company’s products will soar and further increase profitability.  We see this company’s shares doubling in price within the next year! Subscribe now and get in on our next BIG potential winner!

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