Your Basket vs. Their Index

I am a firm believer that for many people the best investment they can make in the stock market is to just buy a few low expense Index’s and let their money ride until they retire. This same advice is supported by Warren Buffet, Jack Bogle and many others.

But, for those of us that want to spend some time, do our research and try to beat the market there is another option that still offers stability and control. I call it building baskets of stocks. The problem I have with relying on an index is that you get you get the great with the terrible. Large index’s don’t have a choice, they needs a wide spread of stocks and feel comfortable holding poor performers because they primarily don’t want to take the capital losses.

I’ll give you an example of my Industrial Stocks “basket” as compared to the well known Select Sector SPDR ETF Industrials (XLI).







Here are the holdings of the XLI at the end of January:

  1. General Electric GE 9.26%
  2. *Union Pacific UNP 5.92%
  3. *3M MMM 5.56
  4. *United Technology UTX5.27
  5. Boeing BA 5.25
  6. * Honeywell HON 4.21
  7. UPS 3.66
  8. Danaher DHR 2.95
  9. * Lockheed Martin LMT 2.79
  10. Caterpillar 2.69

The stocks shown with a “*” are also in my Industrial Basket, along with General Dynamics, FedEx and United Rental (URI). I usually classify FedEx in my “transportation basket” of stocks.

Now let’s compare:

  1. General Dynamics is up 32% in last 12 months, Danaher has barely kept pace with the S&P at 14%
  2. UPS had a huge earnings miss again in the 4th quarter, just like the 4th quarter of 2013, whereas FedEx was up 32%.
  3. General Electric was up a disappointing 1% in the last 12 months and Caterpillar was down 13%.

If you want to take the time and do a little homework you can build your own “baskets” of winners, instead of going with the index “average” performance stocks.

In future posts I’ll give you some of my other “basket” choices that also outperform the market on a consistent basis.



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