IU Model Portfolio Update

Starting a model portfolio seemed like a good idea at the time. Two months into the deal, it doesn't seem like much fun anymore, especially since we're under water. But that's investing.

As an investor, you have to pick a strategy and ride out the tough times. It can be painful. If you are weak, you are likely to sell at the worst times. I am going to stick to my guns. My basic strategy is to accumulate low-PEG stocks and hedge currency devaluation with gold. It's been working for 10 years, and I don't think it's going to stop now.

Yesterday, I wrote about purchasing shares of Barrick Gold (NYSE: ABX) for a personal portfolio, and I will also be obliged to add Barrick shares to the model portfolio. This makes me a little nervous in that my gold exposure is getting quite large, but with gold having sold off so viciously, it is the right time to try to add it. I'm going to step in lightly with 50 shares at $35.26, with a cost basis of $1,763.

People are worried about the bull market in gold ending, but I don't think we're there yet. What would change my mind? A close below $1,475. In that case, I'd reevaluate my position. You have to remain flexible.

What else is going on? It's hard for me to resist bargains. The energy sector -- specifically, natural gas -- has been battered. Gulfport Energy (Nasdaq: GPOR) was recently punished for missing its earnings estimates. The stock traded down heavily on that news and now has very attractive numbers. The trailing P/E ratio is 7.4, and the forward ratio is about 10. But this energy producer has an eye-popping 46% operating margin over the past 12 months, and its revenue was recently growing at a 30%-plus clip. I'm going to step in and buy 100 shares at around $21.40, where it was trading at midday today.

Table 1: Model Portfolio YTD

Holding	Symbol	Price 3/16/2012	Amount	Value	Yield
Doubleline Total Return Fund N (DLTNX)	DLTNX	$11.23	500 shares	$5,615	8%
Proctor & Gamble	PG	$64	50 shares	$3,217	3%
Newmont Mining	NEM	$43.77	50 shares	$2,188	2.40%
Barrick Gold	ABX	$35.26	50 shares	$1,763	2.10%
Gulfport Energy	GPOR	$21.40	100 shares	$2,140	N/A
Dell	DELL	$15.05	200 shares	$3,010	1.40%
Spot Gold		$1,690	10 oz.	$15,400	N/A
Invested Total				$33,333
Cash				$13,967
Portfolio Total				$47,300
P/L 5/16/2012				($2,700)	-5%
S&P since 3/8/2012					0.70%
The Model Portfolio is down 5% since being launched. But we're not going to panic. Dividends are not included -- we will include dividend payments in the next update.

That's it. I'll try to restrain myself. I'm a bit loaded up on energy and metals names now, so let's see how that goes in the next month. And a few reminders on current positions: I'm still long everything else we started with in March, including Dell Inc. , the DoubleLine Total Return Fund N (DLTNX), and Proctor & Gamble (NYSE: PG).

Overall, as the table shows, the model portfolio is down 5% since its inception. This doesn't make me happy, but it's no reason to panic, either. There is still plenty of cash to deploy, which I intend to do over the course of the year.

(Disclosure: The model portfolio reflects the author's own investments, though exact amounts may differ. As of this writing, the author was invested in Barrick Gold, Newmont Mining, and the DoubleLine Total Return Fund N.)

Related posts:

• Introducing the New IU Model Portfolio
• Why I Bought Barrick Gold Today
• Bearish on Gold? Not by a Long Shot!