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Top 10 portfolio performance?
Old 06-16-2019, 04:30 AM   #1
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Top 10 portfolio performance?

Hi,

I was wondering if anybody can give me some feedback on the following strategy
Once a year (eg early January) buy top 10 of biggest companies (market cap). and swap/redistribute once a year when needed.
So currently that would be, MSFT, AAPL, AMZN,GOOG, etc…
https://finviz.com/screener.ashx?v=1...4&o=-marketcap

sure they did great last 10+ years but how did they do around 2008 or 2002? Did they bounce back, got broke or got hit more than eg. The sp500?
I quickly searched for historic data but couldn’t find any to run a back test.

If you simply compare the dow30 with the sp500 the result is dramatic, so if you assume the dow30 contains the biggest players of the sp500 you surely would not use that strategy but that is perhaps a bit too simple.
https://finance.yahoo.com/chart/%5ED...FuZ2UiOm51bGx9
anyway, I’m interested if anybody has such a portfolio (starting pre 2008) and likes to share his/hers experience
or if somebody knows where to find historic data (top 10 market cap. stocks/year)
Or would it be simpler to buy an ETF?

Thanks!
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Old 06-16-2019, 09:26 AM   #2
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1. The gold standard in stock price databases is here: CRSP - The Center for Research in Security Prices |

2. If you think about it, you'll realize that anyone with an IQ above room temperature should be able to come up with a scheme that backtests well. Essentially, one just follows Will Rogers' advice: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

3. If there is actually anyone running this (or any) scheme successfully, why would they tell you? Why would they tell anyone? They wouldn't, of course.

Quote:
Originally Posted by 2Black View Post
... Or would it be simpler to buy an ETF?
Of course; any total world market fund or a pair of total US market and total international market funds in your choice of proportion. It will also almost certainly be more profitable.
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Old 06-16-2019, 11:12 AM   #3
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I find Portfolio Visualizer's backtester useful... with respect to your strategy, I'm guessing that the top 10 in market cap don't change all that often from year to year.

The link below compares the performance of the top 10 at Dec 2009, rebalanced annually, from Jan 2010 to May 2019... not much different than the S&P 500... actually a tad lower.

https://www.portfoliovisualizer.com/...100&total3=100

When I first started reading the OP I thought the OP was heading towards a Dogs of the Dow strategy.

Top 10 by market cap as of Dec 2009 and Dec 2018
Attached Images
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File Type: png Capture1.PNG (37.9 KB, 58 views)
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Old 06-16-2019, 12:06 PM   #4
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thanks pb4uski,

with facebook, Berkshire, amazon, etc (the new kids) all outperforming the sp500, i guess the total result would be higher than the sp500 although it would largely depend on timing.

if anybody knows historic market cap data of these stocks, let me know, would be interesting to see if in deed it did outperform the sp500.
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Old 06-16-2019, 12:13 PM   #5
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Try this: https://www.iweblists.com/us/commerc...ion_Dec18.html

Change Dec18 to mmmyy of the period that you want.
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Old 06-16-2019, 12:19 PM   #6
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here same changes i came across...

https://www.visualcapitalist.com/cha...-cap-15-years/
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Old 06-16-2019, 12:56 PM   #7
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top 1 to 10
Dec-09 XOM MSFT WMT GOOG AAPL JNJ PG IBM T JPM
Dec-10 XOM AAPL MSFT BRK-A GE WMT GOOG CVX IBM PG
Dec-11 XOM AAPL MSFT IBM CVX GOOG WMT BRK-A GE PG
Dec-12 AAPL XOM GOOG WMT MSFT BRK-A GE IBM CVX JNJ
Dec-13 AAPL XOM GOOG MSFT BRK-A GE JNJ WMT CVX WFC
Nov-14 AAPL MSFT XOM GOOG BRK-A JNJ WMT WFC GE PG
Dec-15 AAPL GOOG MSFT BRK-A XOM AMZN FB GE JNJ WFC
Dec-16 AAPL GOOG MSFT BRK-A XOM AMZN FB JNJ JPM GE
Dec-17 AAPL GOOG MSFT AMZN FB BRK.B JNJ JPM XOM BAC
Dec-18 MSFT AAPL AMZN GOOG BRK.A FB JNJ JPM V XOM
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Old 06-16-2019, 01:28 PM   #8
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2Black:
There's a guy, Dale Roberts, on Seeking Alpha who has posted several articles regarding skimming the top ten (or whatever) holdings from ETF's. I don't recall if he has done the research that you are interested in, but, he does offer up some amount of research on skimming.
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Old 06-16-2019, 01:42 PM   #9
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thanks redduck, i'll try and find it.
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Old 06-16-2019, 01:50 PM   #10
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here the results for only the top 4 (easier to do since they don't change)
compared to sp500
invest $100,000 in 4 stocks or spy only
period: buy 4th jan 2010, till now (so from dec. 2009 data)
spy %/yr (ir.schema) -> 12.6%
top4 %/yr(ir.schema) -> 18.4%

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Old 06-16-2019, 06:45 PM   #11
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Quote:
Originally Posted by 2Black View Post
here the results for only the top 4 (easier to do since they don't change)
compared to sp500
invest $100,000 in 4 stocks or spy only
period: buy 4th jan 2010, till now (so from dec. 2009 data)
spy %/yr (ir.schema) -> 12.6%
top4 %/yr(ir.schema) -> 18.4%
...
Wait a minute. Were those stocks picked on info available on 4th jan 2010, or are they the top stocks now?

It is far too easy to pick (yet, impossible to buy, w/o a functioning time machine) the stocks that did well since 2010.

And even if this was a 2010 information based pick, how did it do in 2009, 2008, 2005, 2000, 1999, 1992, 1984, 1966, etc?

Even a broken clock is right twice a day.

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Old 06-16-2019, 06:55 PM   #12
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Quote:
Originally Posted by 2Black View Post
top 1 to 10
Dec-09 XOM MSFT WMT GOOG AAPL JNJ PG IBM T JPM
Dec-10 XOM AAPL MSFT BRK-A GE WMT GOOG CVX IBM PG
Dec-11 XOM AAPL MSFT IBM CVX GOOG WMT BRK-A GE PG
Dec-12 AAPL XOM GOOG WMT MSFT BRK-A GE IBM CVX JNJ
Dec-13 AAPL XOM GOOG MSFT BRK-A GE JNJ WMT CVX WFC
Nov-14 AAPL MSFT XOM GOOG BRK-A JNJ WMT WFC GE PG
Dec-15 AAPL GOOG MSFT BRK-A XOM AMZN FB GE JNJ WFC
Dec-16 AAPL GOOG MSFT BRK-A XOM AMZN FB JNJ JPM GE
Dec-17 AAPL GOOG MSFT AMZN FB BRK.B JNJ JPM XOM BAC
Dec-18 MSFT AAPL AMZN GOOG BRK.A FB JNJ JPM V XOM
Quote:
Originally Posted by 2Black View Post
here the results for only the top 4 (easier to do since they don't change)
compared to sp500
invest $100,000 in 4 stocks or spy only
period: buy 4th jan 2010, till now (so from dec. 2009 data)
spy %/yr (ir.schema) -> 12.6%
top4 %/yr(ir.schema) -> 18.4%


Well, when I plug your top 10 into portfolio analyzer, it shows a very small lead for the 10, but the lead changes hands over time, so no clear winner. Might be different next month.

No way am I going to give up the power of diversification for such an unsure potential advantage.

http://bit.ly/2WMD5ts << short link to portfolio analyzer.

-ERD50
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Old 06-16-2019, 06:59 PM   #13
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And here's a screen shot. The top 10 is p1, slightly ahead of VTI:

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Old 06-17-2019, 12:59 AM   #14
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Regarding the top 4, for 2010, dec 2009 info was used, for 2011 dec 2010, etc.
When you use the top 10, you get 12.77% so slightly ahead of sp500 with 12.6%/yr
I guess the issue is that stocks moving up in the list (gaining market cap) are the good ones, but the total results is compensated by the ones going down in the list (loosing market cap)
For those top 4, it worked out well for 2010-2018 since they didn’t change, if there is change in the top 4, I’m sure performance will go down quick.
Perhaps a scenario were you buy newcomers and dump the ones as soon as they go down (1 or more positions) in the list. But that gets rather complex, you may end up with little stocks.
So I agree not worth the trouble.

if you look at the relative risers of the top 50, going up in the top 50 over the past years and now in the 10-20 range, you should buy V, MA, CSCO and DIS
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Old 06-17-2019, 04:48 AM   #15
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But... market cap can increase for reasons other than an increase in stock price. For example, additional shares issued as the result of a merger or acquisition paid for my shares rather than cash... and since many acquisitions ultimately destroy value that might not be a good sign.
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Old 06-17-2019, 05:12 AM   #16
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Quote:
Originally Posted by ERD50 View Post
Well, when I plug your top 10 into portfolio analyzer, it shows a very small lead for the 10, but the lead changes hands over time, so no clear winner. Might be different next month.

No way am I going to give up the power of diversification for such an unsure potential advantage.

http://bit.ly/2WMD5ts << short link to portfolio analyzer.

-ERD50
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Old 06-17-2019, 06:26 AM   #17
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Quote:
Originally Posted by ERD50 View Post
And here's a screen shot. The top 10 is p1, slightly ahead of VTI:

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I believe you did not adjust for market cap, had you done so, I think the top 10 performance improves. In other words right now MSFT is 3.3 times the weighting of the #10 stock Exxon Mobil, so you should own 3.3 times as much
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Old 06-17-2019, 11:01 AM   #18
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I believe you did not adjust for market cap, had you done so, I think the top 10 performance improves. In other words right now MSFT is 3.3 times the weighting of the #10 stock Exxon Mobil, so you should own 3.3 times as much
OK. But that leads to even higher levels of stock specific risk. I'll pass.

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Old 06-17-2019, 11:43 AM   #19
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I find Portfolio Visualizer's backtester useful... with respect to your strategy, I'm guessing that the top 10 in market cap don't change all that often from year to year.

The link below compares the performance of the top 10 at Dec 2009, rebalanced annually, from Jan 2010 to May 2019... not much different than the S&P 500... actually a tad lower.

https://www.portfoliovisualizer.com/...100&total3=100

When I first started reading the OP I thought the OP was heading towards a Dogs of the Dow strategy.

Top 10 by market cap as of Dec 2009 and Dec 2018
Thanks for reminding me how I lost money on XOM

I thought this looked a little like Dog o Dow as well... I've since widened my thinking that indeed, owning 3000 equities via a few ETFs serves my pockets better than me trying to pick 10 *WINNING big Mega Caps.

Just let the robots re-balance.
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Old 06-17-2019, 12:04 PM   #20
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Thanks for reminding me how I lost money on XOM

I thought this looked a little like Dog o Dow as well... I've since widened my thinking that indeed, owning 3000 equities via a few ETFs serves my pockets better than me trying to pick 10 *WINNING big Mega Caps.

Just let the robots re-balance.
First off, just using the average of the top 10 market caps gives almost perfect correlation to VTI over the last 10 years. Secondly, unlike fake index backtesting to 1926 the market capitalization of top individual stocks actually existed and could be tested to see how it behaved.

All I have read in the past 2 years in defense of passive indexing is: Show me a system that works and a means to implement and I’ll implement it, I think this thread pretty much puts the truth out there is no real seeking of such an investment.
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