We are rebalancing our holdings in Conservative Growth/Balanced on Monday. We are reducing two large positions that have about a 30% return to my target over the next year, making them more average in their size. Both have held up very well, with the Healthcare company up 7% YTD and the Consumer Staple company up 15% so far in 2011. The latter reports on Tuesday, and, while I think the stock remains attractive, it seems prudent to take some chips off the table. The piece I am trimming is a LT capital gain, rising 30% since the purchase in February 2010.
On the buys, we are adding to a Technology name that we trimmed about 10% higher recently. While my confidence level honestly isn't that high given all of the carnage in the sector, it is sitting on big LT support and offers 51% price return to my target over the next year (based on just 13PE and adding in $1 per share in cash). We are also adding to our Energy holding, which offers 45% price return to my projected target. We had also trimmed this one at a higher price in March and April.
With the rebalancing, the CG/B equities, which are at about 74% (bonds are at 11.5% and cash about 14.5%), have expected returns on average of about 48%. With our portfolio weightings, the return is about 49%. Honestly, it seems a bit unrealistic on the surface, but I believe that our assumptions are reasonable. Most likely, we won't get as much multiple expansion as I project (stocks could stay very cheap to corporate bonds) and maybe the earnings won't be quite as robust as analysts currently forecast.
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