I first wrote about FROIC here and created an equal-weighted equity portfolio in July. FROIC is (Free cash-flow Return On Investment Capital). It's a measure of how much free cash a company can generate for every dollar employed. I've found it such a useful tool, that I've dedicated a new page to track my budding FROIC-based portfolio (below).
Today is 26-Aug-2010. Below is the most current portfolio, created 01-Jul-2010. Notice that the portfolio beta is less than 1.0, which means that it is below average risk. Also notice that Jensen's Alpha is 9%, which means that this portfolio is outperforming the S&P 500 by 9% (on a risk weighted basis).
My original stock list has dwindled. Several stocks sold off within two weeks of purchase (break-even stop-loss orders). Stocks that were dropped are Netflix(NFLX), NutriSystem Inc (NTRI), Diamond Management (DTPI), Hasbro Inc. (HAS), The Hershey Company (HSY) and AmerisourceBergen (ABC). This is part of the Darwinian process such that only the best survive. The next list of candidates is here.
| Name | Symbol | Beta | Return |
| Compania Cervecerias Unidas S.A. (ADR) | CCU | 0.78 | 31.77% |
| Herbalife Ltd. | HLF | 1.70 | 15.38% |
| The Scotts Miracle-Gro Company | SMG | 0.69 | 8.30% |
| Coca-Cola Enterprises Inc. | CCE | 1.34 | 9.30% |
| Campbell Soup Company | CPB | 0.34 | 3.21% |
| Continental Airlines, Inc. | CAL | 1.18 | 4.13% |
| Urstadt Biddle Properties Inc. | UBA | 0.66 | 8.28% |
| Penn Virginia GP Holdings, L.P. | PVG | 0.80 | 5.59% |
| Alliance Resource Partners, L.P. | ARLP | 0.77 | 20.85% |
| TransMontaigne Partners L.P. | TLP | 0.68 | 15.97% |
| StoneMor Partners L.P. | STON | 0.92 | 18.06% |
| Plains All American Pipeline, L.P. | PAA | 0.39 | 4.75% |
| Yum! Brands, Inc. | YUM | 1.04 | 9.40% |
| Average | 0.87 | 11.92% | |
| Jepsen's Alpha | 9.06% | ||
| Risk Free (10-Yr Note) | 2.50% | ||
| S&P 500 Index | 1.00 | 2.92% |
Source: http://davidxjohnson.blogspot.com/2010/08/froic-alpha.html
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