Doing a stock take, or rebalance, of your portfolio is important. Rebalancing according to risk, performance or dollar value is common. The important aspect of any rebalancing model is to set yourself up for maximum success and, perhaps more importantly, control risk. You do this by positioning your portfolio accordingly.
Having a mixture of blue-chip, dividend, growth and – if your like me – speculative stocks is important. Regularly assessing the performance of individual companies is crucial and locking in profits (or selling at a loss) can be a tough decision but also vital for success.
Why sell a good thing?
We do this because a company's management may change their focus from one of growth to consolidation or vice-versa. Your risk is directly related to the decisions and intentions of managers, so it's important to keep on top of their strategies and assess them against your own, many investors will do this bi-annually when reports are released.
Below I've compiled a short-list of companies which are continuing to impress the market and have recently changed their strategies to bring greater shareholder wealth in the long term. They, at least, deserve a spot on your watchlist.
Telstra Corporation Ltd (ASX: TLS) is a market darling. It pays a top dividend, has robust balance sheets and, what many investors may not know, is it's presence in Asia – particularly China and Indonesia – continues to grow. Despite its share price increase, I believe it will continue to reward current shareholders and new investors with modest but stable returns in the long-run.
In 2014 I'm expecting a pick-up in the mining/resources sector as the biggest, cash-flow positive companies begin returning funds to shareholders. Despite a large increase to its dividend yield, I still prefer BHP Billiton Limited (ASX: BHP) over rival Rio Tinto Limited (ASX: RIO). BHP maintains a more diversified ship which allows it to answer the long-term questions in regards to growth.
In recent years, savvy investors have ridden the Australian medical industry's path to success. This is one sector where Australia has a competitive advantage. Resmed Inc (ASX: RMD) leads the way for respiratory disorders throughout the world. The sleep apnoea market is huge and largely unconsolidated but provides a massive runway for growth.
Small and mid-cap stocks can provide investors with good growth potential on long-term investments. In this space its important to find strong management, low levels of debt and a clear growth strategy – the simpler the better. Donaco International Ltd (ASX: DNA) is the perfect example of this. It's about to open its revamped hotel and casino operations in Lao Cai Vietnam which will boast more tables, much more hotel rooms and transportation infrastructure, providing easier access to 'high-roller' clients from China.
Speculative stocks should only be bought if you can afford to lose the money. High risk/high return is exactly what they are and they can be extremely volatile. Liquefied Natural Gas Limited (ASX:LNG) is a junior gas explorer/potential producer with assets in the USA's booming gas region of Louisiana. It is currently developing its Magnolia project which has the ability to generate 8 million tonnes of gas per year. I'll be rebalancing my own portfolio to make room for this one.
Foolish takeaway
Regularly assessing your portfolio's performance is important to ongoing success. In addition to pure investment decisions, investors should also consider the taxation implications involved in selling for a profit or loss. Each of these companies look likely to reward shareholders in the medium-to-long term with experienced management at the helm.
