AT&T: Lightning Hasn’t Struck TwiceNovember 22, 2018
That portfolio was designed to last 6 months, and 6 months later, it had hit it out of the park , outperforming my site’s best-case scenario and the SPDR S&P 500 ETF ( SPY ), as you can see in the chart below.
In August, I presented another hedged portfolio around AT&T, though I wrote at the time that it was unlikely to be able to replicate last year’s extraordinary performance.
You want to invest in a handful of names, including AT&T, with a goal of maximizing your potential return net of hedging costs.
Step 2: Calculate Hedging Costs
We wrote about how to find optimal hedges here .
For each of the names in your initial universe that has a positive potential return, you’ll want to subtract the hedging cost you calculated in Step 2 to get a net potential return.
Using the process outlined above, this was what Portfolio Armor’s automated hedged portfolio construction tool presented us:
In addition to AT&T, the site included Broadridge ( BR ), Callaway Golf ( ELY ), and Morningstar ( MORN ) as primary securities, based on their net potential returns when hedged against >8% declines, and their share prices being low enough that it could include round lots of each of them in a $100,000 portfolio.
That chart illustrates why you wouldn’t want to invest in such a concentrated portfolio without hedging.
Here’s how the hedged portfolio has performed so far.
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