Individual Investor

James Roberts

Financial Writer,Financial Services

Education Vanderbilt University
Investment Experience 30 Years

Best Ideas

Exceptions
Sell Discipline
Allocation Discipline
Research
Approach
Summary

The "Best Ideas Model" will use some of the most compelling ideas derived from the other two portfolios, StockDiagnostics and Most Admired. Occasionally, I will utilize an idea that wasn’t used in either of these two other models.

The "Best Ideas" portfolio allows room for ideas that do not comply with the strategies and methods of the other two models. For example, "Most Admired" is almost exclusively populated with large cap companies. While large cap companies are included in the "StockDiagnostics Model", they do not compose the majority of holdings. The greatest number of selections come from the Mid Cap category in the "StockDiagnostics Model." The "Best Ideas Model" will intentionally gravitate towards companies with less than $1 billion in market cap, which will include roughly 25% to 33% in the micro cap category.

The model uses a fundamental approach, focusing on cash flows, ROE and growing sales.

The model will not invest in ADRs, but will invest in companies with an international presence. The model may invest in ETFs or Closed End Funds to gain exposure to a region or sector.

This model will likely have higher turnover than the other two models.

I currently write company stock reports for StockDiagnostics.com, selecting from companies with superior cash flow characteristics. StockDiagnostics.com is an independent financial research company that creates investing software. I am an independent contributor and I am running the Covestor models independent of my work with StockDiagnostics.com. However, my research does play a role in the selection process.

In deciding which stocks to feature for StockDiagnostics, I have used a number of other services including Barron's online, GuruFocus.com, IBD's Investors.com, SeekingAlpha.com, and Zacks to gather both fundamental and technical analysis. Brokerage firm data comes from Charles Schwab and Stifel Nicolaus, among others.

When capital is fully allocated, this model will own more than 15 different companies, but may have up to 50% of its assets invested in two or three industry groups as relative strength dictates. At times, the model may own less then 10 positions if market conditions dictate.

The "Best Ideas Model" will deliberately "trade around the fringes" by making partial sales and sometimes build positions in stages rather than all at once. When earnings disappointments rear their ugly head, positions will be pared. When an industry group falls from favor, the exposure to the industry will likely be completely eliminated.

Occasionally, the model will rely on momentum investing in order capture movement in an entire industry.

Approach Fundamental
Cap Bias Large caps
Geography US

Replicability

100.0%

Replicable

Top 5 Holdings View all

9.7%

9.6%

9.5%

9.0%

8.6%

HD
ADS
EPD
CBRL
BIIB

Model commentary

Researching retail stocks the old fashioned way

14 May 2012

I like investing in retailers because you can keep your finger on their pulse by visiting their stores.
Why our portfolio is John Deere green 18 April 2012
Apple, PepsiCo and IBM Join Our Most Admired … 14 March 2012
How to lower correlation with the broader market 15 February 2012
Right now, dividends are king 11 January 2012

Performance detail

Manager
Russell 3000
S&P 500

30D 90D 365D SI

Performance

Inception August 11, 2011

as of May 22, 2012	Manager	Russell 3000	S&P 500	Average Subscriber
Past 30 days	-2.3%	-4.7%	-4.5%	-
Past 90 days	-0.2%	-3.6%	-3.0%	-
Since Inception	9.2%	11.8%	12.3%	-
2012 (YTD)	2.2%	4.8%	4.7%	-

Risk Metrics

Since Inception

as of May 22, 2012	Manager	Russell 3000	S&P 500
Best 30 days	10.9%	14.2%	13.6%
Worst 30 days	-7.4%	-10.1%	-9.8%
Volatility	16.1%	22.4%	21.4%
Sharpe Ratio	0.72	0.67	0.73
Sortino Ratio	1.05	0.96	1.05
Maximum Drawdown	-7.4%	-10.9%	-9.8%
Value-at-risk (95%, 1 week)	-3.7%	-5.2%	-5.0%

	vs. Russell 3000	vs. S&P 500
Information Ratio	-0.35	-0.46
Alpha	1.2%	0.3%
Beta	0.67	0.70
R-Squared	0.85	0.87

Latest transactions view all

Average trades per month 6.4

Executed	Symbol	Security	Replicable	Type	Price
04/27/12	JBL	JABIL CIRCUIT INC		Sell	$23.55
03/13/12	GWW	WW Grainger Inc		Buy	$216.45
02/29/12	WMT	Wal-Mart Stores Inc		Sell	$59.00
02/24/12	JBL	JABIL CIRCUIT INC		Buy	$26.23
02/24/12	CMCSA	Comcast Corp		Buy	$29.34
02/17/12	IBM	International Business Machines Corporation		Sell	$193.39
02/13/12	AGCO	AGCO Corp		Buy	$52.82
02/13/12	WYN	WYNDHAM WORLDWIDE CORP		Buy	$44.26

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$5,000 subscription min
1.1% fee

Important Information

1. Past performance is no guarantee of future results.

2. Performance of the model manager's account is calculated by Covestor on a daily time-weighted basis, including cash, dividends and earnings distributions, and broker commissions. Manager returns include trades that fail Covestor's trading rules, do not reflect any Covestor suitability or risk score restrictions and are exclusive of Covestor fees. More

3. Average subscription returns ("Avg Sub" or "Avg Client") are calculated by Covestor and are composed of the average, daily, time weighted returns of all active subscriptions to the underlying model. These daily average returns are then linked together for the timeframe requested. In addition, these returns include cash, dividends and earnings distributions, brokerage commissions, Covestor advisory fees, and reflect individual client suitability and risk score restrictions. More

4. All graph data is as of the end of day for the referenced period, unless otherwise specified. The subscription minimum is the minimum subscription required to follow a particular model. The minimum amount is determined by Covestor, based on the characteristics of the underlying model. It should not be considered as specific investment advice for your investment situation.

5. Benchmark returns have been calculated by Covestor using a time-weighted calculation of daily index valuations and do not include cash, dividends and earnings distributions, or transaction costs. More

6. Leverage indicates the level of margin utilized and is calculated by dividing gross exposure by portfolio net liquidation value.

7. All Model Manager information including personal data, profiles, strategies, monthly investment reports, and historical results outside of Covestor has been provided by the Model Manager. Covestor makes no representation or warranty of its accuracy, completeness or relevance and it does not represent the opinions of Covestor. Transaction history is available upon request. Model classifications (Approach, Asset Class) are provided by Covestor, and are intended to serve as a general guide.

8. Top Replicable Holdings: These securities are currently held in the model manager's brokerage account. Those marked as "Replicable Holdings" currently pass Covestor's trading rules, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription holdings may vary.

9. Latest Transactions: These transactions were executed in the model manager's brokerage account. Those marked as "Replicable" () passed Covestor's trading rules and were eligible for replication at the time of execution, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription trade activity may vary.

10. S&P 500 Index is an unmanaged index compiled by Standard & Poor´s Corp. Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. S&P 500 index data: S&P 500 Copyright © 2012.

11. Dow Jones index data: CME Group Index Services, LLC 2012

James Roberts