The Beast That Devoured My Portfolio.
Or How I Learned to Stop Worrying and Love the (Apple) Bom. (Apologies to Ian.)
Under the heading of problems we all should have, AAPL has taken over/destroyed my portfolio allocation model.
What began this year as a modest 5% position in AAPL 1/99 $20 LEAPS allocated to my domestic value sector has grown to more than 18% -- and threatening to go higher.
Since I'm allocating only a *total 15%* to domestic value and don't want to sell my mutual funds (I'm obsessive about this stuff) and don't want to classify my AAPL position "off-portfolio", I had to come up with an idea (rationalization) so that I don't have sell off my AAPL holdings (my best story) in order in keep things neat and not subject myself to the risk of an *undiversified* portfolio. :O
FYI, my allocation model is this:
15% Domestic Value
30% Domestic Growth
24% Europe
16% Emerging Markets and Others
05% Japan
10% Cash
So, I came up with this: AAPL revenues are worldwide. As such its stock price is in large a reflection of different geographic economies. Asia slumping, Japan looking to stimulate the economy, Europe investing in productivity, etc. AAPL is a global play as much as anything else.
Looking at notes of the last AAPL shareholder's meeting, I got the following revenue numbers:
1,406M/100% total
$751M/53.4% US
$343M/24.3% Europe
$191M/13.5% Japan
$121M/08.6% Asia + Other
I also figure that AAPL has half-migrated itself from a pure value play at $13 1/2 to an earnings growth story at $28.
So, smooshing/rounding the numbers, I came up with the following way to allocate AAPL:
27.5% Domestic Value
27.5% Domestic Growth
25.0% Europe
07.5% Emerging Markets and Others
12.5% Japan
(I know AAPL has a lot of cash on the books but, I don't think they'll let me have easy access to it, so I didn't include it in cash.)
I think this approach has some integrity. As the economic health/currencies of these regions go, so too will AAPL -- which is kind of the point of diversification.
This way, for better or worse, my precious allocation model should stay fairly stable.
soup
PS> Am I the only one on this thread who worries about this stuff? |
