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Author: TMFGuardian Three stars, 500 posts Supernova Odyssey 1
Mission Team Member CAPS All Star SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77  
Subject: Re: Another Bite? Date: 12/14/2012 7:13 PM
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Hi Tony!

Fellow Stock Advisor analyst Jason Moser and I had the opportunity to speak with Chris Hill about some Tier 1 companies on yesterday's MarketFoolery podcast:

http://www.fool.com/investing/general/2012/12/13/this-is-why...

As for the rules for the Real Money Stock Picks competition, we basically are asked to make at least three stock recommendations (long/short/or options) per quarter. We started out with $5,000 in cash and then receive $1,000 at the beginning of every month. One group of analysts started in Nov 2010, my group started on Sep 1, 2011, and some other analysts started on different dates. Our resident Investment Operations Specialist, Yervand Khoranian, uses an industry standard time-weighted approach for calculating our returns to account for this.

I see that your picks are beating the S&P by a good margin, but some analysts seem to have more cash than your portfolio and they are not even in the green, how come? Just curious.

The time-weighted calculations see to it that cash infusions do not boost our returns. For more on this, these links may be helpful:

http://www.investopedia.com/terms/t/time-weightedror.asp#axz...

http://en.wikipedia.org/wiki/True_time-weighted_rate_of_retu...

It’s a bit complicated, but basically it allows us to compare our investment returns after adjusting for the impact of the monthly $1,000 cash contributions.

And as to why some analysts have a greater proportion of cash in their portfolios, it’s mostly because I saw attractive investment opportunities in the market and intentionally allocated substantial portions of my portfolio to them. Part of the reason was because I knew the $1,000 monthly injections would quickly dilute my holdings (a 20% position eventually becomes 15%, then 10% etc. over time). But it was also because I was comfortable managing a highly focused portfolio comprised solely of my best ideas. And I still am, but my longer term target for the number of holdings in Tier 1 is probably somewhere between 10-15 positions.

Some of the other RMSP participants were more conservative with their capital allocations. And some were probably just lazy :)

Thanks for all you do.

It’s my pleasure, Tony. And thank you for taking an interest in Tier 1.

Joe T
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