Do You have Enough FUN in Your Portfolio?

By Justin Carley - May 2, 2012 | Tickers: AMZN, BEAM | 0 Comments

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With the warmest winter in a century now in the record books, it is time for investors to focus their attention on summer and let the optimism shine.  Or not, as we are constantly reminded about what transpired the previous two summers- European distress and a near 20% correction in equity markets.  And guess what, European data is weakening anew.  Do you sell in anticipation of a third consecutive summer flight to safety?  Do you remember the strong presidential election cycle track record for stocks and hold through any intermittent corrections, albeit with elevated stress levels?  My recommendation is that investors forget all this headline garbage and add an often overlooked component to their portfolio- FUN.  I use the term fun, but other synonyms are whim, prayer, homerun, and gut instinct. 

That’s right, forget all the P/E fundamentals and usual investing jargon and just buy a company that you love and think has a real shot of being something special.  You probably have three of four you can rattle off in a couple seconds, but then you find reasons to pass.  Maybe you don’t know much about it, but love what little you do.  You might have passed because someone told you never invest in a company you don't completely understand.  Maybe the stock has surged recently.  Maybe you are looking for some confirmation bias, but you are the only one that likes this stock?  Buy it now!  Maybe you already have added some fun, but it is just a tiny little 1-2% and can’t fully blossom.  Buy more of it now!  A portion of your portfolio should have some gut-instinct to it, a little personal signature to what are often fairly cookie-cutter portfolios.   Below I highlight my personal fun portfolio, what is yours?

Amazon is Amazing                                                               

I have loved Amazon (NASDAQ: AMZN) for the better part of three years.  I just bought something there today and spend more at this retailer than any other, excluding groceries.  Actually, I do buy some of my food there.  The company has done exactly what I thought they would do- grow and become more fully engrained in an individual’s purchasing decisions.  They just reported 1Q12 sales of $13.2 billion, which is 34% higher than a year ago.  Profits remain a second thought to investing in the business, but the stock still exploded and now the market capitalization exceeds $100 billion.  And the cherry on top of this cake is Jeff Bezos, who I consider to be one the smartest CEOs in the world.  I have focused on the negatives of this stock for too long, and there are plenty, but that doesn’t matter today.  Today is all about FUN and Amazon is at the top of my list.

Biotechnology will Boom

The second name on my fun list is actually a sector- biotechnology.  I am not talking about the members of the S&P 500 Biotechnology Sector (Amgen, Gilead Sciences, Celgene, Biogen Idec), but the tiny future stars.  SPDR S&P 500 Biotech EFT (NYSE:XBI) is not bad as a sector play because it isn’t a pure cap-weighted index.  It is diluted with some of the big boys, but does offer great diversity into this crapshoot industry.  I personally own three names: BTX, GALT, and NNVC.  They focus on regenerative medicines, carbohydrate based cancer cures, and other “potential” cures for modern illnesses.  I must clarify that I know NOTHING about the science behind these names.  I just believe that this will be a huge opportunity in the next 10-20 years.  These are but a couple names in this large ocean of potential stars.  A couple will be everyday names in a decade, but most will go bankrupt.  I have tied my fate to these three stocks/horses/bets and they have had anchor weights attached to them.  Time to buy more!

I bet Jim Beam was a fun guy

My final fun stock is Beam Inc. (NYSE: BEAM) and it doesn’t get much more fun that drinking or trying to correctly pick a takeover candidate.  Mix ‘em and you definitely have one fun stock.  I previously highlighted the company back in early February.  The thesis still holds.  Since then, the company has acquired Pinnacle Vodka for just over $600 million.  They report 1Q12 results on Thursday, May 3^rd after noting that 2011 momentum continues to persist during an update in March.  I believe that Beam will be acquired at a nice hefty EBITDA multiple sometime in 2013 or early 2014.  This is a way off, so it is more akin to an all-day football tailgate than a happy-hour special.  That sure does sound fun!

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