Core Positions

The 'core position' concept may be worth considering as we begin building the Haile Fund portfolio. Core positions provide strong exposure to asset classes or sectors being pursued by the investor. Usually, core positions are 'low maintenance' in that they do not require constant review and oversight. As such, time horizons associated with core positions are usually long term in nature.

When putting a portfolio together, I personally like to look for core positions early in the process. This is because core positions can serve to anchor my portolio in the asset classes that I am interested in. Once the portfolio is solidly anchored, then I can pursue other, more specialized (or speculative) positions that help tailor the overall asset class composition toward more specific views.

As an example, I would view the Rogers International Commodity Index fund (RJI) discussed yesterday as a potential core position in commodities because it provides broad, market weighted exposure to the sector. Once I have positioned a broad fund like RJI in my portfolio, then I can look for other, more specialized commodity investments, such as DBA (ags), JJC (copper), or GLD (gold), that better express my preferences toward specific commodities.

In equities, core positions are often reflected by large cap stocks that dominate attractive industries. Due to its size and influence in the tech sector, Apple (AAPL) can be considered a core equity position.

One problem I often encounter with acquiring core positions is that they are often overpriced (from where I sit, anyway). Two strategies that I use to cope with this problem are a) sit on my hands and patiently wait for the security to be put 'on sale' by the market (this happens more often that you might think), or b) take a small position now at the current price with plans to add more shares if/when price goes lower.

Recently, I have employed strategy b) to begin building core equity positions in my personal portolio (I have not owned stocks for quite some time). I have initiated small 'starter' positions in a few large cap tech and healthcare names such as Microsoft (MSFT) and Johnson & Johnson (JNJ). My work suggests that these names offer decent--but not great--value here. These starter positions give me initial exposure, while leaving the door open for using lower price to my advantage to build more meaningful core positions down the road.

Should stocks rip higher from here and never look back, at least I have some core exposure that will allow me to participate.

Anyway, you might find the core position concept useful as you search the investment landscape for ideas.

positions in GLD, JNJ, MSFT, RJI