(Editor's Note: The numbers of the model portfolio have been adjusted to reflect the final closing prices for 12/31/2014, including a steep market selloff in the waning hours of 2014, probably due to tax-loss selling.)
It's the last day of the year, so it's time to update the results of our annual tradition, the Rayno Report Portfolio, our stock picks for the year. The Rayno Report Portfolio had a great year with an return of 17.5%, beating the average indices including the S&P 500 Index, which returned 11.30%
The total return was boosted by about 2% if you include dividends, making the total return of the portfolio about 20%.
Where does the model come from? I've been building model portfolios since 2004 based on a proprietary stock selection portfolio that looks for healthy, growing companies with relatively low valuations. It's based on a basic low-PEG (Price/earnings/growth) formula. It uses a proven, quantitative model based on the work of outstanding fund manager Joel Greenblatt. Once I have a list of promising, low-PEG companies, I dig further into the individual companies and trends. This approach is designed to provide good returns with lower-than-average risk.
A big part of our portfolio's success this year was tied to mobile networks and Apple (Nasdaq:AAPL), which we've been telling people has been undervalued for years. Apple had a great year, up 45%, boosted by a new product cycle and stock buybacks. But the biggest story in our portfolio was Skyworks Solutions (Nasdaq:SWKS), a big wireless chip supplier to Apple and others, which rose 166%.