We have just recently added Cree, Inc. (NASDAQ:CREE) into our CAPS’s stock picks. Cree, Inc. is a developer and manufacturer of LED (Light Emitting Diode) products and some other related-products. Their LED products are used in video screens, gaming displays, function indicator lights and automotive backlighting.

Why Cree? If we look at their data on Yahoo! Finance, their last quarter’s revenue increased by 35.10%; and their earnings increased by 215.90%. They also don’t have debt at all, which is always a good thing.

If we look at the chart, their stock price has been up in almost a straight line in the last 52 weeks with 193.87% increase. The stock is currently a little bit overbought. We are waiting for pullback to a 50-day moving average before buying this stock.

Some people call it “passive investing”.  Some others call it “index investing”. They are all basically an investing strategy that means buying an index fund or ETF. Beating the index, like S&P 500, is not an easy task. Many fund managers are not able to beat the index consistently. Rather than spending time trying to beat the index, why don’t we just stay with the index?

Coach Potato Portfolio

One of the most popular passive investing is The Couch Potato Portfolio, created by Scott Burns. The idea is to invest in:

• S&P 500
• Shearson/Lehman Intermediate Bond Index

Investors can adjust the percentage of allocation based on their risk tolerance. For example, investors with higher tolerance can invest 75% in S&P 500 and 25% in the bond index.

Lazy Portfolio

Another popular passive investing in Lazy Portfolio from Paul B. Farrell. Paul has 8 different lazy portfolios depending on how complicated or how simple you want. One of Paul’s simplest portfolio is Second Grader’s Starter. It invests in Vanguard mutual funds:

• Vanguard Total Stock Index
• Vanguard Total International Stock Index
• Vanguard Total Bond Index

If you are interested to learn more about Paul’s Lazy Portfolio, you can read his book, “The Lazy Person’s Guide to Investing”.

Permanent Portfolio

Harry Browne has passive investing, called Permanent Portfolio, with unique approach since he’s recommending large amount of cash and gold. His permanent portfolio consists of:

• 25% in US stocks
• 25% in long-term US Treasury Bonds
• 25% in cash
• 25% in precious metals (gold especially)

If you are interested to learn more about Harry Browne’s Permanent Portfolio, you can read his book, “Fail-save Investing: Lifelong Financial Security in 30 Minutes”.

15% US Index

• PowerShares QQQ Trust, Series 1 ETF (NASDAQ:QQQQ)
• BlackRock Enhanced Capital and Income Fund (NYSE:CII)

15% Canadian Index

• CIBC Canadian Index (CIB300)

15% Emerging Market Index

• Claymore Canadian BRIC ETF (TSE:CBQ)
• Market Vectors Brazil Small Cap ETF (NYSE:BRF)
• Claymore/AlphaShares China Small Cap ETF (NYSE:HAO)

30% Fixed Income

• TD Canadian Bond Index (TDB966)
• iShares iBoxx High Yield Corporate Bonds ETF (NYSE:HYG)
• PowerShares Financial Preferred Portfolio ETF (NYSE:PGF)

5% REIT

• Vanguard REIT ETF (NYSE:VNQ)
• iShares Canadian S&P/TSX Capped REIT ETF (TSE:XRE)

Notes

• For the US index, we basically invest in Nasdaq-100 and S&P 500. We use a closed-end funds (CII) for S&P 500 because of its dividend. Check also our posting here for a couple of different closed-end funds that replicates S&P 500.
• Although Canada represents only 2% of the world GDP, we maintain a pretty high percentage of Canadian index. Why? It’s just because we live in Canada. Our “native” currency is Canadian dollar.
• We know that CIBC Canadian Index might not be the best mutual funds. However, we have to keep it this way until end of next year.

So far, we’ve been talking about our stock picks (see also here), but we never disclosed our portfolio. Now, we’re going to disclose our real portfolio.

First of all, we use a couple of different strategies in our portfolio. For example, we use dollar-cost averaging in our retirement account. We use a combination of fundamental and technical analysis in our short-term trading account. Having said that, we try to keep our portfolio as simple as possible.

How does our portfolio look like?

• 15% US index
• 15% Canadian index
• 15% Emerging market index
• 30% fixed-income, which includes government bonds, corporate bonds and preferred shares.
• 5% REIT
• 20% speculative stocks, long-term options and currency speculation

As we mentioned in our previous posting, we use mostly ETF and index mutual funds (we always prefer “no-load” mutual funds). We’ll discuss about which ETF/mutual funds issuers that we use in future posting.

(Picture is from stock.xchng.)

For those who don’t know, Motley Fool (fool.com) is web site for for long-term investor. It features news, commentary, stocks rating, community and many more. One of their services is called CAPS; where we can pick stocks for compared our performance with other CAPS members as well as S&P 500.

We have been using CAPS to track our stock picks for quite a while now. Our CAPS address is:

http://caps.fool.com/player/1stmilliondollar.aspx

Unlike the our stock picks at the Canadian bloggers contest that has limitation of 4 stocks; we list all stocks that we think is a good investment in CAPS. Our current stock picks are:

• PEGA
• CAGC
• BIDU
• ITC
• EW
• CTRP
• ARD
• ASIA
• CHK
• POT
• DAR

If you look at our picks as of today (February 13, 2010); 9 out of our 11 picks have beaten S&P 500.

Links

• Our Stock Picks for 2010
• Our Motley Fool’s CAPS account