2010 in review - Genzyme bounces back

Another year, another unpredictable stock market. How was it for you?

My main portfolio grew by 19%, largely thanks to Genzyme which jumped up when Sanofi-aventis made a hostile bid for it. BHP Billiton also kept on rising, as it has since I bought it four years ago.

My "aggressive" portfolio grew 26% thanks to rises in Apple and Google. It is now almost entirely composed of these two companies as I flew to quality.

My strategy for 2011 is to continue sorting the wheat from the chaff in my portfolios. Why hold mediocre stocks merely for the sake of diversification when you can hold quality growth stocks like Google, Apple and Oracle? The diversification requirement can be met by having a large chunk of your portfolio in an index fund.

In this vein I will eventually unload BP and Barclays when the time is right. BP is a fine company but is exposed to the risk of big accidents as we are all now very aware. I am also unsure of the ethics of investing in a company that is directly and indirectly responsible for so much global pollution (even when accidents do not occur.) I don't see any reason to hold BP individually rather than an index of petroleum companies or of large high-yielding corporations.

Barclays did better than most banks in the financial crises of 2008 but is now a low-yielder and I don't think I understand enough about banking to justify investing in individual companies. Again it would be better to buy into an ETF of financial stocks.

Holding BHP Billiton (BLT) for 4 years has demonstrated the advantage of holding on to a winner rather than taking a quick profit. I could have taken a 50% gain after a year or so (and re-invested the profits in rubbish like banks) but instead I held on for the ride and am now sitting on a gain of over 100%. How many FTSE 100 companies have done that in the last four years? BLT is large enough to act as a mining ETF in itself and has a decent yield so I will be holding for now, despite some ethical concerns about the amount of pollution it causes.

I now have to decide what to do this my Genzyme (GENZ) shares. When news of the Sanofi bid first emerged I sold half my holding to lock in a decent profit. Do I sell the rest now or wait for a higher bid? I expect I will sell in the near future and re-invest in either Johnson and Johnson or Berkshire Hathaway. Watch this space for a comparison of the three companies.

Looking forward I think smartphones will continue their explosive growth in 2011 and so I am happy to have large position in Apple and Google. I will take a look at Qualcomm in the near future as they supply the chipsets that many Android phones are based on.

Happy value investing in 2011!