Ten‐Five‐Two (10–5–2) Allocation Models
John Konnayil Vincent · 2013
The chapter discusses ten-five-two (10–5–2) model portfolios constructed from the 13F filings of the three shortlisted managers: Bill Ackman, Warren Buffett, and David Einhorn. Back-tested performance of the model portfolios over a period of three years along with a comparison to the performance of the S&P 500 Index return over the same time period is presented. The tables included illustrate portfolio progression along with rebalancing and trading requirements based on a total portfolio value of $100,000 at inception. The comparative spreadsheet shows how the portfolio progression of the models compares to portfolios that exactly cloned the manager picks. The chapter concludes with an analysis of the characteristics and trading requirements of the models offered as well as their strengths and weaknesses. A recommendation on choosing allocation ratios based on the number of positions and weightage in the source portfolios is also presented.