Top-25 vs. S&P 500 Performance Update 01/31/13

With the S&P reaching new highs this week and logging significant gains in the month of January, we thought it fitting to reflect on how far the market has come over the last 5 years and highlight the fundamental Purple Chips difference - quality.

Without timing entry and exits of trades, but just by simply comparing our Top 25 US Picks with the S&P 500 today and at their respective valuations at the peak of the S&P 500 in October, 2007. Over the last 6 years, as the chart indicates, the gap between Purple Chips stocks and the rest of the market continues to widen reaching over 30% difference in overall return despite the markets recent rise. Rumpelstiltskin would've been happy to have slept through the credit crisis if he owned each of the Top-25 Purple Chips stocks.

This is the starting point for Purple Chips investments - quality stocks with quality earnings. Then we attempt to purchase them at low valuations compared with the historical norm and cycle profits into new low valuations when the stocks get too expensive.