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This long-term, buy-and-holdish portfolio was originally based on my 2008 book The Jubak Picks. In that book I identified ten trends that were strong enough, global enough, and long-lasting enough to give anyone who invested in them a good chance of beating the stock market averages. To mark the publication on January 26 of my new book on volatility, Juggling with Knives, and to bring the existing long-term picks portfolio into line with what I learned in writing that book and my best new ideas on how to invest for the long-term in a period of high volatility, I overhauled the Jubak Picks 50 Stocks portfolio in January 2016. Click here to buy Juggling with Knives on Amazon

How did that revision do? Just fine, thanks. For 2016 the stocks in this portfolio gained 21.5% in price. Dividends added another 0.4% to the returns, (This isn’t my Dividend Portfolio, remember, and quite a few of these long-term picks pay $0 in dividends.)

That brings the total return for the portfolio to 21.9% for 2016. (That return is based on a rebalancing of the portfolio in January 2015 so that all the stocks in the portfolio represented equal dollar amounts. I will rebalance the portfolio again this January for 2017.) That means that anyone new to the portfolio in January 2016 would have earned that 21.9% return. For comparison the gain on the Standard & Poor’s 500 stock index was 9.54% in 2016. With dividends reinvested, the total return was 11.15%. (The total return on my Dividend Portfolio was 26.79% in 2016. For more on that portfolio see my January 11 post

Let me review some of the basics of this portfolio.

When I started this long-term portfolio, based on my 2008 book The Jubak Picks, my goal was simple. I wanted to create a portfolio for a long-term investor of 50 stocks backed by long-term trends (10 of them in fact) that were strong enough, global enough, and long-lasting enough to give anyone who invested in them a good chance of beating the stock market averages.

The portfolio would be largely passive with changes limited to 5 potential drops and 5 potential adds (ideally just once a year.)

That worked fairly well for the first four years of the portfolio. In its first year, 2009, The Jubak Picks 50 portfolio gained 57.8% versus a gain of 28.3% for the S&P 500. Year two, 2010, the portfolio gained 20.1% versus 15.01% for the S&P 500. Then in 2011, the portfolio lost 18.6% versus a 2.1% gain for the S&P 500. Year four, 2012, the portfolio gained 6.6% versus 16% for the S&P 500. Total for four years came to a gain of 64.4% for the Jubak Picks 50 portfolio versus 72.3% for the S&P 500.

But I could already see a problem. This long-term portfolio had a lot of fundamentally solid stocks that would do well when the global economy was in a growth mode and when global stock markets were in an uptrend. (2010 is a good example of this. I discount 2009’s really great performance as a timing artifact since I started the portfolio close to the post-global financial crisis bottom.)

But in a volatile down market, this portfolio could take a deep hit. Part of that underperformance was a result of the fact that when investors get scared by a correction or bear they tend to sell their most liquid positions first and also tend to take profits in their winners.

In the process of writing Juggling with Knives, I became convinced that I needed to 1) junk my once-a-year rigidity so I can buy and sell whenever, although I would keep portfolio turnover very limited, 2) add short-side ETFs to the portfolio when needed during a period of downside volatility to enable me to keep portfolio turnover limited, 3) use that low turnover and the portfolio’s long-term positioning to take advantage of potential bargains created by market volatility, and 4) keep my emphasis on finding stocks of companies with long-term competitive advantages that would hold up for the long run.

That rejigging worked well in 2016 when some very beaten down stocks recovered mightily because the underlying company had preserved its competitive advantage.

Cummins (CMI), for example, gained 55.3% in 2016 as the company kept to its strategy of long-term investments in R&D to gain market share. Freeport McMoRan Copper and Gold (FCX) gained 94.8% as the commodities sector crawled off a bottom. Brazilian iron miner Vale (VALE) gained 131.6% on a rally in iron ore prices and a recovery in the Brazilian market from a deeply, deeply over-sold position. Brazilian bank Itau Unibanco (ITUB) gained 57.9% on that same recovery. Steel tube maker Tenaris (TS) added 50% as the energy sector’s capital spending bottomed. Latam Airlines Group (LFL) gained 51.8% as emerging markets recovered and airlines gained on low fuel prices.

Other picks surprised me with their underperformance. Alphabet (GOOG) gained just 1.7% on the year and Cisco Systems (CSCO) was ahead only 11.3%. Potash of Saskatchewan (POT) continued to lag, climbing only 5.7% and Indian stocks had a tough year with Indian bank HDFC Bank (HDB) off 1.5%. Two of the picks I made in November closed lower for the remainder of the year: Apple (AAPL) was down 9.3% and Facebook (FB) was lower by 9.5%.

In the next week of so I’ll be dropping a few stocks from this list–the companies don’t any longer have a big enough competitive advantage in my analysis–and adding several more to bring the list back up to 50. In addition I’ll be revising a few picks to take account of spin-offs, mergers, and acquisitions.

In case you haven’t figured out the pattern, I’m working through performance reports on all my portfolios. Next up is Jubak Picks, where I’ve fallen way behind and need to review both 2015 and 2016. But that is the next task.