Supernova bills itself as the portfolio service that is built on the best of David Gardner’s stock picks from Stock Advisor and Rule Breakers. The only problem is that up until now there has not been a lot of actual portfolio management happening. It’s been more about just buying stocks on a regular basis with a dash of allocation guidance thrown in. But both Phoenix and Odyssey have entered new phases where portfolio management is taking on growing importance. And this change might finally make the Supernova service worth its premium price.
Phoenix is entering its second phase as it heads into 2015 where it will no longer be adding new money to the portfolio. Furthermore it will have to make $10,000 in distributions each quarter, mimicking a person in retirement, which has always been its charter. This means it will have to be very careful about its future Buy and Sell choices in order to avoid depleting the portfolio.
Odyssey on the other hand has also found itself in a situation where recapitalization has become necessary. The portfolio will continue to contribute new money on a regular basis, but as the portfolio has grown, each new $1000 investment has amounted to smaller and more allocations, which in turn has made each investment decision less and less impactful. And so they have just undertaken a recapitalization plan where they sold 10% of their holdings in order to make money available for new investments that are bigger than their normal $1000 contributions allows. They will do this rebalancing on an annual basis.
I like both developments. For Phoenix, this moves it into the interesting position of being an investment portfolio where there will be more selling than buying. The real world application here is huge and will require an entirely different type of strategizing than what you will find anywhere else in the Motley fool universe, let alone most other investment services out there. Odyssey is also incorporating a realistic constraint that most investors face: limited funds and the need to make hard calls on which stocks to keep or sell as they look to optimize growth. In their first round of recapitalization they have made some interesting and controversial decisions and the service has benefited from the discussions these moves have generated.
With Supernova opening up to new members in the near future, the service has never been more valuable as it starts to really earn its premium status.