A portfolio of 8 stock picks from the edge

“On top of the world or in the depths of despair.”

This week Wall Street’s fourth largest investment bank fell 77%. The largest US Savings & Loan declined 36% after being down as much as 59%. The largest US insurance company fell 46%.  But despite these crushing losses for Lehman Brothers, Washington Mutual, and AIG, the indexes all posted gains for the week.

At various times this year, the entire market has become seemingly fixated on a single stock or group of stocks. The news, rumors, or price movements of these stocks would reverberate through the entire market. Remember the bond insurers MBI and ABK? Or recently FNM and FRE? At each instance, everyone was convinced that the failure of these companies would have devasting effects that would ripple through the entire financial system. Disaster was avoided (or deferred) in each case.

Now, three large and once venerable companies are collapsing and the market refuses to blink. What does that mean to you?

This week the 8 Stock Portfolio posted its second weekly loss. It was also the first week that the indexes outperformed the portfolio. The portfolio had a loss of 5.87% for the week. This is measured as the change in value from the closing prices on 9/5/2008 to the closing prices on 9/12/2008. This compares to a gains of 1.79%, 0.24%, and 0.76% for the Dow, Nasdaq, and S&P 500, respectively.

From the start on 8/1/2008, the 8 Stock Portfolio is up 18.08%. This compares to again of 0.84% for the Dow and losses of 2.15% and 0.68% for the Nasdaq and S&P 500.

Here’s the performance individually for the week:

And here’s the performance from the start: