Your 2014 portfolio return

[intothebreach]

 

There are a number of posters here that have said something along the lines of how they have "underinvested" in their "best ideas."

 

Fair point. Being one of those posters, this may very well be the case. However, a side effect of increasing concentration, at least for me, has been to move away from standard position sizing (ie. a constant % of the portfolio) and to start sizing positions according to my degree of conviction AND understanding of a given situation (granted, perceived understanding).

 

In the same way that strategy is also about choosing what not to do, I think concentration is not only about increasing the size of the bets, but also about choosing what not to invest in versus what one would do with an otherwise similar but less concentrated approach. If I was investing the same way I was in 2007 in a more concentrated fashion, I'd be blowing up big time. But coupled with a much higher respect for the risk of permanent loss—resulting in a higher threshold to make a buy decision—I personally feel this approach to be more comfortable as well as less risky for me than what I was doing previously.

 

So far, for me concentration has been beneficial mostly because of what it forces me to do to get to the point I'm comfortable enough to commit a bigger chunk of capital than I would otherwise. I'm pretty sure the same results could be achieved with a less concentrated portfolio, but I personally would find it more difficult to do so. I'm also convinced that in any given year, this approach may cause me to lag my benchmark significantly, but I'm OK with that.

[Cageyone]

Thanks to everyone for their contributions to this thread – it’s a great learning experience for a guy who is probably the least active (read lazy?) long-term buy and hold investor on the board!  But it’s also inspired me to go back and have a look at the performance of my financial holdings since I retired in 1999 and stopped adding any new money to my investment portfolio.

 

Concentration has worked extremely well for me during 2014. Currently I’m 53% in FFH, 17% in BAM, 7% in TRP, with the balance diversified over 30 other names.  This year my tax sheltered RRIFs are up 17.3% even after withdrawing a mandatory minimum 7.5%.  Over the past 15 years the annual percentage change in these accounts has been “lumpy” – up 31% in 2003 and up 25% in 2006; down by -6% in 2008; and basically flat in 2000, 2011 and 2012.    But over the 15 years the CAGR for these accounts has been a reasonable 8.3%, resulting in slightly more than a triple.

 

I was particularly “lazy” in 2014 – not initiating any new positions nor adding to any existing positions.  My only transactions were to sell 20% of a small VRX holding near its 52 week high (that more than covered the cost of my original Biovail shares) and 20% of one of my larger forestry holdings (CFP) when it reached a 52 week high.  Currently I’m holding about 8% cash in my RRIFs, so I will have to do some more selling in 2015 to meet the mandatory withdrawals (and to keep the tax man happy!)

 

The downside of being a long-term buy and hold guy is that there were 8 positions totalling over 10 % of my 1999 portfolio that I literally “rode down” to zero – including such memorable names as Can West Global, Hollinger and Stelco.  So going forward I really should be a little more proactive in divesting “losers” before they totally disappear.  But I seem to find reasons for holding on, even to the bitter end!  A current example might be BlackBerry where I’m down 50% -- but then it’s only a 1% position – and so far it looks like Prem has the right guy (in John Chen) “on the job”.  (But I also followed Prem into SD and I’m now down about 75% and still holding/hoping!) 

 

My bigger concern has been whether I should remain so concentrated – so the discussion on this thread on concentration has been quite relevant and helpful. So thanks again, and best wishes to all for 2015!

 

[Palantir]

17% up for the year. Yay. I feel the concentrated vs diversified debate is silly. Some stocks are meant to be concentrated, if they are great compounders, others like your net-nets, spinoffs etc. should be held in basket  portfolios. If you do a core-satellite strategy, you can have your cake and eat it too!

[KCLarkin]

33% total return on my actively managed portfolio. 3rd year in a row at 30%+.

 

Amazingly, 11 of my 12 stocks beat the S&P 500. I will never repeat that hit rate. IBM was my sole loser (down 6%).

 

Notes:

- total return is dollar weighted return (using quicken)

- currency effects are excluded (I think). Actual return would be higher due to strong US dollar.

- returns are unlevered (I think). Actual return would be higher due to modest amount of leverage.

- my portfolio is currently 50% passive. I am moving towards 100% active.

 

 

[Mephistopheles]

Up 26% for the year. Winners include SHLD, BAC common and options, GM warrants. Losers are FNMA/FMCC common and preferred. I got lucky with SHLD, in that I sold out at just the right time before it tanked, and reinvested in BAC in the $15ish range. Took a big hit with the GSEs but made it back up with GM.

 

Last year I was up 60% and 40% the year before.

 

I have a 12.3% IRR ever since I first started investing in 2006, though I've become an exponentially better investor in the last few years, so I think that number should increase as time goes on.

[Packer16]

Back to earth.  +8.5% for 2014.  In Aug was up 20% but lost a good amount on Lukoil, Emeco and Intralot since then.  Both AIQ and S. Korean preferreds who were positive nicely at mid-year but have retreated to losses for the year.  Positives were selling out of the Freddie/Fannie preferreds, Cinedigm, Oi, Telecom Italia and Awilco earlier in the year and Fiat, GM and GNCMA.  Part of the price of holding a volatile portfolio.

 

Packer

[Liberty]

17% up for the year. Yay. I feel the concentrated vs diversified debate is silly. Some stocks are meant to be concentrated, if they are great compounders, others like your net-nets, spinoffs etc. should be held in basket  portfolios. If you do a core-satellite strategy, you can have your cake and eat it too!

 

I would agree with that. I think arguing about concentration vs diversification in the abstract is a bit like asking "winter coat or hawaiian shirt?". What's best for you depends on other factors.

[Mephistopheles]

Back to earth.  +8.5% for 2014.  In Aug was up 20% but lost a good amount on Lukoil, Emeco and Intralot since then.  Both AIQ and S. Korean preferreds who were positive nicely at mid-year but have retreated to losses for the year.  Positives were selling out of the Freddie/Fannie preferreds, Cinedigm, Oi, Telecom Italia and Awilco earlier in the year and Fiat, GM and GNCMA.  Part of the price of holding a volatile portfolio.

 

Packer

 

Hi Packer,

 

Just curious, what made you sell out of the GSEs?

[Packer16]

Nothing fundamentally other than finding the S. Korean preferreds which had better upside and I was already exposed to the GSEs via holding Fairholme.

 

Packer

[CorpRaider]

Looks like about a +23% in my primary discretionary account.  Big ups to my main man Richie Kinder and his warrants (really I suppose I should credit hedge eye and barron's for the buying opportunity).  I gave a material portion of that gain back on the TLM takeunder, but it was a much smaller position, thankfully.  Could have been a real nice year, as I had an order to double down in TLM at just about the low tick for the year, approximately two days before the Repsol offer but I didn't get a fill.  Maybe CPP will come in with a $10-$12 bid and light up my life.

[gokou3]

Up 46% this year in my main, tax-sheltered account with 6-digit sums.  This includes about 10 points of performance due to CAD weakness.  It does 18.5% CAGR since inception in Oct 2005, albeit with very small sums back then. 

 

Obviously very satisfied with my results, especially for the relatively little effort I put into researching stocks this year due to personal circumstances (It makes me wonder though whether my limited time restricted me to only the best ideas which improves return).  Big winners include the leaps of BAC, AIG, and KMI.  FCAU common and VZ leaps also contributed to performance.  LTS dragged on performance; almost a wipe-out for me considering I bought it in 2011.

 

I run a concentrated, highly-leveraged portfolio and got lucky this year again (did 70%+ last year with similar leverages).  I worry about a blow-up as much as I am concerned about gains.  My biggest hedge is that I am still rather young (in my mid-30s) so if s*it happens I still have time to make up.

 

Given the market level and macro uncertainties (oil price, Fed increase, Russia, China, Japan, Europe, etc), I currently have about 50% of NAV in cash having exited BAC and AIG leaps a couple weeks ago (hoping to roll over to the 2017 at a favourable prices).  That said, I still hold significant, leveraged positions in KMI warrants, CBI common + leaps, and FCAU, plus some misc positions.  Notionally, they still represent about 175% of NAV although I am not sure if it is a good indication of risk.  For example, the KMI warrant is 10x leveraged given the high exercise price to premium ratio.  In any case, I guess my return distribution will be barbell-shaped.

 

I would like to thank the board for the tremendously valuable ideas.  My out-performance in the last 2 years wouldn't have been possible otherwise.  Thanks for reading my long rambling and happy new year.

 

[berkshire101]

Ended the year with a 20% gain.  I'm happy.  I only sold two positions during the whole year too so I'm glad to have kept my turnover low. :)

[james22]

+15%

 

 

Winners: FRFHF (+33%), BRK (+27%), MKL (+19%), MMM (+18%)

 

Losers: LUK (-20%), VGELX (-20%), VGPMX (-11%)

 

 

Better than I deserve, given my pessimism. Due only to a significant inherited 3M position I've promised to let ride.

 

I'll be adding to VGELX (Energy) and VGPMX (PM&M), otherwise to bonds/cash.

[Andy Dufresne]

Hard to figure out my "real" return as I have no control of my pension accounts and a good portion of my funds were sidelined for a house purchase which did not materialize.  I'd estimate about 25% in my taxable account in terms of my local currency (before tax).

 

Headwinds - the NIS depreciated about 15% versus the USD/CAD and I bought USD/CAD throughout the first half of the year,when it was lower, ending up with ~65%, so this added ~8% return

 

Best positions:

 

Value-wise

 

1. CKI - a loonie for 70 c (twice - exited and am back in) and run by smart guys to boot;

2. BAC $15 2016 LEAPS - sold recently for a significant gain; hoping to roll into 2017s;

 

Catalyst

 

1. YHOO $30 2015 LEAPS - this was the best and worst position of the year - I bought at the bottom after the disappointing quarterly earnings (YHOO was around $33) thinking that the BABA IPO would happen soon and was up ~150% days before the IPO; I bought more ITM LEAPS - strike 35, they also went up nicely. Then the IPO and short-sellers knocked me out (it was a large position for me), and I sold the 35s at a loss. I still had a nice overall gain, but had I held on I'd be sitting with a quadruple now. Lessons learned: (a) think about the shorts! (b) hedge!

 

I can only hope I get another 1 ft hurdle in 2017, recognize it and stay the course with my conviction.

 

2. ALSK - waited for the FCC approval of the AWN merger with GCI and bought immediately when it came out. Had a double at one point, but was greedy and ended up selling later for a small gain.

 

More Luck than Brains:

 

1. Oi - I made money twice here, even though I should have lost my pants the second time.

2. AIQ - same deal - sold for a nice profit twice when shares seemed to be stuck.

 

Packer - thanks for the ideas in any case (ALSK included)!

 

Worst positions:

 

Penn West - I bought right before Oil tanked, which could not be helped I guess; however, not enough DD on my part and I am sitting on a significant loss.

 

Learning positions:

 

I bought and sold two "hot-air" stocks to experience the thrill and pain of the roller-coaster trader's ride - both were quite volatile. Ended up selling one for a gain and one for a loss (overall I lost some money), but the bad feeling I got was worth the price of the lesson.

 

Greedy Miss of the Year:

 

Idenix Pharmaceuticals - I followed the stock and when I saw Klarman aggressively enlarge his position I should have done more DD or bought a starter position to force myself to do the DD. Sadly, I did not ...

 

All in all, a good year. I appreciate the camaraderie that exists on the Board and hope to be a more meaningful contributor in 2015!

[giofranchi]

In the last few days BH’s stock price has brought the increase in BV for my company in 2014 to +32.42%.

 

A prosperous 2015 to all! :)

 

Cheers,

 

Gio

 

[orion]

+11.78%

 

 

[constructive]

2014: 13%

2013: 52%

2012: 34%

 

Winners include Apple, DirecTV, Baidu and Netease. Losers include Genworth and Altisource.

[Jurgis]

Preliminary 2014 results:

 

Results are preliminary, since Quicken has not updated some of the 12/31 trades and distributions. These should not be large enough to affect much. Also Fidelity does not have their calculation of yearly results yet and won't have them for couple weeks at least.

 

Other caveats: rates are from Quicken/IRR which I still believe is buggy/not reliable. Couple positions are wide spread micro caps that trade on appointment, so their prices are sometimes misprinted and therefore misaccounted. Couple positions are foreign stocks that may have incorrect final prices. Some results include 401(k) accounts where I cannot invest into my selection of stocks and ESPP accounts where return accounting by Quicken is suspect. So reader beware.

 

Executive summary: 8.7% return which underperformed market. I am selling my investment portfolios and winding down active investing.

 

Longer version: Total IRR across all accounts is 8.05%. After removing ESPP and 401(k) accounts, the return is 8.7%. Both of these undeperformed market a lot (benchmarking against SP500 13.7% return). These returns are even worse considering that BRK stock return was 28% and Fairfax return was 31%. Both of these were positions in my portfolios.

 

Even considering ~16% cash position and ~16% fixed income position, the results are bad. The fact that other active managers did not do well this year is of little solace.

 

As an aside 401(k) portfolios underperformed SP500 because of: 30%+ bond fund allocation, 30%+ international allocation (VTIAX and FDIKX are both negative for year) and some small cap allocation.

 

So my plan is to liquidate my investing portfolios in orderly fashion and convert to mostly passive investing. I have some concern that funds that I passively allocated performed worse than my active investments last year. However, there are two solutions to this: 1. Passively invest in BRK/FRFHF/etc. mix. 2. Longer term the non-ideal allocation might even out.

 

Have fun

[NoCalledStrikes]

2014: +12.74%

2013: +51.7%

 

Looking at the difference between 2013 and 2014 and the impact AWILCO had on it explains why I think one year performance measures based on the position of the earth relative to the sun rather than measurements based on market cycles are somewhat nonsensical.

 

Had I sold all my Awilco on 12/31/2013, my 2014 numbers would have been much better:) But had I never bought Awilco, my 2013 numbers would have been about 15% lower.  Since I sold a fair bit of Awilco stock in the spring of this year when my first holdings went long-term and the dividend was so rich along the way, I did ok, but boy did I give back a lot later because  I got too greedy and held the  remainder too long. Repeat after me: Drillers are always and everywhere cyclicals.

 

 

Winners : Deep in the money BRK leap calls (60's and 80's) that I  bought in Dec 2012 which expire next month

 

Losers: JGWPT, I blindly followed Kerrisdale Capital's write-up on JGWPT and thought I saw an undervalued company.  In hindsight, I was blinded by my success with Kerrisdale's UHAL writeup.  But whereas UHAL is a real business dealing with rational customers providing a useful service, JGWPT is a financial operator selling a product to mostly financially illiterate people who truth be told in most cases shouldn't be buying the product. Dumb, dumb, dumb, it didn't pass the smell test, and complicated financials are out of my circle of competence, but I bought it anyway. 

[Liberty]

In the last few days BH’s stock price has brought the increase in BV for my company in 2014 to +32.42%.

 

A prosperous 2015 to all! :)

 

Cheers,

 

Gio

 

Very nice, Gio. How did your investment portfolio do?

[wknecht]

Up 14.8% this year, with cash in the 20-25% range. Not terrific, but am reasonably pleased to keep up with the market.

[mpauls]

77%

[Guest longinvestor]

+36.8% - All accounts

      + 34.13% in my IRA (main-$$ acct)

      + 56.5% 48.9% in my ROTH

 

Thanks to the bumper year, my IRA is now at a CAGR of 14.2% since inception, which was in Jan -2006.

 

the star of the show for me in 2014 & the previous 4 years was lvlt. stock has done + 23% in 2011; +36% in 2012; +43%34% in 2013 and +49% in 2014.

 

I continue to be a do-nothing-investor....bought nothing sold nothing. LVLT has grown by itself to a 30%+ position. The rest is BRK. Unless I see some material change in BRK's prospects or culture in light of the coming leadership transition, I can see myself going to a 100% BRK position one of these days. Together, BRK and LVLT have been >50% of my portfolio since inception. Much of my early gains during 2006-11 was borne by FFH. I consider myself lucky to have concentrated in 3 for 3 winners over the past decade. My conviction in all 3 was based in trust in stewardship. (Not 3 pieces of paper). I owe my sincere gratitude to Buffett / Scott / Watsa for taking such good care of the common shareholder. For doing nothing more than holding on to my shares. It was easy with BRK to do so, lesser with FFH and certainly even lesser with LVLT. 

 

Going forward, I don't certainly expect a repeat of 2014 in most(if any) years. But I do look forward to reporting my 10 year performance in the year 2019. My performance is the same as BRK's performance. Hope to share that magic of BRK sans the noise of the great recession. There is a real lollapalooza going on over there.

[DanielGMask]

Final number for me: +17.72%

[innerscorecard]

The final numbers are in. Dollar-weighted returns (XIRR) of 54.33% annualized for 2014 (38.55% annualized for partial 2013 for comparison - not managing an investment portfolio before then.)

 

High concentration and leverage. Pretty much always fully invested.

 

I was earlier above 60%, which is what I reported in the poll at the time the question was asked, but unfortunately, I can't un-vote.

 

I don't expect to ever have as great as year, and I would be thrilled to simply not lose purchasing power next year, as that's my actual #1 goal.