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Corner Market Capital 2016 Annual Letter


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2% outperformance vs the index. In a taxable account, likely no better than the index...

 

Depends on the time frame you examine...if you measured at the beginning of the bull market we were destroying the index.  If you measured half way through this bull market, we were beating it by close to 6% annually.  If you measure in totality after one of the longer bull markets in history, we are modestly ahead.  We haven't gotten any dumber, and the non-PDH and non-cash portion has averaged something like 70% over the last two years...chances are with PDH making up a smaller percentage of the fund now, we are going to outperform dramatically again in the next decade.

 

But for all intents and purposes you are correct!  It is worth noting that our 11 year results were done with an average of nearly 35% cash in the fund over those 11 years.  When the S&P500 drops again by 20-30%, our clients will sleep well at night knowing we are taking advantage of circumstances...and they didn't pay us a cent in those down years. 

 

For our clients in IRA's...they are doing better than the index with all of the benefits of their non-IRA partners...and that small 2% advantage will be greatly to their benefit after 20-30 years.  Cheers!

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I am actually rather concerned by this statetment. The CEO does not not feel PDH's returns will not outperform in the next decade.  Did I misread that? 

 

chances are with PDH making up a smaller percentage of the fund now, we are going to outperform dramatically again in the next decade.

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I am actually rather concerned by this statetment. The CEO does not not feel PDH's returns will not outperform in the next decade.  Did I misread that? 

 

chances are with PDH making up a smaller percentage of the fund now, we are going to outperform dramatically again in the next decade.

 

No, that's not what I meant at all.  I was trying to point out that PDH made up such a huge component of the fund at one point. 

 

We have no control over PDH's stock price...intrinsic value will be ultimately decided by the amount of cash that comes out of the business...that has a longer time frame than the more traditional public-company or fixed-income assets in the fund. 

 

When we invest in the fund, the ideas we put capital into are undervalued by the market and take anywhere from 6 months to 3 years to get back closer to intrinsic value as the market revalues.  The businesses within PDH may take years as they scale up before they are reflected in PDH's intrinsic value.  Cheers!

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