2011 results

[gaf63]

big mistake in not selling LVLT when it was up in mid 2's,

biggest mistake: buying it in the first place

 

Hah!  I'm just waiting for some poster who shall remain unnamed to jump all over you for that one!

Yeh, the unnamed did cross my mind when  I was writing, as to LVLT, if there are no improvements in cash flow in the next few qtrs. I'll have to bite the bullet and move on

[Uccmal]

Uccmal - just a query to you; why do you still go to work? Seems to me that you can retire just like Eric.

 

Two or three reasons:

1) not enough money - spent alot on the house.  cant generate consistent enough returns yet to cover all fixed costs of two little kids, cars, daycare, mortgage.

2) not as savvy as Eric

3) I am kind of an eclectic.  Investing full time would just drive me nuts.  I need the diversion.  I took an extended leave over a year ago after my daughter was born and made myself crazy. 

4) As per 3) i would probably trade myself into oblivion.  Buffett alludes to behaviour and knowing yourself as being more important than outright smarts.  He has been proven right over and over again.  Now, Eventually I would like to follow my heart more, but right now I cannot figure where it wants to go.

 

Al.

[Uccmal]

big mistake in not selling LVLT when it was up in mid 2's,

biggest mistake: buying it in the first place

 

Hah!  I'm just waiting for some poster who shall remain unnamed to jump all over you for that one!

Yeh, the unnamed did cross my mind when  I was writing, as to LVLT, if there are no improvements in cash flow in the next few qtrs. I'll have to bite the bullet and move on

 

Strikes me Lvlt is going to get slaughtered by White Space.

[twacowfca]

Al, one generally has to have an established relationship with a big institution to purchase illiquid derivatives.  These can bite both ways, and the institution will want to know the customer very well and know that the customer is sophisticated enough to fully understand all risks. 

 

It's almost always better to trade in established markets that provide liquidity when needed.  :)

[Kraven]

big mistake in not selling LVLT when it was up in mid 2's,

biggest mistake: buying it in the first place

 

Hah!  I'm just waiting for some poster who shall remain unnamed to jump all over you for that one!

 

I am not sure I understand why.  I thought LVLT was a guaranteed 10 bagger.

[ERICOPOLY]

>Two or three reasons:

1) not enough money - spent alot on the house.  cant generate consistent enough returns yet to cover all fixed costs of two little kids, cars, daycare, mortgage.

2) not as savvy as Eric

3) I am kind of an eclectic

 

Thanks for sharing - wish you all the best.

 

Not as savvy as me, that's pretty funny Al.  I may evolve to a 2 trick pony once BAC recovers.

 

Retirement gets a lot easier if you have enough where you're only living on 4-5% even when your portfolio is down by 50%.  Buffett can most easily ride out volatility because he'd need to be down 99.99+% before he had to worry about the things the rest of us worry about.  Stated differently, you become a better tempered investor as you get richer because the losses are less significant (it's non-essential money that you lose to volatility).

 

Living in Australia will make my life easier because the US markets will be closed when I wake up in the morning, and won't open until after I go to sleep.

[Guest longinvestor]

 

 

Hah!  I'm just waiting for some poster who shall remain unnamed to jump all over you for that one!

 

I am not sure I understand why.  I thought LVLT was a guaranteed 10 bagger.

 

Depends on two ?'s investors are supposed to ask and answer before investing; @ "how much" and in "how long". Those that did control this company today. Those that did'nt have developed a life habit of suffering on message boards. LVLT is a humbling lesson of what investing is (& not). And if it makes it thru all this, it is one of a kind, like none other.

[Baoxiaodao]

Hi baoxiaodao, 

 

Common stock holdings in approximate size order:

ffh

 

ssw ~ 15%, will be tendering some early next week - credit jeast, Irwin Michael - 3+ yrs

 

others <10%

cfx:t. - had for 2.5 yrs.  sell some when it reaches16-17, buy back below 12

ylo.pr.d - perpetual preferreds - face value 25- position will be covered by dividens within 1.5 years.

credit to ubuy2wron, ffhwatcher, and rstuzu.

rbs.pr.p - rbs perpetual prefs. dividend in suspension until April - no sign dividend will not be restarted - credit dcollon

mtl - maturing position assured dividend.

bac and wfc tarp warrants

wfc common

mfc common - stuck in RSPs - dont want to sell at a loss

bce - bought after merger blowout - double in 3 yrs with dividend

bby common - small pos.

 

A smattering of other tiny positions.  There is nothing above the board has not discussed.

 

This years results were so bad due at least 50% to RIM.  One of my major goals is to practice patience when buying.  I am starting to learn that cheap stocks dont require immediate action and can often be had for cheaper after the knife has fallen.  Virtually all of my major mistakes have been from acting too fast. 

 

Nothing fancy except the leaps.

 

Thanks, that is what I was looking for. I bought SSW for 9 accounts and tendered those 99 shares in each account. I would definitely look at others and ask anything I do not understand.

[Baoxiaodao]

Hi UCC, I looked at YLO-D and to be honest I have no clue how to analyze this investment? Could you please elaborate so that I can get started?

 

And just curious, why YOL-D instead of other series? I searched the board using yellow meida, but nothing turned up. That is why I ask here.

 

Thanks in advance!

[Ross812]

I didn't have time yesterday to write about 2011. I was down 16%.

 

Bank of America warrants and LEAPS really hurt me in my IRA account. My largest holding (30%),  Bidvest was down 8% due to the SA Rand being off 23% vs the Dollar. I really expected the dollar to start weakening due to quantitative easing. There is always 2012... I would have gotten killed, but I had a lot off cash going into the crash in September and was able to buy a lot of BACpL, and tripled my exposure to Petrobakken, and bought JEF.

 

Does anyone have some advice on holding BAC preferred shares in addition to LEAPS and warrants? I have about 4% in warrants 2% in leaps and 18% in preferred shares right now. I think BACpL is worth $1000 a share if BAC doesn't go bankrupt, but I still have 24% of my money tied up in BAC... The preferred shares are paying 9% right now which adds contribution free cash in the roth. 

 

 

 

     

[Uccmal]

yellow, try this: http://www.cornerofberkshireandfairfax.ca/forum/index.php?topic=5342.0

 

essentially, the d's and c's (i think) cannot be converted and are cumulative.  The debentures are convertible and will be converted in March.

[returnonmycapital]

Ross,

 

A while back, I wrote about my foray into BAC warrants and the series L preferreds. It looks like you were doing the same:

 

From "BAC-WT - Bank of America Warrants" (Nov. 3, 2011)

 

"I have bought BAC wts (class A) with 13.30 strike at an average of 2.75. I have also bought BAC pfd (series L) at an average price of 750 (yield 9.67%). Per $1,000 par of pfd., I have bought 75 wts (1,000 / 13.3 = 75). This has created a reasonably low strike convertible pfd security. My total cost per $1,000 par is 956.25 which earns close to 7.6% yield. My assumption is that the pfd. will eventually trade at par and the business will eventually earn 1% on assets of about $150 - $200 per share (putting the common fair value at about $20, imo, given interest rates today). 

 

The wts currently trade at about 45% premium to the stock. I expect that premium to decline approx. 6% per annum. Netting out the premium decay fromt the pfd dividend receivable gives a net 1.6% yield. Which gives a 1% yield advantage over the common. Should dividends increase on the commn, the wt strike will decline $1 for $1 (unlike WFC wts). This hedges, to some extent, the wt's premium decay.

 

If the pfd is money-good and eventually trades at par, this operation should result in profit, even if the wts expire worthless. If you leverage the pfd., with an attractive spread and it proves to be money-good and the common gets through the strike price by 2019, this should offer a superior operation to holding the common. And finally, because the series L pfd is already a perpetual convertible, should the common later rise well past $20, you might get some extra kick from the pfd rising through par. Example, given a $750 pfd cost, option breakeven on the common is $37.50 per share.

 

And, while not wanting to dwell on the negatives, it's no small thing to have even marginally better terms to the common in any prospective liquidation scenario."

 

 

I would add that the premium on the BAC class A warrants has gone down to about 36% over the last month or so. The premium decay over the remaining life of the warrant is significantly lower than when I initially posted, increasing the net yield on the combined security. I have been adding to the position recently.

[txlaw]

This is interesting.  If 2011 had five extra days added to it, I do believe I'd be flat or even up for the year (as of today). 

 

Just goes to show how little meaning these annual figures have in isolation.  Better to look at a track record over time.

[ERICOPOLY]

I was up 8% in the first week of 2011, but I ended up having a terrible year.

 

This year I'm also up 8% again.  Hopefully it's not a repeat.

 

 

[cwericb]

Taxlaw nearly took the words out of my mouth. In the first trading day of 2012 I was up by 50% of what I was up for the previous 12 months. Unfortunately not the 8% Ericopoly was up. Sure would be nice if this was the shape of things to come...

[Valuebo]

My IRR since 2011 is also up to 18% from 8.2% in just 4 days and I bet a lot of members can say the same. Indeed, it doesn't say much at all.

[ERICOPOLY]

There's nothing quite like recovering lost ground and feeling like it's a gain.

[onyx1]

This is interesting.  If 2011 had five extra days added to it, I do believe I'd be flat or even up for the year (as of today). 

 

Just goes to show how little meaning these annual figures have in isolation.  Better to look at a track record over time.

 

Agreed.  Long term track records smooth out the effects of year end tax selling.

[txlaw]

There's nothing quite like recovering lost ground and feeling like it's a gain.

 

It is nice.  But the last couple of years have been good for training myself not to get too excited at temporary paper gains or too depressed at temporary paper losses. 

 

Now, I only really get excited when I have an opportunity to deploy at crazy cheap price levels.  Even selling at fair value after a huge gain doesn't do it for me because I always wonder whether I will be missing out on upside due to Mr. Market's irrational exuberance.

[racemize]

My IRR since 2011 is also up to 18% from 8.2% in just 4 days and I bet a lot of members can say the same. Indeed, it doesn't say much at all.

 

yep, my full history IRR jumped from 13.8% to near 20% (though I only have 1.5 years on it thus far).

[merkhet]

Full-year results were about +2.6% or so.  Avoided the selldown during the summer, but Bank of America was definitely a drag on results.

[Baoxiaodao]

Ross,

 

A while back, I wrote about my foray into BAC warrants and the series L preferreds. It looks like you were doing the same:

 

From "BAC-WT - Bank of America Warrants" (Nov. 3, 2011)

 

"I have bought BAC wts (class A) with 13.30 strike at an average of 2.75. I have also bought BAC pfd (series L) at an average price of 750 (yield 9.67%). Per $1,000 par of pfd., I have bought 75 wts (1,000 / 13.3 = 75). This has created a reasonably low strike convertible pfd security. My total cost per $1,000 par is 956.25 which earns close to 7.6% yield. My assumption is that the pfd. will eventually trade at par and the business will eventually earn 1% on assets of about $150 - $200 per share (putting the common fair value at about $20, imo, given interest rates today). 

 

The wts currently trade at about 45% premium to the stock. I expect that premium to decline approx. 6% per annum. Netting out the premium decay fromt the pfd dividend receivable gives a net 1.6% yield. Which gives a 1% yield advantage over the common. Should dividends increase on the commn, the wt strike will decline $1 for $1 (unlike WFC wts). This hedges, to some extent, the wt's premium decay.

 

If the pfd is money-good and eventually trades at par, this operation should result in profit, even if the wts expire worthless. If you leverage the pfd., with an attractive spread and it proves to be money-good and the common gets through the strike price by 2019, this should offer a superior operation to holding the common. And finally, because the series L pfd is already a perpetual convertible, should the common later rise well past $20, you might get some extra kick from the pfd rising through par. Example, given a $750 pfd cost, option breakeven on the common is $37.50 per share.

 

And, while not wanting to dwell on the negatives, it's no small thing to have even marginally better terms to the common in any prospective liquidation scenario."

 

 

I would add that the premium on the BAC class A warrants has gone down to about 36% over the last month or so. The premium decay over the remaining life of the warrant is significantly lower than when I initially posted, increasing the net yield on the combined security. I have been adding to the position recently.

 

I am totally in awe. I think I am gonna read this at least 5 times to understand it. Thanks for posting!!!

[Valuebo]

Guys, how do you measure performance against your benchmark(s)? I'm looking to add a chart in my excelfile and need accurate data including dividends.

 

I was thinking of tracking against an S&P 500 ETF that accumulates dividends but I can't seem to find any.  :-X

Good volume and accurate tracking preferred.

 

Anyone got an idea? TIA

[Sullivcd]

I just go to the source to find the total return number:

 

http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--

[racemize]

I just go to the source to find the total return number:

 

http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--

 

For those of you using google spreadsheets, this will pull the relevant value automatically:

 

=(Index(ImportHtml("http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--", "table", 7),4,7))