SBFB Index

[Crip1]

Through the years there have been literally thousands, perhaps tens of thousands of postings on this board and its MSN predecessor. The topics have run the gamut from various investing ideas (pro and con) to the philosophical, macro/micro economic discussions and the occasional sports reference as well. While there have been differences of opinion, one constant is that all members fees that this board has produced some of the more rational and insightful investing discussion to be had on the web. Since we all know that numbers will tell the story the next question becomes how do we quantify this? If one describes a good baseball player the questions are invariably asked “What is his batting average? How many Home Runs does he have? What’s his ERA?”, etc. I have a proposal to help quantify to the collective acumen of this board.

 

My thought is to establish the SBFB (Sanj’s Berkshire-Fairfax Board) Index to track our “performance” versus the various indexes of the world. The name is not really catchy so if someone of the marketing ilk can come up with something else, I would be well open to any suggestions. Here are my initial thoughts:

 

• Poll the board to establish our initial top 10 personal holdings. This seems relatively simple in that we would have members indicate their top 3 holdings in their personal portfolios and the 10 companies with the most “votes” would constitute the initial portfolio. This would only include long positions excluding shorts, leaps, calls, puts, etc. The reason for excluding these is that when comparing against the indexes, since indexes cannot utilize these methods, allowing the SBFB to do so would provide an unfair comparative advantage. Once all of the “votes” were in, I would publish the results and establish an initial portfolio which would consist of these 10 holdings each of which would be 10% of the portfolio.

• Quarterly, I would repeat the voting process gathering a new “top 10”. Should there be any changes to our top 10, I would “sell” the stocks that did not make the new list and “buy” the new entrants (effectively keeping a zero cash position).

• For any dividends earned, I could either assume that they are reinvested in the applicable stock or I could hold the cash until the next quarter and invest that cash in any new holdings. I am undecided on how to do this and would welcome any opinions.

 

In truth, this index would likely under-represent our cumulative returns for a variety of reasons. For starters, it does not lend itself to special situations where several board members are able to generate solid ST profits. As well, the lack of puts, calls, leaps, etc would presumably cause the index to underperform the portfolios of those of us who effectively use these methods as well. Finally, the dynamic nature of markets suggest that rebalancing quarterly will cause us to miss opportunities. Example, as many of us loaded up on Wells Fargo in the Feb/March timeframe, if we re-balanced on April 1, the index may have ended up buying Wells at a significantly higher price than did the board members. This is certainly important and does suggest that the sum total of our own portfolios will be better than the index. We could re-balance more often, but that would be more work and the goal of this is not so much to outstanding returns, but to roughly approximate the acumen of this board. And, importantly, if the SBFB shows that it outperforms the various indexes, we can argue effectively that the sum total of our portfolios likely outperforms by a wider margin.

 

So…the question is simple…if asked, would you be willing to share your top three holdings quarterly with me? It would amount to simply sending your choices into an e-mail box. I’ll do the tabulation and will publish the results. Also, if you have any other ideas, please feel free to let me know (although, I reserve the right to not use an idea if it creates more work for me!!!!)

 

Thanks all.

 

-Crip

 

[Crip1]

All:

 

Just bringing this to the top. Please let me know, in addition to the voting, whether or not you feel that this is worthwhile or if you have any other thoughts on how to put this together.

 

-Crip

[woodstove]

My only thought is that Berkshire and Fairfax maybe should be givens.  They are my #1 and #2, so little additional info comes from me telling my top 3.  Better maybe to look at my top 5, discard Berkshire & Fairfax, if trying to get any ideas from my portfolio.  Likely true of others too.

[oldye]

How would this add value to the discussions on this board? 

[Redskin212]

Crip,

 

very interesting idea, which I fully support.  I am most interested to see if the top 10 holdings as report reflect the amount of talk/discussion on the board.

 

Redskin

[Crip1]

How would this add value to the discussions on this board? 

 

 

Oldye,

 

I am not sure that it would add substantial content to this board to be honest, but from my perspective, it would be worthwhile for the following reasons:

 

1) The presumption is that boardmembers here are "better than the average investors" but it has never been quantified. Perhaps it is me, but I would really like to be able to quantitatively prove (or disprove) this presumption.

2) It would be interesting to see changes in the overall makeup of the SBFB Index. This may show a shifting between industry groups (financials to consumer stocks to services to oil/gas, etc)

3) Selfishly, there would be an element of "fun" to see where my personal holdings compare to the rest of the board.

 

Of course, it would take a little while before we could get any meaningful long term data, but it would be interesting none the less.

 

My only thought is that Berkshire and Fairfax maybe should be givens.  They are my #1 and #2, so little additional info comes from me telling my top 3.  Better maybe to look at my top 5, discard Berkshire & Fairfax, if trying to get any ideas from my portfolio.  Likely true of others too.

 

Woodstove...perhaps a top 5 list would yield a better result...not really sure. I do not think that we can dismiss FFH and BRK, though I am pretty sure that they would both be on the list each quarter. However, either of these companies were to drop off the list, that would strongly suggest that the  one which dropped off was over-priced.

 

-Crip

[SharperDingaan]

 

Makes a lot of sense but small steps first.

 

Poll for the direction of the major macro variables (inflation, currency, economy, etc) 6 months out - & divide by region: NA, Asia, Europe, etc.

 

SD