2013 – A Game of Two Halves

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AIM stocks, Alternative Asset Opportunities, Asta Funding, benchmarking, correlation, fear and greed, hedge funds, home bias investing, KWG Kommunale Wohnen, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, Saga Furs, Tetragon Financial Group, Titanium Asset Management, US Oil & Gas

Yup, it’s that time of year again… [For reference, here’s my mid-year 2013 performance report, plus my FY-2012 report]. Right off the bat, I have to admit assessing annual performance isn’t my most favourite of activities (as I’ll explain). It also reminds me how easily our (personal) fear & greed equation can magically transform itself as we finish an old year & head into a new one. While most traders tend to start a new year cautiously, investors often set out brimming with over-confidence – which can prove pretty hazardous…

The UK’s AIM market, for example, has enjoyed significantly positive returns in 14 of its last 18 Januaries. This annual love-fest is even more remarkable when you realize the AIM index has declined 17% since its 1995 inception. [Growth and value investors, take note!] My favourite muppets provide a more ludicrous example: Shareholders of US Oil & Gas (USOP:G4) (I’m presuming no new suckers are buying at this point) hailed the new year by immediately buying/running up the price 60% from its yr-end close! Sure, hope springs eternal…but with most USOP investors having lost 95%+ of their investment to date, this kind of new year exuberance is wildly irrational.

Thinking about & tracking your stocks (& portfolio) on some kind of calendar basis is yet another fixated version of tracking individual stock gains/losses. And that’s how fear & greed grabs hold & encourages you to play the ‘if…‘ game. I’ve already recommended you Forget Your Purchase Price – now I recommend forgetting your Year-to-Date Gains. Free yourself of those deadly anchors, and you’ll be forced instead to look afresh at your holdings every single day. For each stock, that’s an exercise in assessing upside potential (i.e. current share price vs. your latest estimate of intrinsic value), and then weighing that reward against the level & range of risk(s) involved. Which boils down to one simple question for each of your portfolio holdings:  Should I buy, sell or hold this stock today? And your cumulative or calendar gains/losses on a stock are irrelevant to that question – no matter how small, large or goddamn painful they might be…

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Mid-Year 2013 – Performance Update

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Alternative Asset Opportunities, Avangardco, checklists, CLOs, correlation, European Islamic Investment Bank, FBD Holdings, Fortress Investment Group, German property, home bias investing, KWG Kommunale Wohnen, Petroneft Resources, portfolio allocation, portfolio performance, quantitative easing, Richland Resources, risk aversion, Sirius Real Estate, Tetragon Financial Group

I remain (somewhat) uncomfortable with performance reviews. Inevitably, they produce a pretty meaningless snapshot…but we just can’t help ourselves, eh? 😉 [I covered this whole topic in greater depth here, in my 2012 Performance Review, so that may be worth another look]. OK, once more unto the breach, dear friends, once more…

Let’s first check how the indices performed in H1-2013:

The performance of Ireland & the UK nicely supports my theory that the northern periphery (inc. Scandinavia – lots of interesting stocks there right now) offers some of the best (& lower-risk) plays on Europe. Then we have the US, which continues to demonstrate how much further along it is (vs. Europe) in the cycle – as Bernanke reminded the market recently, to its (feigned?) consternation! [And to the genuine consternation of the ECB & BoE – oh boy, there’s going to be plenty of playing chicken, on all sides, in the months & year to come]. I’m profoundly suspicious of the US market now – it’s not that rising bond yields can cause much damage, they’ll obviously remain low in absolute terms for a v long time. But the market’s a discounting machine – when buying stocks gets easy & the economic outlook starts to look rosy for the average investor, that’s when things turn dangerous: Because how much of that’s already been priced in? Too many times, this scenario leaves you at break-even for a couple of years (if you’re lucky), or much worse…

And if you think this time is different – well, I actually agree, but not in a good way! There’s no free lunch – you can’t just print your way to prosperity & expect to escape scot-free, there are always (unpredictable) consequences. So, has that been priced in also..?

Heading Into 2013…

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Alternative Asset Opportunities, Argo Group, Asta Funding, Avangardco, correlation, EIIB, FBD Holdings, Fortress Investment Group, JPMorgan Russian Securities, KWG Kommunale Wohnen, Livermore Investments, Margin of Safety, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, shareholder activism, Sirius Real Estate, Total Produce, Trinity Biotech, Universe Group, Vietnam Opportunity Fund

There was a gratifyingly large surge of page views yesterday checking in on my 2012 Portfolio Performance! I’m suitably humbled by the attention – gulp, makes me wonder what challenges 2013 will throw up?! Hopefully the blog’s sparked a few decent ideas & stock picks for you in the last year or so, and you’re pleased with the progress of your own portfolio in 2012. It’s certainly been rewarding for me – most obviously in terms of improving my investment focus & analysis, but also in terms of the constant stream of questions, challenges, feedback, gossip, ideas, etc. from blog readers.

As a result, I now feel somewhat honour-bound to cough up some kind of 2013 Portfolio. I should immediately flag that some of you may find this a bit of a cop-out… 😦 But, in my defence, let me say:

– The start of a new year really means little to me, I don’t suddenly discover I have whole new batches of stocks to buy & sell!

– I rarely write about stocks I don’t own. This is pretty deliberate – my intention was never to simply fill up blank space with an idea each day/each week. I think people can really only judge your level of analysis & conviction against whether you actually own a stock – and, of course, by how much stock you own!

– I also don’t write about stocks I track, or discard, very much. First, mostly because they’re far too numerous! Second, I’m not sure I’d always manage a proper (in-depth) write-up about such stock(s). And third, I’ve sometimes tracked stocks every single day for literally years on end before buying – how often do you want to hear about them?!

2012 – Aaah, How Was It For You..?

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alternative assets, Argentina, Argo Group, Avangardco, Baker's Dozen, diversification, dividend yield, EIIB, frontier markets, hedge funds, home bias investing, Irish shares, JPMorgan Russian Securities, NAV discount, Petroneft Resources, portfolio allocation, portfolio performance, Renaissance Russia Infrastructure Equities, Richland Resources, Russia, Sirius Real Estate

[Here’s my last performance report, for reference].

OK, just in time, my performance analysis got a bit more sophisticated. It now includes dividends, and is calculated on a weighted average gain basis, so now the impact of larger & smaller portfolio stakes is recognized. I think I’ve tracked any increase/decrease in portfolio holdings pretty well during the year, via Twitter (so plse sign up as a follower!) & blog comments. [No point in having interested readers if I don’t post such relevant info on a timely basis]. This allowed me to calculate an average portfolio stake for each holding, which I think is the best metric to use.

I did, however, stick with my original yr-end 2011 or 2012 write-up prices as a cost base – I didn’t want to drive myself crazy calculating average net purchase prices! However, I know I’ve subsequently added to portfolio holdings at higher & lower prices, so I think that pretty much cancels itself out. It also means I’ve omitted partial profits harvested on certain holdings, so my total return may be marginally understated.

Overall, eyeballing my respective analyses, dividends & portfolio weightings have in total (on a pretty even split) added about 2-3% to my annual return. The pretty low contribution from dividends may surprise you, but don’t forget I’m none too enamoured with them… See here, here & here. As far as I’m concerned, if you’re impressed enough with a stock’s valuation & prospects to actually buy it, surely you’d prefer to see it compound its earnings?! Only a third of my holdings pay a dividend.

2012 Baker’s Dozen – More Pie!

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Argo Group, Baker's Dozen, binary outcomes, catalyst, Foo Fighters, FTSE 100, FTSE Eurotop 100, Granville, Hamlet, hedge funds, inflation, ISEQ, junior resource stocks, Livermore Investments, performance appraisal, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, risk management, S&P 500

Righto, another quarter’s done, time to check in on performance again. First, my Q1 and H1 performance reviews will provide you with some handy background & context. Second, it’s always fun to pose some questions before hitting the stats:

– Of the US/Europe/UK/Ireland, which do you think has had the worst year to date?

– And the best?

– So, did you predict your best stock winner year to date?

– Ever notice how much easier it is to predict your worst stock loser?

– Is there any lesson, or story, attached to your losses?

– Why has the average hedge fund under-performed so badly this year?

Well, hopefully I cover some/all of those questions here..!

Hitting The Century (VII – Natural Resources)

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agri-business, BP, bubbles, correlation, garbage stocks, gold, Howard Marks, idiots, inflation, junior resource stocks, miners, natural resource stocks, oil, Petroneft Resources, QE, quantitative easing, Richland Resources, silver, Statoil, Total

In my recent Inflation post, I elaborated on my conclusion that, contrary to widespread (and my prior) opinion, inflation was likely to prove a fairly distant threat. Despite the smoke rising from the bloody printing presses… And despite the Fed since confirming their long-expected QE III – or should I say: QE Forever, QE Infinity, QE God Fucking Save Us… Take your pick! You know, the mind boggles – how/why on earth does the Fed confidently expect Agency MBS purchases to smoothly flow through into improved labour conditions?!

No real need to revisit my post, just read Howard Marks’ latest instead, which came out a few days later. In his memo, he covers much of the same ground – probably in a far better & more relentless manner… [And apologies if I ramble on: Remember, with this series, my intention isn’t to necessarily write about specific stocks here, old or new. Rather it’s to give you some deeper insight into the thoughts, logic and pros & cons underlying each of my allocations].

H1 2012 Performance!

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Argo Group, Avangardco, Baker's Dozen, Irish Stock Exchange, Irish value investing, natural resource stocks, Petroneft Resources, portfolio allocation, portfolio performance, Richland Resources, Russia, The Office

OK, it’s performance time. For reference, here’s a link back to my Q1 2012 review.

If I told you European markets were actually positive in the first half of 2012, would you believe me?! Actually, it’s true. Wow, doesn’t feel like it, eh..? Hmm, I think we all know that’s just the tip of the iceberg in terms of the tricks the media & your own mind/emotions play on you. Say what you like about Microsoft & Excel, spreadsheets are your only hope of separating fact from fiction, and analysis from emotion (as for Powerpoint, sigh…).

Some notes first: For simplicity, an equal weighting is assumed for all stocks. No attempt’s made to calculate any FX gains/losses either – which would depend on your base currency anyway. If a stock wasn’t held/written-up as of year-end 2011, the price noted at the time of my investment writeup is used instead. Similarly, if a stock was sold (marked**) before end-June, the price noted when I reported the sale (via blog post, comment and/or tweet) is used. Right, so how did we do in H1 2012?

Let’s Talk About Risk, Baby…

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portfolio allocation, portfolio performance, Richland Resources, risk management, Salt-n-Pepa, technical analysis, trader, value investing

(All props first to Salt-n-Pepa).

In early-Feb, I published my first write-up on Richland Resources (RLD:LN), flagging an Upside Potential of 137%. Three weeks later, I was looking at a 65% gain on the share price. This presented an interesting dilemma (would that we could all enjoy more of these..!). But it seemed strange to be contemplating a sale so soon after diving in. Aren’t I a long-term holder, like most value investors..?! Well, ideally…but I use price, technicals and risk management to scale in and out of my positions.

For example, picture a GBP 100p stock I recommend/hold, and which I believe has a 125% Upside Potential. Sweet! With this kind of upside, I might have something like a 5% portfolio allocation. Shortly after, the stock shoots up 75% – so what do I do?! Well, in value investing world this is entirely expected (value will out, etc…) and I should definitely just sit tight. And sure I’ve got another 50% of value to realize…buy and hold, baby! Of course, in the real world, the answer may be a little different…

Richland Resources Refresh

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Bernard Olivier, Dar Es Salaam, dilution, Gemfields, Ian Harebottle, JORC, Petra Diamonds, Richland Resources, sapphires, Special Mining License, tanzanite, technical analysis, tsavorite, Twitter

Please see my previous Richland Resources (RLD:LN) blog posts, here and here.

Well, RLD’s price action’s certainly been hectic since I last wrote about this stock in early Feb! One of the stock highlights I mentioned was the share price chart. While I was already fundamentally bullish, I was heartened by the fact the share price was threatening to break out of a long established trading range. This was capped at GBP 10.5p, and I speculated a break of this level might quickly lead to GBP 16.5p. Sure enough, it did, and in little more than three weeks..!

This prompted me to trim my position from an expanded 2.7% back down to 1.8%. I reported this at the time on my blog comments, and Twitter, so please be sure to sign up for one, or both, if you want to keep track of any specific stocks. Note I generally don’t do a new stock write-up until I have substantial new info/commentary to share (and I know you’re tracking news releases just like I am). Soon as I tweeted, Richard Beddard popped up to ask ‘Pourquoi? It sounded so glittery!‘ Haha, a bit tongue in cheek, methinks… Well, the quick 65% gain was pretty glittery too! I couldn’t resist taking it on a portion of my holding (btw I hope to write more shortly about this whole subject).

Trinity Biotech, Be My Valentine… <3

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Adriana Lima, Clearstream Technologies, Ex-Cash Ratios, FBD Holdings, intrinsic value, Owner-Operator, Price/Sales, relative value, Richland Resources, Trinity Biotech, Valentine's Day, value investing

To celebrate Valentine’s Day, I thought it was only fitting that I write about my favourite stock… For some of us, Valentine’s is still about love and constancy. (Not that the Valentine’s ‘industry’ agrees – much as I enjoyed this ad, among others, the increasingly strident commercial ‘come-on’ that a gift guarantees sex seems far too crass for all concerned). So, I’m not going to fall for some hot young tramp like Richland Resources (RLD:LN)…

Instead, I wanted to revisit my fondest love, Trinity Biotech (TRIB:US). How did she win my heart? Well, she’s never let me down, about 40% of her market cap consists of cash, I currently have a 265% gain on my average entry price, I see 30% upside from the current price (with a secondary price target that offers 68% upside), and it’s my largest portfolio position at 7.6%!