2016 Performance Review - Five Full Years Beating Buffett and Crushing The Market
The above quote from Benjamin Graham is one of my favorites.
It means in the short-term emotion and psychology drive the market. But in the long-term the market - and individual stocks - get judged on how well they've operated and grown over time.
This is great news for us as long-term oriented value investors.
If we can find a few great companies at cheap to fair prices and hold them for the long-term, we'll have great returns over time. Why? Because...
"Time is the friend of the wonderful company, the enemy of the mediocre." Warren Buffett
With this as a backdrop, below is the 2016 performance review.
Also, as noted above I made multiple mistakes in 2013 when calculating my returns. The numbers below - which show the five full years between 2012 and 2016 - are correct.
2016 Performance Review
The hard work, extreme patience, discipline, and low returns from 2014 and 2015 paid off in 2016.
I only bought and recommended three new companies all year for the portfolios I manage and for Press On Research subscribers.
But the companies I still own from 2014 and 2015, combined with the three new recommendations in 2016, produced a fantastic 32.8% return on average in 2016.
Here are the highlights...
- One of the companies I recommended while working at the investment newsletter got bought in 2016.
- Another company I recommended to Press On Research subscribers merged with its parent in 2016.
- Another two Press On Research picks from 2015 more than doubled in 2016.
- None of the 12 total picks I've made for Press On Research were down in 2016.
- At the time of their recommendations, all companies were well below $1 billion in market cap.
- I now own two companies - the two that more than doubled - that are worth more than $1 billion in terms of market cap.
- The average market cap at the time of my 12 recommendations was $246.4 million.
- The average market cap of the 11 companies I still own - not including company that got bought - is now $413.3 million.
Below is the full spreadsheet...
If you'd like to know what the companies are you need to subscribe to Press On Research. And remember Value Investing Journey free subscribers get a 50% discount on a Press On Research subscription. If you're a Press On Research subscriber I'm sending an unedited version of the spreadsheet your way.
What does this mean for cumulative full five-year returns now?
Five Full Years Beating Buffett...
I don't compare myself to Buffett because I want to be the next Buffett. But because everyone knows who he is as he's regarded by most at the best investor ever.
I want to be known as the first Jason Rivera when my career is over. At the end I want to be known as a better investor and capital allocator than Buffett and to produce better returns over time than he has.
At least for now - five full years into my career - I am achieving this lofty goal by beating Buffett when compared to the first five years of his career.
In the first five years of my career I've now produced average - non-compounded - returns of 29.7% each year. Or a total cumulative return of 148.3% over that period.
In the first five years of his career Buffett produced average - non-compounded - returns of 25.4% each year. Or a total cumulative return of 126.9% over that period.
This means in the first five years of our careers I've produced returns 4.3 percentage points better each year than Buffett did in the first five years of his career.
But what does this 4.3 percentage point excess return per year mean in dollar terms over this period?
Assuming we both started with an asset base of $10 million at the beginning of the five-year period I would have grown that $10 million into $36.7 million after five years. Buffett would have turned his investors $10 million into $31 million in that time.
This is why every point of excess returns is so important. And why you need to be aware of any fees charged to your account by your money managers.
Over a long period - or in this case five years - "only" an excess 4.3 percentage points each year would have made investors $5.7 million extra.
Not only am I achieving my lofty goal of beating Buffett through this time, but I'm also crushing the market as well.
And Crushing The Market
From 2012 through 2016 the Dow Jones Index produced a total cumulative return of 37.4% for the five years or 7.5% per year on average.
The S&P 500 produced a 43.2% total return for the five years or 8.6% per year on average.
And the Russell 3000 index - closest thing to a small cap index - produced a 43.5% total return or 8.7% per year on average.
I've produced returns in excess of these indexes by 21%, 21.1%, and 22.2% points each year over these five years.
Assuming a $10 million asset base I would have produced $21.5 million more for investors over this five-year period than the Russell 3000 index would have.
- $36.7 million minus $15.2 million the Russell 3000 would have produced.
I started posting my results publicly in 2012 because this is when I began doing "real", in-depth, investment research and analysis instead of speculating.
Results have been great thus far... Better than I expected... But there's still a lot of work and improvement necessary to continue this.
Other Highlights From 2016
Thanks to sales of How To Value Invest and Press On Research subscribers we continued helping Mhicaella and her family in the Philippines.
The last letter we received from her mother told us that Mhicaella is now in kindergarten. She loves P.E., singing, and drawing, and is learning to read and write so she can begin writing letters to us soon.
Here is a recent picture of Mhicaella...
With your help, some of the things we've been able to help provide for her and her family over the last year are school supplies, medical and dental care, and Christmas gifts for her entire family.
A percentage of all sales of my books, services, and products sold will continue going towards charities like these well into the future. And I plan to expand and sponsor more kids and families in 2017 now that Rivera Holdings is up and running.
Thank you so much for helping with this.
Other highlights from 2016 are:
- Started Rivera Holdings LLC.
- Began raising capital.
- Grew personal connections by an exponential amount due to capital raising efforts.
- Grew from 320 subscribers between Value Investing Journey and Press On Research to now 455 total subscribers between those two services and now also the Rivera Holdings Mailing List.
- Read between 50 and 75 books this year.
- Grew from 720 followers on Twitter as of the beginning of 2016 to 1,008 now.
- Grew from 790 connections on LinkedIn as of the beginning of 2016 to 896 now.
- As mentioned above we continued helping Mhicaella and her family in the Philippines survive and thrive.
- For the first time in three years expanded my circle of competence in terms of industries. I now understand and feel comfortable evaluating three new industries - marinas, hotels, and multifamily real estate.
- Also expanded knowledge and experience into the private equity/investment arena as well.
As mentioned above the patience of the last two years paid off this year in a big way. Going forward I wouldn't expect results to continue this trend.
Due to the still ever rising market and valuations it's become harder to find great cheap companies to buy. I only recommended three companies in 2016 and all those were in the beginning of the year before the market took off again.
Barring a major sell off I expect to add few to no companies again in 2017.
As I've mentioned already mentioned to Press On Research subscribers I will only buy something that meets my ultra-strict criteria. Under no circumstances will I buy something because I haven't bought in a while.
This helps keep us only in great companies and should help us continue producing exceptional returns over time.
No matter what the market continues to do though over time I'm confident we'll continue to beat the market by a wide margin. And continue to compound our wealth over time.
I'm still raising capital for my new investment holding company so if you'd like more information about how you can invest with me and the market-crushing returns I've produced thus far email me at JasonRivera@valueinvestingjourney.com, call me at 605-390-3157, or sign up for the Rivera Holdings mailing list.
As always 2016 wasn't all great news...
Up next will be a post detailing my major failures in 2016.
Here's looking forward to an even bigger and better 2017.
Thanks so much for everyone who's been a part of this journey so far. And please let me know how I can continue to improve things going forward in the comments below.
Chairman, CEO, and Founder of Rivera Holdings LLC