2013 Portfolio Review: Cumulative Two Year Gain of 98.13%!

“Investing is where you find a few great companies and then sit on your ass.” Charlie Munger

Last year I did an entire write-up on my 2012 portfolio review going over how well or poorly all the companies I wrote articles on did after I wrote those articles.  I wrote 15 total articles last year and the companies I bought led the portfolios I manage to a gain of 26.20% last year. I thought it was a pretty good first year after truly dedicating myself to value investing but I knew I could do better after eliminating some of the many mistakes I made in that year and purging the few remaining companies I still owned in those portfolios from when I bought into them when I didn’t know what I was doing.

With the help of the rising market, eliminating some of my mistakes, doing a lot of other stuff instead of investing, and getting some tips from other value investors on companies to buy, the portfolios that I manage have gained 71.93% this year as of today.

% Gain YTD
Core Molding Technologies (CMT) 88.67%
Vivendi (VIVHY) 12.39%
Paradise Inc (PARF) 42.86%
Calloway Nursery (CLWY) 100%
Brazil Fast Food Company (BOBS) 112.63%
Strattec Security (STRT) 75%
Average Gain 71.93%

 

Core Molding Technologies – I bought into this company too early last year when I gave into my impatience after months of not being able to find a company to buy into.  At the end of last year I as sitting on an 8% point loss on my investment.  With the rising market and good continued developments at the company this year it gained 88.67%  I still own CMT.

Vivendi – At year’s end last year I was sitting on a 27% gain.  This year with all the spin offs/sales at the company YTD it has gained another 12.39%.  I still plan to hold onto this company while it continues its transition to a purely media driven company.

Paradise Inc – I bought this company in March (one of only two companies I bought this year) and in that time it has had almost no news either positive or negative so I guess this companies gains of 42.86% are chalked up to the overall rise in the market.  I still own Paradise Inc.

Calloway Nursery – The other company I bought in the calendar year of 2013.  Originally I saw other value investors like OTC Adventures writing about the company and paid no mind to it.  Luckily after talking with Jeff from the Ragnar is a Pirate blog, DTEJD1997,  them sharing some information about how much the companies properties were worth, and doing my own research into the company, I decided to buy into them and I am glad that I finally paid attention to these other investors.  I have sold out of most of my position in this company at an exact double of 100%.  So far it has taken me four months to sell out of that position and it will likely take another two to sell out of the rest of it.  I still like this company and if the price goes back down substantially, all else remaining the same, I may buy back into it again.

Brazil Fast Food Company – I bought into this company last December after Red from the Red Corner Blog recommend that I take a look into them.  Again, I am thankful that Red mentioned them to me.  After a year where the company was gaining a lot after continued good results, the companies owners wanted to take it private at a ridiculous offer, which was then voted down, and the company has continued to rise after that.  The company YTD has gained 112.63%, I still own them, and plan to hold them for the long-term.

Strattec Security Corp – Another company I bought into last December.  This company had very good continued results, had some new positive developments, the stock went up very quickly and I sold out of the entire position up 75% in May.  Since then the company’s stock price has hovered around where I sold it.  Like Calloway, if STRT drops substantially, all else remaining the same, I will buy back into them because I think they are an excellent company.

Last years 26.20% gain + this years 71.93% gain means that the portfolios that I manage have cumulatively gained 98.13% (49.06% on an annual basisin two years since I started to take this seriously.  The portfolios I manage were in 40%-55% cash the entire year and are at the higher end of that range now.  Frankly I was shocked when I saw this years gain and the two-year cumulative gain since I only do an entire portfolio review once a year.

What Does The Above Mean To Me?

Not much honestly.  A two-year track record doesn’t mean much to me since I am a long-term investor.  I was also helped a lot by two recommended companies from other value investors and the overall rise in the market.  Am I glad and excited about this great start yes, but I still have a lot of work to do and at this point I think that I am only an average to above average stock picker as I have a lot of room to improve and was helped a lot by short term luck of the stock market rising a lot.

Some of the Lessons Learned This Year

  1. My extreme patience and discipline gained from dealing with my health issues helps greatly as a long-term, very strict value investor.  I did a lot of stuff not directly related to investing this year because I could only find two companies that I could buy into all year.
  2. You need to keep a record of what you do.  This was such a long year filled with great and not so great things for me that I have recently been telling everyone I only bought one company this year.  I completely forgot about the PARF and BABB articles I wrote at the beginning of this year and that I actually bought into PARF back in March along with CLWY.  Memories are not always what they seem to be.
  3. Sometimes it pays to “steal” investing ideas from others, but you still must do your own research into the company.
  4. Turn over as many rocks as possible.  While I only invested in two companies this year I have researched hundreds if not thousands of other companies and have built up a watch list of around 20 companies.  When those companies stock prices go down I will be ready to potentially buy some of them with the cash I have built up and the knowledge I have gained of those companies.
  5. Starting a business is very hard.  This is my biggest failure of the year by far and one that I hope to rectify at some point in the future.  The business my brother and I started was a complete failure from the point of gaining customers and revenue.  At this point we are not doing anything at all with the company as we overestimated the demand in our area for our product.  We learned a lot of lessons from this and we hope to start a successful business in the future.
  6. Writing a book is very hard.  Most of my year (the better part of 10 months) was spent writing, editing, researching, etc for the book.  It was well worth it as it has provided some for my family, for two needy families Christmas presents, I learned an enormous amount, and it has hopefully helped newer investors learn this craft faster.
  7. It obviously pays to buy into a few great companies and then sit on your ass and be patient.

Goals For This Year

  1. Continue to learn something every day.
  2. Improve in some way every day.
  3. Turn over more rocks.
  4. Read more.
  5. Write more.

I hope you all had a great year, thank you all so much for all the conversations, reading this blog, buying my book, and I look forward to talking with you all more and getting back to writing more articles for the blog in this coming new year.

 

I Got Interviewed About Core Molding Technologies By MergerMarket; A Part Of The Financial Times Network

Mergermarket Mark.jpg                            Visit mergermarket.com

I Got Interviewed About Core Molding Technologies By MergerMarket; A Part Of The Financial Times Network

Directly below is the link to the article where I got interviewed about Core Molding Technologies by MergerMarket; a part of The Financial Times network. The original PDF can be viewed in the following link.  Interviewed By MergerMarket About Core Molding_09.23.13

Tying Up Loose Ends Part 2: Site Updates, Portfolio Update, and Updates On Companies I Own

Tying Up Loose Ends Part 2: Site Updates, Portfolio Update, and Updates On Companies I Own

I have updated the site for the first time in months and today it is the portfolios turn. Over the weekend I updated the Translation Page/Traducción de página/صفحة ترجمة/翻译页面/Übersetzung Seite/翻訳ページ/번역 페이지, and the Recommended Value Investment Reading and Viewing with updated information and sites.  I also combined, and then deleted, the Helpful Links page with the Recommended Value Investment Reading and Viewing page because a lot of the information was redundant.

For the time being the portfolio below is based on the portfolios that I manage.  Earlier this year I liquidated my personal account to fund the start-up of me and my brothers business, pay off some bills, go on a trip for the first time in 10 years, and save money for me and my wife’s baby that is due in late October.  I am going to start building the funds in my personal portfolio back up again as soon as possible

092313_0142_1.png

Cash – Approximately 40% of portfolio.

Calloway Nursery, CLWY – Approximately 19% of portfolio.  I have a sell order pending for this company now due to it rising close to my estimate of its intrinsic value so the above chart could change if my sell orders are filled.  Up 90% as of today since I bought them in March.

Brazil Fast Food Company, BOBS – Approximately 14% of portfolio. First article I wrote about them can be viewed here, second article can be viewed here.  As of today up 109% since buying them in December.

Vivendi, VIVHY – Approximately 11% of porftolio. First article I wrote about them can be viewed here.  As of today up 32% since buying into them in June of 2012.  The following two links are recent updates about the company and its plans.  Vivendi is still thinking about splitting the company further after the sale of Activision Blizzard goes through.  The sale of Activision Blizzard has been put on hold by court in Delaware.

Paradise Inc, PARF – Approximately 10% of portfolio.  First article I wrote about them can be viewed here, second article can be viewed here.  As of today the position is about even since buying in March.

Core Molding Technologies, CMT – Approximately 5% of portfolio. First article I wrote about them can be viewed here.  As of today up 27% since buying into them in August of 2012.  The company has won multiple awards in recent months for being an excellent supplier and has also added significant additional business with Volvo.

As you can see from the portfolio above I have made some changes in the portfolio since my last update adding Calloway Nursery and selling Strattec and Main Street Capital.  I sold Strattec up nearly 75% since buying into them in December because they rose very fast to the high-end of my estimated value for them.  Will possibly buy back into them again if their price falls because I still think they are an excellent company.  I sold Main Street Capital up 65% due to the liquidation of my personal portfolio, which is the only place I held it, due to the reasons listed above.

The Float Of The Companies I Own

The Float Of The Companies I Own

Originally I was planning on evaluating the float of every company I have written an article on but decided to just focus on the companies whose stock I currently own.  Below I am going to give you an example of the full analysis on one company and then just do an overview and chart of the rest of the companies as the calculations are all the same.

Brazil Fast Food Company (BOBS)

All numbers for BOBS are in $R million unless otherwise noted.

  • Financial Assets: Cash and cash equivalents of 28.4+prepaid expenses of 1.2+advance to suppliers+deferred tax assets net of 6.8=38.5
  • Operating Assets: All other assets such as goodwill, IA, AR, inventories, etc of 89.3.
  • Total Assets=127.8.

Liabilities

  • Equity of 38.3
  • Debt of 21
  • Float-Accounts payable & accrued expenses of 9.7+payroll and related accounts 6.7+taxes 4.6+deferred income tax 0.2+current portion of deferred income 2.5+current portion of contingencies and reassessed taxes 2.1+other current liabilities 0.8+deferred income 2.4+long term contingencies and reassessed taxes 17.9+other liabilities 1.2=float of 48.1

Total liabilities are 69.4

Float/operating assets=53.86%.  BOBS float is supporting 53.86% of operating assets meaning that BOBS float is not completely free.  The float being completely free would mean that the company’s operations are being operated generally by completely free money if the ratio was over 100% and the float is costless.  A situation where float is costless is when an insurance company is earning an underwriting profit.  BOBS still has a pretty good portion of its OA operated by float, as you will see in the chart below, which is always a good thing.

Pretax profits/total assets=ROA

  • 17.4/127.8=13.62%

Pretax profits/ (total assets-float) =levered ROA

17.4/79.7=21.83%

BOBS MAIN CMT STRT VIVHY DOLE
Float/Operating Assets

53.86%

90%

27.27%

60.53%

37.68%

27.69%

Unlevered ROA

13.62%

9.59%

14.23%

10.65%

6.43%

1.29%

Levered ROA

21.83%

9.73%

19.25%

20.59%

9.67%

1.79%

As you can see from the chart, BOBS, MAIN, and STRT all have float supporting more than 50% of each companies operating assets and BOBS, CMT, and STRT’s levered ROA make the companies look even better than I already thought they were.

VIVHY and DOLE, my two spin off companies that I do not plan to hold for as long as the other companies above, have ratios that are generally quite a bit worse than the other four.  Looks like I have been doing a decent job of spotting float in my long term companies before I even knew what it was.

To tie this whole theme up of the past several weeks I am capping it off by analyzing and evaluating an insurance company, the ultimate providers of float and a big reason why Buffett was able to compound his returns at such a fantastic rate over the past four decades.  I started research last night on an insurance company whose market cap is under $75 million and will have the write up written as soon as possible.  It will take me longer than usual to get this article ready because this is the first time where I have truly tried to evaluate an insurance company and need to learn as I am going; the specific terms and best ways to evaluate this type of company.

In the mean time I will probably post some links but from now on I will not be posting updates on what I am doing anymore.  I am constantly reading, learning, and trying to find companies to research and evaluate so if I don’t post for a while, from here on out that just means I haven’t found a company I think deserves a full write up.

My Portfolio Update And Two Powerful Insights Every Serious Investor Should Read

Take a glance on my updated portfolio and sharing you two powerful insights every serious investor should read…

Portfolio Update

Yesterday I made some adjustments to my portfolio and the portfolios I manage and I just wanted to update those positions.

Personal Portfolio and Portfolios I Manage:

  • Bought Strattec Security Corporation $STRT

Personal Portfolio:

  • Sold Altria $MO up 18%.
  • Sold Philip Morris $PM up 24%.
  • Sold Intel $INTC up < 1%, could have sold a while ago up 30%, doh!

All sold positions are after fees but before taxes.  I never bought any of the above three positions for the portfolios I manage and I bought Altria, Philip Morris, and Intel before doing any kind of valuations or any kind of in depth research so I am a bit fortunate to end up anything in those positions.

I said a couple months ago that I planned to hold the above positions for the foreseeable future because I felt that I could have my results compound well over time in all of the three companies.  I still think that is true for all of the above companies but have still decided to sell them all.  Lately I have been gaining confidence in my abilities to analyze companies, and I now think that I am at the point where I am getting pretty good at analyzing companies and think I can find better opportunities in the smaller mid to nano caps that I am concentrating on now.

Also as Red reminded me of the other day, why would I try to compete with the millions of people who are invested in and analyze those massive companies when I can find less competition, potentially less efficiency, and more upside, in the much smaller companies.

After selling those companies to free up cash for future opportunities, my current portfolio stands as follows, ranked by position size.  Portfolio does not add up to 100% because of rounding:

  1. $VIVHY.PK-28% of portfolio.
  2. Cash-26% of portfolio.
  3. $STRT-16% of portfolio.
  4. $MAIN-11% of portfolio.
  5. $CMT-8% of portfolio.
  6. $DOLE-8% of portfolio.

Two Powerful Insights Every Serious Investor Should Learn From and Reread.

Fundoo Professor-Presentation On Moats And Floats.

The Red Corner Blog-Kfaftwerk; A look at economies of scale and how Wal-Mart changed its industry and made a ton of money.

I hope you enjoy the above links as much as I have.

I have already started researching another company and tomorrow I will post some links and ask your advice on something I have been thinking about quite a bit lately.