Beat the Market by 2X: Year 2019 Performance Review

On this 2019 performance review, we go over how we beat the market by two times.

Finding a few great stocks continued as a trend from 2017 to 2019 which Charlie Munger fondly describes as “sitting on your ass and doing nothing.”

Charlie Munger said this, or something similar, and it’s what I’ve done for almost 4 full years now.

I’ve bought ZERO new stock investments since April of 2015, when I bought a few great businesses, and haven’t done much since.

At least in terms of buying investments.

Why I haven’t done much

Because 11 years on, the market still continues to go straight up and valuations on ALL assets worldwide are still at or near all-time highs.

I’ve now said this for 4 straight years.

This is why I’ve spent my time building businesses and training others in the last four years.

But patience gives us an enormous advantage as deep and disciplined value investors over the long term.

I WILL NOT alter my criteria just to buy an investment.

Even when its been almost 5 years since I’ve bought one.

I’ll remain patient and diligent, and continue to learn and wait for valuations to come down.

The above quote from Benjamin Graham is one of my favorites.

It means in the short-term – emotions 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.

Past Performance Reviews

For links to the prior years’ performance reviews you can use the links below.

• 2012
• 2013
• 2013 Updated Numbers
• 2014 and 2015
• 2016
• 2017
• 2018

Also, as noted above in some of the individual posts, I made multiple mistakes in 2013 and 2018 when calculating my returns. The numbers below – which show the eight full years between 2012 and 2019 – are correct.

2019 Performance Review

I still own all the companies from 2014 and 2015 except for six of them. I bought 3 new companies in 2015, ZERO new investments in 2016, ZERO investments in 2017, ZERO in 2018, and ZERO in 2019.

Investments that are no longer owned were among the following – merged, gone private, liquidated, sold.

The remaining investments in the portfolios I manage produced an average GAIN of 33.8% in 2019.

Below is the full spreadsheet going back over the last 8 years of my returns…

SPREADSHEET LINK HERE

Results were way up this year after 2018’s mid to late year brief market fall. And also due to the overall market rising a lot this year.

The stocks I still own are up an average of 78.6% since originally buying them.

Two factors affecting this year’s results were

1.) Since I last bought a stock in 2015, there are 6 companies I owned that have been sold / bought-out / merged / gone private. Other than 1 of these companies which I made a mistake buying, the others were some of the best companies I owned.

2.) The average cash position in the portfolios I manage is now up to 65.6% with new cash additions, sales of stocks, and proceeds from merging / going-private transactions.

This large cash position is a massive lag on performance…

If I was fully invested – which I rarely am, so I can keep open for opportunities – this would increase results further.

So what does this mean for cumulative full eight-year returns now?

Eight Full Years of My Investment Returns

Here are Buffett’s returns that I reference below…

I Don’t Want to Compare to Warren 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 as the best investor ever.

Rather, I want to be known as the first Jason Rivera when my career is over.

In 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 so I can help millions or billions of people all over the world.

Achieving a Lofty goal

For the first six full years in my career I was achieving this lofty goal…

In the 7th year with my first ever down year, I fell behind… And in the 8th year, I’m still behind Buffett and will remain so for the foreseeable future since it’s now been almost 5 years since I’ve bought something new.

In the first eight years of my career, I’ve produced average – non-compounded – returns of 21.7% each year. Or a total cumulative return of 173.6% over that period.

In the first eight years of his career, Buffett produced average – non-compounded – returns of 28.3% each year. Or a total cumulative return of 226.3% over that period.

This means in the first eight years of our careers, I’ve produced returns, now 6.6 percentage points LOWER each year, than Buffett did in the first eight years of his career. This is why Buffett’s number 1 rule is to never lose money.

For the first 6 years of my career compared to his I was winning… But after one down year, I’m likely to stay permanently behind Buffett now due to that one bad year… And also because Buffett’s returns are incredibly high during the next few years.

My one down year last year will likely keep me perpetually behind Buffett’s yearly returns now… And allowed him to take an even bigger lead over me this year than compared to last year’s 2.9 percentage point gap between us.

What does this 6.6 percentage point excess return per year mean in dollar terms over this period?

In Assumption

Assuming we both started with an asset base of $10 million at the beginning of the eight-year period, I would have grown that $10 million into $48,119,890 million after eight years.

Buffett would have turned his investors $10 million into $73,419,809 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 eight years – ‘only’ an excess 6.6 percentage points each year would have made Buffett’s investors $25,299,919 million extra when compared to my numbers.

And this further illustrates the power of compounding over time.

I explained why I’m now losing to Buffett, and why I’m not worried about this in more detail further below.

But I’m still crushing the market.

Crushing the Market by More Than 2X

From 2012 through 2019, the Dow Jones Index produced a total cumulative return of 67.3% for the eight years or 8.4% per year on average.

The S&P 500 produced a 79.2% total return for the eight years or 9.9% per year on average.

And the Russell 3000 index – the closest thing to a small cap index – produced a 76.9% total return or 9.6% per year on average.

I’ve produced returns in excess of these indexes by 13.3%, 11.8%, and 12.1% points respectively each year over these seven years.

Assuming a $10 million asset base like above, I would have produced $27.3 million more for investors over this eight-year period than the Russell 3000 index would have.

• $48.1 million I would have produced minus $20.8 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, especially with valuations still at or near all-time highs.

And also because of mergers / sales / acquisitions, the portfolios I manage are down to 6 companies owned, and the portfolios are now on average in 65.6% cash.

Sponsorship

Thanks to you for investing in yourself via sales of my products, services, courses, real estate sales, and consulting jobs, we’ve continued sponsoring Ashley in the Philippines who you can see below.

The last letter I received from her was in December 2019… She said she’s in 6th grade and loves singing and dancing.

With your help, some of the things we’ve been able to help provide for these two girls – Mhicaella before Ashley – and their families are: school supplies, medical and dental care, birthday presents, and Christmas gifts for their families.

We were also able to help feed 332 people in the Philippines negatively affected by typhoons and earthquakes in poorer regions of the country in 2019 in large part because of your investments in yourself via our products, services, and courses.

You can view that post talking about that by clicking here.

A percentage of all sales of my books, services, and products sold will continue going towards charities like these well into the future.

We will expand on this in the future and help even more kids and their families.

Thank you so much for helping and being a part of this milestone.

Highlights from 2019

Below are many of the rest of our highlights from 2019…

Social Responsibility

• Continued helping Ashley and her family with our sponsorship through Children’s International
• Helped feed 332 people in the Philippines negatively affected by Typhoons and Earthquakes

Value Investing and Other Investments

• Met with one of my Masterclass and Coaching program students while in Madrid and Abu Dhabi
• Got invited to Dubai and Abu Dhabi UAE in late March/Early April to help business owners grow their businesses
• Contracted with one of the companies I met with while in the UAE to help grow/then sell the company to a third party
• Helped Increase the value of this company by $2.7 million or 77.1% in 6 months when we received an offer to buy the company at a $6.2 million valuation
• Got hired by an investment newsletter to write
• Value Investing Journey got named a Top 50 Value Investing Blog in the world for the 4^th time
• Started the podcast I Love Value Investing
• Our podcasts – Value Investing In Your Car and I Love Value Investing – were both named Top 15 Value Investing Podcasts in the world
• Wrote and did 1^st and 2^nd edits of the Second Edition of How To Value Invest
• Planned 3 other books and 7+ other courses and resources to produce

Other Businesses

• Sold a home as a licensed Florida real estate agent
• Became a John Maxwell Teacher, Coach, Speaker, and Trainer
• Reworked/streamlined/delegated much of the work in my businesses to have more time to focus on what I’m good at
• This also allowed me to create more content and release more content regularly, be more productive, and earn more revenue, profits, and cash toward the end of the year
• Read 50 books
• Wrote, read, recorded, created, watched, and learned from more than the equivalent of 15,000,000 words
• The investment portfolios I manage were up 33.8% this year
• My team and I finished redesigning the Value Investing Journey site and Alpha Capital Allocation site
• Released our free guide – 7 Tips To Picking Great Stocks and 3 Times You MUST Sell After You Buy
• Combined, in 2019 my businesses produced their highest revenue and profits ever

Personal

• Worked to get and achieve greater personal health
• Helped coach my middle daughter’s soccer team to their local championship
• Went to Spain with my wife for our first ever vacation after being together for 15 years
• And more…

***

Conclusion Thoughts

We’re now losing to Buffett, but still crushing the market.

And I expected these returns to reverse in the short term.

Here’s what I said about this in the 2017 and 2018 performance reviews…

***

Value investing works best with a falling or stagnant market, so with valuations at or near all-time highs, and reaching new highs on an almost every day basis still, this is expected.

Unless the market corrects sometime soon, I would expect Mr. Buffett and the market to continue catching up to or possibly passing us in the near future.

As I said last year at this time, barring a major sell-off, I expect to add few to no companies again in 2018.

This is because 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 real estate investments 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.

And with the market’s march ever higher, it’s allowed me to take the time to learn other valuable business skills.

This will help us even more over the long term as we get back into buying public companies stock, and into buying private businesses and multi-family real estate investments once we reach enough revenue and cash flow.

Here’s looking forward to an even bigger and better 2018.

***

This is still true today…

With valuations still at or near all times highs I’ll likely continue underperforming Buffett… Especially with last years down year and the portfolios I manage now sitting at 65.6% cash.

Thanks so much to 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.

Here’s looking forward to an even better 2020 to keep this momentum going.

Always in your service,

Jason Rivera

Chairman, CEO, and Founder of Rivera Holdings LLC

Chief Capital Allocator Alpha Capital Allocation

Rivera Brothers Marketing