Performance 2013 … and best wishes for 2014 !

I just checked my performance for 2013 and as shown here I’m pleased to see that I managed to beat the S&P total return. In a nutshell: in 2013 I made €48,204 (Euros) with a €135,859 investment, equivalent to 35.5% versus 32.4% for the S&P total return. What makes me more happy is that it’s the 6th year I could beat that index. What makes me even happier is that this year it was done with the biggest amount invested, therefore the gain is substantial in absolute terms. I do though worry because besides 2008 and specially 2009 none of the latest years’ performance has been significantly higher than the S&P.

2013 has been a sabbatical year. I concentrated on doing things like spending time with my family and building my house. So basically this year I did little on the securities investing front. I did look at the market and kept an eye on my companies. Since I found no interesting new investments and no reason to sell I kept my portfolio basically intact. The gains from 2013 are mostly the result of investments from earlier years.

I had little activity, but it’s worth mentioning it. I added 13 shares of CAF, a spanish train builder. Most of the shares were bought under 280 Euros (currently at 380). Some of them were for my sons, I manage money for 3 of them.

I recently liquidated my mother in law’s portfolio. She needs the money to buy a new apartment. She had a very good result of around 60% for a period of a little more than 2 years while I managed some of her money.

I sold out my 20 RYAAY (Ryan Airlines) shares. I like the CEO and the company but I have learned to dislike the business enough to stay out of it. I sold them in May at 49 and the shares are currently at 47, I did not avoid a terrible drop but they did underperform the market quite a lot since back then. I had a bit over a 30% profit in a long time, with a small amount invested, so the investment was not good.

My 300 TLT shares short position was closed @107.98 by my broker by the end on October. TLT is currently at the same price so I have not lost anything by staying out of it. On the contrary, I saved the payment of dividends and interests on the short amount. I have been thinking, specially today, about reentering the trade by shorting TMF (Direxion Daily 20+ Year Trsry Bll 3X Shr) a leveraged fund. The good thing about it is that it allows me to invest much less on the short amount for the same possible return, therefore saving money on the short interests. The other good thing is that it hardly pays any dividend compared to TLT, there is a substantial saving there too. I still think that the long dated treasuries market is way overvalued and I plan to profit from it. The TLT short played out well even though it was closed (by luck) prematurely. I believe that there is still much more room for the treasuries to go down so I might soon enter that trade again, possibly with TMF this time.

I added a couple of VXX shares short by the end of August. I still think that VXX is designed to go to 0 and plan to keep shorting it indefinitely and add to my shorts at every possible opportunity when the volatility jumps a bit.

I sold out my small XHB (home builders fund) position (8 shares) by the end of May @32. It was a small legacy position that I had since before 2008 (the housing crash). I waited and sold out when it recovered its value. I normally dislike having funds and small positions so Im glad I got rid of it.

On the selling put options side I had some good results by closing some shorted puts after they became worthless. Like that I basically gained 1400 USD by closing in January 2013 a couple of Berkshire Hathaway strike 62.5 and strike 65 puts which had become worthless. I did the same in the 1st semester 2013 by closing a shorted strike 10 AMAT put and a strike 10 Dell put gaining 143 and 191 USD respectively. I also made some 120 USD by selling covered puts against my TLT short position, not much, but every amount, no matter how tiny, is always welcome.

On the forex side I basically made a bit under 600 Eur profit. Mostly by borrowing dollars to buy Dell shares when the dollar was quite low with respect to the Euro. When the Dell shares were converted to cash due to the privatization for the company I covered the dollar debt at a lower dollar price.

With Dell (without counting the 600 Eur profits from the dollars borrowed to enter the trade) I basically had a 5000 USD profit when the merger was consumed @13.75 by the end of October. I invested in average 1000 shares, the vast majority in 2012. The investment profit took around 18 months to materialize so it was quite a good one. 4250 USD were gained on stock appreciation, 550 on dividends and 191 on a shorted put.

The activity above produced results that are quite small compared to the appreciation of the companies I had from before. The best move in 2013 was basically to remain inactive and let the companies I admire and own run its course.

I think 2014 can be a tough year. I do not see much value left and even though the companies are not overvalued in average, the playing field starts to get tough. I am not used to play and profit in markets like this. So I am being cautious, to say the least. If I concentrate on something it will possibly be on reducing positions and following specially closely what I own.

That would be all for now, sorry for my past silence. I now feel that I have more time to dedicate to investments and I possibly will come back to them soon. For the time being I am doing one of the best investments I discovered: building a great house that I am shaping with love ! I do not want to publish pictures of it yet because I believe that a work of art should only be shown when it’s completed so for the time being I will only show a rock I found that was obstructing our garden :) (I’m the one on the right) !

De Werkers

Best wishes for 2014 !
jrv

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Latest Activities And Some Of The Books I Read Lately.

More than anything I have been focusing my energy on building a house. Since I am doing most of it alone, including the bricks, it goes slow. I could hire help, specially here being quite cheap, but the enjoyment would be lost if I did it. That is a probable reason why I have been writing little. Another reason is because lately I prefer reading than writing.

I have also dedicated time to do some other things like follow some of the companies I have. I sold out recently a small investment in Ryan Airlines. Ryanair is an exceptionally well managed company but in a business that the more I learn about the more I get convinced that it’s bad. I am also not too fond on having small investments. I sold out while the profit was decent. I have finished increasing substantial positions on a Spanish train company called CAF. That’s the only investment I’ve done this year if I remember well. There are also a couple of new companies I have been reading about that seem quite interesting. One of them is National Oilwell Varco and the other is a Sweedish company called Sandvik. Sandvik is a supplier of machine tools, services, and construction materials for the mining and several other industries. It is widely diversified internationally in most of the markets I am interested about. It seems to be very well run, conservative, shareholder friendly and with a very sustainable future. National Oilwell Varco is a supplier for the Oil and Gas industry. It has acquired several companies and integrated them quite profitably. It’s market is also quite diversified, although not as much as Sandvik. It is focused on new non traditional drilling activities, which I think have a good future. It’s debt load is also quite reasonable. Both companies seem to be trading at reasonable prices, but of course if they get cheaper I would be even happier about investing in them.

I read some books. A very interesting classic book was “The Crowd – A Study of the Popular”, from Gustave Le Bon. It is a serious study on the behaviour of crowds. The book was referenced by Roger Lowenstein’s “Buffett The Making of an American Capitalist” and has also been more deeply referenced by Ludwig Van Mises. The book makes me further think that the more people that get involved in investing decisions the worse the results are. Not only does a crowd decision lead to mediocre results, I even tend to think more and more that the intelligence of a crowd is often quite worse than the average intelligence of its members and tends to the lowest of them. This helps me understand why sometimes very bright people acting together act worse than each of them separately. It also helps me understand why Warren Buffett, in its early partnership letters, said that the investment results obtained by groups of more than one member are often bad. Note that if you read French I recommend you reading the original, even though the English version seems well written.

Another interesting book, quite recent, was Ronald Chan’s “The Value Investors”. It’s not nearly as deep as the previous one. It’s interest lies in being kind of an interview to several successful investors. The ones that interested me quite much, besides Walter Schloss, who I already knew, were Francisco Parames, from Spain, sometimes referred as the Spanish Warren Buffett and Teng Ngiek Lian from Singapore. It was interesting to note that several of the investors read enormously, specially the centenary Irving Kahn, which by the way gave a very interesting interview. Kahn highlighted that, even though the classical value opportunities have changed, now there are as many opportunities in the investing world as before. There are much more securities and countries where to invest, and the amount of available information is much bigger. Another interesting point that impressed me quite much is that both Jean-Marie Eveillard, a french investor interviewed, and Francisco Parames were followers of the Austrian school of economics. I have noticed that several of the investors I admire follow that school, or think very similar to it, specially Charles Munger and Phil Carret. Carret was also a friend of Buffett and one of it’s relatively early investors. He is actually the one who introduced me to Von Mises and his thoughts.

Speaking of Von Mises, another great book I read was Ludwig Von Mises’ “Theory and History An Interpretation of Social and Economic Evolution”. An incredible underrated book, philosophical, practical and centered on human action. It shows how human acts and ideas shape history and economical evolution. A must read for any serious investor who wants to increase his analytical thinking.

A very interesting book about financial analysis I am currently reading is Martin S. Fridson’s “Financial Statement Analysis: A Practitioner’s Guide”. The book was referenced by one of the investors interviewed by Ronald Chan. It was a surprise to learn about it. It has nicely shaped and cemented some of my views about the nature of financial reporting and what can be extracted from it. It shows why it pays well to be quite skeptic and focus on human motivations when reading financial information.

I had unfortunately never found a woman investor whom I admired until I stumbled upon Hetty Green. I knew about Hetty Green since I was eight, but forgot completely about her for many years. The first time I read about her was in the Guinness Book of World records. Her record was being the greediest person ever. It is interesting to note that she was a Hathaway investor, even before it was merged with Berkshire or that Buffett entered into the scene. She was infamously remembered as the Witch of Wall Street. Besides her terrible reputation she is currently widely unknown and after reading about her I have shaped a completely different opinion than the rest. She seems to me an outstanding investor, better and sounder than many other much more famous. She survived the great depression with almost no scars and multiplied her fortune through a lifetime of very conservative investments. Holding cash and not leveraging was one of her characteristics, as well as never panicking when others did, buying cheap and selling dear. For those interested about her I recommend her biography written by Charles Slack.

Cheers !
jrv

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