2013: Year in review

This post will be updated again later.

This was a transformational year for the way I think about investing. This had some drastic effects on my portfolio. In particular, I sold almost everything I did not have a good grasp on.

This year I started with 50% cash in my portfolio and it has built up through the year. I now have 70% of my portfolio in cash.

Meanwhile, the portfolio value has gone from 75,000 at the beginning of the year to 115,000 at the end. Taking out the 20,000 cash which I put inside the portfolio, the performance has been close to 20%. Interestingly, given that I was only 50% in stock, the performance has been more like 40%. But this probably is cheating.

Mental dissonance

I had ended up owning stocks which I did not necessarily believe in but stayed invested because of several reasons — which can be likely be grouped under the term “bullshit”. I was coat-tailing in some (BAC, SAN) and hoping for a turnaround in others (FTE, EOAN).

I was reading this excellent blog by Prof. Sanjay Bakshi and came across the case of “three legged stool” [read it here]. I have suffered from this fallacy for a while now.

Today I decided to sell every company in my portfolio that I did not understand or had done insufficient research on to justify an investment. Bank of America, Banco Santander, Orange and E.On for example are too big and convoluted to get a clear picture of. In case of E.On and Orange — the management does not seem focussed on creating shareholder value.

I now own the following companies: Fortress, Tesco, Altius, Weight Watchers, Nam Tai, ArcelorMittal, Intel, Bouygues, CAF and PostNL.

I have decided to add an item on my investment checklist. Draw a line, which if crossed will qualify the position to be sold.

I also sold PostNL, mainly because they have decided to sell their TNT stake to shore up their balance sheet. This destroys the margin of safety for which I invested.

 

Monthly update: November 2013

After reading the conference call, I have decided to take a calculated bet in Weight Watchers (WTW). The management is cognizant of the problems and even though there are competitive/balance sheet risks, I feel comfortable with owning it at these prices. This will remain a small position.

A similar situation exists with Fortress Paper (FTP.TO). I own 400 shares and will probably add some more, maybe 100-200 shares. This is a risky proposition with huge upside. The company is a call option on DP pricing, which is at its lowest for the last decade or so.

November2013

 

My cash position continues to swell. These are the trades I made in this month.

FTP.TO 200@4.52
ABB position closed at a profit of sfr 995
TSCO.L 200@£3.53
TSCDY position closed at a profit of $362
WTW 50@32.2
WTW sold 100 put expiry 17Jan2015@strike price $32.5 for $5.1 each

Profit from options: MT,NOV=$838.37