Is anybody making money this year?

[muscleman]

Isn`t one of the purposes of this website to learn something on how to become a better investor?

Then if not, what are you doing here?

 

I picked 20% because I think it is hard to achieve in this environment. I wanted to see if there are over-achievers and how they have done it if they are grateful enough to share. 15% still work, you know. However, I think that we need a meaningful difference between individual and market returns to call it real useful Alpha.

 

Regarding the timing, does it really make a difference? Who said that results need to be measured after exactly 365 days or the time for the Earth to rotate around the Sun? What do you do for leap years?

 

I thought that there would be much more to learn from a few individuals who are over-performing in a tough year, than by people pounding their chests after doing 40% when the market is up 30% simply because they were overweight one or two stocks or industries that did better than the market.

 

Cardboard

 

Well, I just think it might be better to focus on a longer term horizon. Otherwise if we go to an extreme we can also ask what's your biggest gain yesterday  :)

[original mungerville]

40% year-to-date:

 

1) highly concentrated value picks,

2) partially to more than fully hedged portfolio,

3) made gains on call options on $US rise early in the year,

4) gains from increasing portfolio hedge to 100%+ in early August.

 

Despite this, did not make too many trades, kept it simple.

[Guest Schwab711]

I thought that there would be much more to learn from a few individuals who are over-performing in a tough year, than by people pounding their chests after doing 40% when the market is up 30% simply because they were overweight one or two stocks or industries that did better than the market.

 

Why is that?

 

It's likely that people who did >20% this year are:

- "overweight one or two stocks or industries that did better than the market". Not gonna pick on people in the forum, but Sequoia's outperformance for last couple of years is VRX. Only VRX. They were questioned about it during the investor meeting. Without VRX, their performance was below market.

- currency tailwinders like Packer said

- have good timing in shorting/derivatives

 

 

Isn't this true in every calendar year? I would think this would be true over almost any period. So if we discuss a specific calendar year, I'm reminded of the trends diagram included below. If you are in these trends ahead of time (or specific stocks that performed well), then, yes, you will do quite well in that short period. Your post kind of implies that you expect alpha over the long-run to be impossible for anyone since any calendar-year alpha can be explained away. There's a lot of ways to outperform, with or without concentrated bets that aren't VRX.

[Jurgis]

Isn't this true in every calendar year? I would think this would be true over almost any period.

 

You should pose this question to Cardboard, not to me. ;)

 

Your post kind of implies that you expect alpha over the long-run to be impossible for anyone since any calendar-year alpha can be explained away.

 

And your post kind of implies that you have to be on a trend every year to deliver alpha. ;)

 

...

 

OK, let me be controversial: learning alpha on this forum (or any other forum) is impossible. One can learn value investing methods, but there is no guarantee that they will deliver alpha. Even if a person knows the financial statements backwards and forwards and they know Buffett/Graham/Watsa/etc. backwards and forwards, there is no guarantee that they will deliver alpha. (Unless they go for pure mechanical system like "Magic Formula", then maybe - if formula works). The composition of their portfolio and their "calendar-year" decisions have more influence on their results than all the knowledge above. And these are not really learnable. Yeah, sure, it's easy to say, "buy great businesses at fair price and hold" or "buy $1 dollars for .70$ cents and sell at $1", but these are not specific enough to deliver alpha - at least not yearly alpha.

 

For example, a person could have gone for "buy great businesses at fair price and hold" and bought AAPL for 3.7% return this year. Or bought VRX for 57% return. Is there a lesson in this?

 

Did anyone suggest at the beginning of the year that MKL will hugely outperform BRK and FRFHF? Is there a lesson in that?

 

Anyway, I am not saying this forum is worthless, it's quite useful. But I am quite skeptical that it's possible learn much from the fact that person X did this-and-that and got XX% in the last year. For example, I would not buy NTLS or VRX, so any lessons from the fact that people bought them and made XX% are quite lost on me. ;) (Well, perhaps the only benefit is that I don't have to ask "why they have XX% return?")

 

Take care.

[writser]

The danger with threads such as this one is that they focus on (short term) results rather than thought process. Anybody up > 15% this year so far is a) likely holding a concentrated ( = high-risk) portfolio, b) likely just lucky and c) more likely to post in this thread than underperformers. So consider me skeptical of the information content of this subset of posts from a subset of investors. Probably you are better off analyzing companies rather than trying to determine which poster in this thread is the next Buffett.

 

In other words, if you opened a thread such as this one repeatedly in 1997, 1998 and 1999 you would arrive at the conclusion that the optimal portfolio would be a concentrated mix of Enron, Geocities and Pets.com shares.

[stahleyp]

40% year-to-date:

 

1) highly concentrated value picks,

2) partially to more than fully hedged portfolio,

3) made gains on call options on $US rise early in the year,

4) gains from increasing portfolio hedge to 100%+ in early August.

 

Despite this, did not make too many trades, kept it simple.

 

That's pretty impressive. Do the past 5 years look pretty similar (since you've been hedged - for a while I'm assuming)?

[Guest Schwab711]

Lost my quote. This is in response to Jurgis.

 

It sounds like you are treating stocks as pieces of paper and maybe that is your problem. Beating the market is quite possible, even over a long period of time. The margin you beat it by starts to correlate with your skill, at some point. I think you inadvertently bring up a good point that when you judge an investor, how they arrived at their returns is often times a better predictor of future returns than prior actual results. How do you know what a good method is? Back to the Buffett-basics of "are they buying quality companies at below-FV?". How can you tell if it's a quality company? It starts with the business model.

 

All my post is implying is that there are a limited number of ways to outperform a given index over any period of time (including 1 year). I'm pointing out with the image that your post will have the same message, with slightly different content in the bullet points, every year.

 

I think a decent method of measuring the success of an investor is comparing actual returns to expected returns at purchase. If your expected results were accurate (and you built in a MOS, as we all claim to), then your actual results should outperform your expected by the average of your MOS/avg holding period. If this isn't perfect but it should at least provide a fair approximation. If you are asking for proof beyond a reasonable doubt that you can generate alpha with a specific method, then you are probably in the wrong hobby (I'm also not sure why anyone would share this info for nearly any price, much less free). This isn't engineering/physics (even though I'd like it to be). We are dealing with a dynamic system and measuring our results using small sample sizes with statistical methods. It's like trying to determine who the best player/team in the NFL in any given year. The randomness is part of the game! Realistically, we should probably wait at least 30 years to measure any investor's results, since prior to then you fail most assumption tests necessary to run statistical analysis of the performance. That sort of takes all the fun out of this.

[investor-man]

The danger with threads such as this one is that they focus on (short term) results rather than thought process. Anybody up > 15% this year so far is a) likely holding a concentrated ( = high-risk) portfolio, b) likely just lucky and c) more likely to post in this thread than underperformers. So consider me skeptical of the information content of this subset of posts from a subset of investors. Probably you are better off analyzing companies rather than trying to determine which poster in this thread is the next Buffett.

 

In other words, if you opened a thread such as this one repeatedly in 1997, 1998 and 1999 you would arrive at the conclusion that the optimal portfolio would be a concentrated mix of Enron, Geocities and Pets.com shares.

 

all true of me.

[Jurgis]

The danger with threads such as this one is that they focus on (short term) results rather than thought process. Anybody up > 15% this year so far is a) likely holding a concentrated ( = high-risk) portfolio, b) likely just lucky and c) more likely to post in this thread than underperformers. So consider me skeptical of the information content of this subset of posts from a subset of investors. Probably you are better off analyzing companies rather than trying to determine which poster in this thread is the next Buffett.

 

In other words, if you opened a thread such as this one repeatedly in 1997, 1998 and 1999 you would arrive at the conclusion that the optimal portfolio would be a concentrated mix of Enron, Geocities and Pets.com shares.

 

+1

[Jurgis]

Schwab711,

 

I'll answer this, but I start to think this is not productive.

 

It sounds like you are treating stocks as pieces of paper and maybe that is your problem.

 

Where did you get this impression?

 

Beating the market is quite possible, even over a long period of time. The margin you beat it by starts to correlate with your skill, at some point.

 

Yes, but the skill is not just knowing value investing and accounting.

 

I think you inadvertently bring up a good point that when you judge an investor, how they arrived at their returns is often times a better predictor of future returns than prior actual results.

 

inadvertently?  ::)

 

How do you know what a good method is? Back to the Buffett-basics of "are they buying quality companies at below-FV?". How can you tell if it's a quality company? It starts with the business model.

 

<snip>

 

I think a decent method of measuring the success of an investor is comparing actual returns to expected returns at purchase.

 

<snip>

We are dealing with a dynamic system and measuring our results using small sample sizes with statistical methods. It's like trying to determine who the best player/team in the NFL in any given year. The randomness is part of the game! Realistically, we should probably wait at least 30 years to measure any investor's results, since prior to then you fail most assumption tests necessary to run statistical analysis of the performance.

 

So we agree that this thread is rather pointless, since it does not talk about method or quality companies or "comparing actual returns to expected returns at purchase" or about long term results?

[original mungerville]

40% year-to-date:

 

1) highly concentrated value picks,

2) partially to more than fully hedged portfolio,

3) made gains on call options on $US rise early in the year,

4) gains from increasing portfolio hedge to 100%+ in early August.

 

Despite this, did not make too many trades, kept it simple.

 

That's pretty impressive. Do the past 5 years look pretty similar (since you've been hedged - for a while I'm assuming)?

 

Thanks ... but no, its not impressive because a return for 8 months is not indicative of much. This just seems to be the way it goes for me. I underperform in big up years and significantly outperform in down years. This year I have been outperforming in a flat year because I felt there was enough evidence to bet on macro events and was fortunate with the timing (but this could just be pure luck as I am no macro expert) while my long-term value picks outperformed.

 

5 years? No, no... 5 years is for the weak, I've been partially hedged for half of the last 15 years (adding precious metals no less since the crisis)!!!! Highly costly - probably not the best idea, I do not recommend it but that's the way I roll. I did not catch the downdrafts in 2000-2002 or in 2008/09 as I moved to more than fully hedged in in both situations which helped tremendously (eg, up 80% during the last crisis as I went significantly short in summer 2007 - this when markets were down 50%).

 

We need to see where this big Fed experiment ends up, the next year or two or three should be telling. I don't necessarily expect the markets to drop here. Stocks are real assets and so if they print enough money, they could continue to go up significantly. I do think there is a limit to the value of stocks in real terms though, but this game has gone on for much longer than I ever expected and may continue to do so. Bottom line is that the game, whenever it ends, will not end well. 

 

I have learnt a ton: buy value with a large margin of safety and concentrate (this is where most or all of my returns have come from), find cheap asymmetric hedges when possible, and don't hedge any more than 50% of notional. My hedges now include precious metals because I think that a "neutral" position now (ie a 100% cash position) is actually 85% cash and 15% precious metals. You just can't keep printing forever and have things work out well.

 

We each have to find our own way - this seems to be mine.

 

 

 

 

 

 

 

[original mungerville]

Anyone who thinks 20% regularly is no big deal with 1m+ and has the record please get in touch with me and I'll get your fund set up.

 

Ericopoly does 20% before getting out of bed in the morning. He eats LEAPS for breakfast and shits big returns by mid-morning. All this before lunch. He probably won't be in touch with you though because he's already quite rich!!

 

There are a few people on this board with healthy metabolisms.

[Viking]

I am up about 13% year to date (in Canadian $). During this time my stocks are down about 2%. The gain is due solely to currency. All of my investments and cash are held in my US $ accounts.

 

Starting about three years ago pretty much 100% of my portfolio has been held in my US$ account. When I sold US stocks I was happy to leave the cash in my US$ account until I found another good U.S. company to purchase. A year ago hen oil/commodity prices crated It was clear to me that economic growth in Canada would weaken (which it has) and the CAN $ has continued lower (versus the US$. At the same time the economic news out of the U.S. has been much better (compared to Canada). My guess is the current trend will hold for the next year or two so I am in no hurry to shift my cash to my CAN $ account). 

 

Needless to say, the currency gains the past three years have been very healthy. The crazy thing for me is I do not consider myself to be a currency investor.

 

I am much more comfortable buying US companies; this year it has been Apple and the big U.S. banks (primarily JPM). I am not comfortable buying the commodity plays and, given I think Canada is in a housing bubble, I am not interested in Canadian financials. Those two sectors represent a big chunk of the Canadian market. I do really like some Canadian companies (CGI, Impact Financial, Saputo) but they are not 'cheap' enough yet for me to buy at current prices. The key learning for me over the years is to keep learning. Keep adding tools to your tool kit.

 

One tool I have yet to add to my tool kit is buying leaps; if we get a big sell off in Sept or Oct I may buy some leaps in a few of my favourite large cap US stocks and start to figure out how it all works. :-)

[innerscorecard]

This thread doesn't refer to me, but I thought I'd chime in so people know how the non-superinvestors are doing.

 

My XIRR across all accounts YTD is 4.4%. Very underwhelming compared to everyone here. Yet still better than my benchmarks, which is exactly what I would be doing if I weren't actively investing (VTI Total Return YTD: -3.0%, VXUS: -4.0%, BND: +0.5%).

 

 

 

 

[one-foot-hurdles]

+26% YTD & +31% 1yr, I would attribute the performance to favourable ccy movements (base is AUD, and this has weakened abt 15% YTd against USD, EUR, GBP - majority of my holdings) and a bit of luck (sizeable position in NTLS and GNCMA). Quite a bit of volatility in my returns YTD, given my exposure to O&G and Russia.

[NewbieD]

+27% YTD, +33% TTM. Most return came from 3 stocks (Bahnhof Internet, Effnetplattformen, Net Entertainment). Two of which had the same role last year. From slight leverage (15%) to partially hedged now (15%). Like original_mungerville I  own some gold (7%).

 

USD rise (BRK.B, AAPL) has given a few % tail in SEK.

 

 

[meiroy]

 

Yes, but almost all of it is due to options trading and macro nonsense which should be discounted for a certain future portfolio annihilation if I continue doing this... therefore the number is meaningless. Bravo to whomever managed to pass Cardboard's hurdle just by investing in plain vanilla.

 

 

[innerscorecard]

 

Yes, but almost all of it is due to options trading and macro nonsense which should be discounted for a certain future portfolio annihilation if I continue doing this... therefore the number is meaningless. Bravo to whomever managed to pass Cardboard's hurdle just by investing in plain vanilla.

 

Why do you think it has been easier for you to make money trading than value investing?

[Packer16]

It depends upon the currency: USD +10.3%, Euro +19.1% & CAD +26.8%.

 

Packer

[meiroy]

 

Yes, but almost all of it is due to options trading and macro nonsense which should be discounted for a certain future portfolio annihilation if I continue doing this... therefore the number is meaningless. Bravo to whomever managed to pass Cardboard's hurdle just by investing in plain vanilla.

 

Why do you think it has been easier for you to make money trading than value investing?

 

Sorry, I'm not sure I understand the question...

[kab60]

Not really sure since I added most of my money halfway through the year but around 20 percent. It's my first year of investing so I'm somewhat happy about the outcome and proces but I made a shitload of minor mistakes re position sizing and trading costs. Still trying to figure out a somewhat structured process since I'm not very systematic. Need to keep it very simple though.

[Shawn]

13.8% so far, still early and a lot can change. I'm trying to find new things to buy.

[innerscorecard]

The more I think about it, the more interesting this thread is.

 

Berkshire Hathaway has a YTD total return of -10.7%. FFH is -3.6%. And yet I am one of the worst performing people YTD in this thread, because I haven't done double YTD returns so far!

 

There are a larger number of non-USD-base-currency investors on here, so there's a big tailwind for many. Is that the big factor?

[Guest Schwab711]

Schwab711,

 

So we agree that this thread is rather pointless, since it does not talk about method or quality companies or "comparing actual returns to expected returns at purchase" or about long term results?

 

My mistake, I interpreted your posts wrong then. :) I was so confused when I thought you were claiming alpha is not possible, especially since our ideas seem to overlap fairly often.

 

You're right, we absolutely agree. This thread would be more useful if the strategy used was mentioned as well as long-term returns. I think this thread could be more interesting with those inclusions since a number of sectors have seen the tide recede recently. It would be interesting to hear about how others are doing over 5-15 year periods and the strategies they used (different thread?). Hopefully we can hear about more normal results and their views of future expected returns.

 

 

Bravo to whomever managed to pass Cardboard's hurdle just by investing in plain vanilla.

 

I've done well over the last 3 years with a boring, vanilla strategy. 3 years isn't too long and it was a pretty great time to be long only. I buy-and-hold quality businesses and I'm aggressively concentrated (shocking, I know). I never use margin or options and I rarely look outside the US. I've invested in private loans and research bonds/arbitrage on an infrequent basis. I don't consider myself restricted to quality. However, I feel I have some ability to detect quality businesses. On the same token, my research shows I'm not nearly as strong at identifying the difference between lousy, average, and above-average businesses, which is why I switched focus 3 years ago. I look for at least a 50% discount (100% upside), like Pabrai, I just demand quality as well. The majority of my research focuses on the business model, potential risks, and determining whether a biz actually compounds [or if it can]. Most of my ideas come from reviewing OTC stocks, from A-Z, 3-4 times a year (it can be boring due to the hit-rate).

 

I pay close attention to current deep-value ideas of all kinds, particularly those of Packer/Oddball. There are dozens of strong practitioners on the board, I'm just more familiar with their thought process. It gives me some idea of relative returns available.

 

YTD returns are conservatively 32% (1 stock is very illiquid) and the past 2 years [since switching strategies] are 31% and 74%. I almost certainly can't continue at this pace. My personal goal is underlying operating returns of 12%-15%. In that sense, I am marginally exceeding my goal over 1, 2, and 3 year time periods. I've seen a couple of posts asking if quality-value strategies work so I figured I'd share. Multiple expansion has accounted for roughly half of my returns so I've been had a large amount of portfolio turnover this year. I was always drawn to the Buffett quote of "outperformance in down years", so it will be exciting to see if my strategy actually works during a full down period.

[Jurgis]

I thought you were claiming alpha is not possible

 

I must have expressed myself badly then. :)

 

What I was trying to say is that alpha may require more than just knowledge of value investing and accounting. There is skill (talent?) factor that might not be easy to learn.

 

Anyway, this is not directly related to this thread.

 

Congrats on good returns.

 

Take care.