Portfolio Performance: -0.4% YTD through September 2008

Click here to view the spreadsheet containing all disclosures for my complete equity portfolio, including initial entry points, YTD returns, total returns, etc.

THE ENLIGHTENED-AMERICAN PORTFOLIO SPREADSHEET

  • Enlightened-American Portfolio: -0.4% YTD (including dividends)
  • DJIA: -18.2%
  • Nasdaq: -21.5%
  • S&P 500: -20.7%
  • DJ WIlshire 5000: -20.0%
  • Reuters 2000 (smallcap): -11.3%


Unfortunately, the listed portfolio has wandered into negative territory (as a side note, my actual portfolio is barely positive due to lower average prices than those listed on the spreadsheet as I average down).  While the portfolio is outperforming the broader indices, I lean more toward Seth Klarman’s view that a good money manager should be focused on absolute returns (making money in any market) as opposed to Warren Buffett’s old approach of outperforming in down markets.  But the danger is far from over and every possibility exists that market volatility will continue to hit the portfolio.

I have modified my strategy somewhat or perhaps it would be more accurate to say I am reinforcing discipline in old strategies.  Nothing like a vicious bear market to ingratiate lessons into my discipline.  Seth Klarman has long held that one of investors’ biggest mistakes is failing to have sell discipline.  Guilty as charged.  I have watched CHK come back almost all the way to my original entry at the beginning of 2007.  CHK is of concern due to the massive crunch in the credit markets and I have covered Chesapeake’s eternal need for capital before.

Another “new but old” strategy is Buffett’s infamous Rules 1 & 2: Never Lose Money.  I have not focused enough on capital preservation — a good example would be the call options on CHK which I wrote and promptly fretted over whether the stock would be called away before I made major gains.  I wound up buying the call back at a slight loss which today looks like a bad call.

But enough with looking back.  Onward.  This is an absolutely horrifying market and only gets scarier by the day.  In such volatility, it is hard to maintain a long-term outlook.  And then I saw this interview today with Marc Faber and it is pretty hard to bet against him.  I am half-debating whether to sell into any rally we get and go largely to cash.  We’ll see if I have the fortitude to maintain my long-term value discipline.

In the meantime, September was the busiest month of the year for me.  I divested my positions in NZT, ACAS and DVN:

  • NZT was an acknowledged mistake — they’ve cut the dividend, their future outlook and I don’t see any tangible plans to reverse the trend.
  • ACAS was as much a tax decision as anything else; still, I suspect the company will take advantage of any pops above book value to raise equity and this credit crisis isn’t going away and the economy is getting weaker.  I still have exposure via a Nov 08 put option @ $22.50.
  • DVN had reached my initial intrinsic valuation.  They’ve added some new acreage in areas like the Haynesville which I hadn’t factored into my initial report but I was really taking Klarman’s sell discipline to heart.

As for new positions, I added BAM, NTE, FCX and INTC as well as an in-the-money put on AMAT.  With the exception of BAM (see my previous post), the other 4 positions shared some common characteristics: little to no debt, strong cash flows, nice dividend payouts.  I will post my NTE report shortly but with the two tech positions, I am moving into new territory where I am relying more on examining the fiscal position of the companies and not as much on my knowledge of the industry and the company’s position within it.  We’ll see how that goes.

FCX is a great mining company that is going down with the rest of the sector.  If commodities recover, FCX should outperform as it is undervalued on both a resource NAV basis as well as a cash flow basis.  I still expect Helicopter Ben to rear his head into American airspace anytime now and cash to fall from the skies shortly thereafter.

As always, YMMV and you should read my disclaimer.

2 Responses to “Portfolio Performance: -0.4% YTD through September 2008”

  1. The Enlightened American » Anybody Have Some Good Drugs? Says:

    [...] Portfolio Performance: -0.4% YTD through September 2008 [...]

  2. The Enlightened American » Quick Take on Devon Energy (DVN) Says:

    [...] think I mentioned selling DVN in the portfolio update post following the month I sold it. Basically, I had valued it around $100 a share based on last year’s reserves number and [...]

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