Portfolio Performance +2.1% Through February 2009

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: +2.1% YTD (including dividends)
  • DJIA: -19.5%
  • Nasdaq: -12.6%
  • S&P 500: -18.6%
  • DJ WIlshire 5000: -17.8%
  • Russell 2000 (smallcap): -22.1%

Again this month, my posted portfolio shows higher returns than my actual portfolio. My real-money portfolio was down -1%, due to different weightings in the actual positions than the equal-weight formula I use for the public spreadsheet.

Despite the discrepancy, I am pleased with the performance thus far. Until the first few days of March, my natural resource-oriented holdings were sitting well above their November lows, even as the rest of the market dived toward new bear-market lows. Some of the other holdings haven’t fared as well but overall, I can’t complain. However, that’s not an invitation to get comfortable in this bear and I have been active in recent days, more on the sell than buy side.

Portfolio moves this past month:

  • Sold Northgate Minerals (NXG) — As I mentioned last month, I was looking to reduce some exposure to the gold sector. The gold run to $1,000 seemed like an opportune time to take some chips off the table. Gold’s subsequent failure to move solidly into four-figure territory suggests the precious metal will need another catalyst to take it into the next leg up. From a company standpoint, I was nervous with the timing between the Kemess end life and the start-up of Young-Davidson. The lack of dividends or ability to overwrite calls sealed the deal for me.
  • Again, I’ve redacted some new positions. I reiterate my pledge not to discuss these securities or the underlying companies on this blog. Generally speaking, while I believe the mad rush into corporate bonds may be somewhat premature, I have poked a toe into a few positions. The junk bond spreads are at record levels on both a relative level (vs. Treasuries) and an absolute level (12%+ interest rates are very high for businesses).

The financial media has been filled with lots of talk about whether stocks are cheap at these levels. I’ve even heard some pundits say stocks are cheaper than they were previously, which is the same as saying absolutely nothing at all.

Despite Alan Greenspan’s protestations otherwise, certain obvious economic conditions and bubbles can be predicted and diagnosed as they happen. Warren Buffett, in his recent annual letter, calls a bubble in the long-term Treasury market. I’m not sure if I share his conviction but 3% over 10 years does seem a paltry return. But he joins Bill Gross and Marc Faber among others who have called bubble in the Treasuries in recent weeks. Understand that at that poker table, you are the fish (or in this case, Treasury buyers).

A few items on which I do have some conviction:

During the so-called bubble in commodities, very little new capacity (as in resources in the ground) were brought to market. From Exxon Mobil (XOM) to Freeport McMoran (FCX), most of these companies repeated the same mantra: Large natural resource deposits are impossible to find.

So we have a bubble that produced little new supply and now a bust that is drastically reducing capacity. Some pundits have been pointed to the gushing storage tanks at Cushing but that is to mistake temporary storage for long-term supply. The gaping spread between WTI and Brent crude made this clear. Today’s surprise inventory draw has erased the WTI/Brent spread. The natural gas market should follow within the year or 2010 at the latest.

A few months ago, I stated the gold sector seemed attractive. Now, energy companies with the ability to bunker down strike me as absolute long-term bargains at these levels.

It’s impossible to predict when the economy will recover but it seems clear the patient is on artificial life support. Despite all the pundits denigrating the Obama administration’s efforts on stimulus and budgeting, government intervention is the only thing propping up this jig. The economy falls through the floor if the government pulls out. It happened to Roosevelt in the Great Depression and history seems to have rhymed an awful lot in the past year or so.

As I promised yesterday, the third part of my “Blogging the Bears” series (a book review of Russell Napier’s Anatomy of the Bear — see part 1 & part 2) will post tomorrow. Given the current economic dislocation, it seems probable today’s situation will be looked upon as a comparably severe market dislocation, which means cheap stocks can get cheaper. But knowing what’s coming doesn’t mean we can predict the timing and times like these are when fortunes are made.

As always, YMMV.

4 Responses to “Portfolio Performance +2.1% Through February 2009”

  1. Jae Jun Says:

    Wow excellent performance so far. Wish I could say the same.

  2. Davy Bui Says:

    Hey Jae,

    Thanks. Sorry about the down year on your end. All the value guys are getting slaughtered though, including Buffett, so you’ve got great company.

    As I’ve always said, my performance could be either luck or skill but statistics suggest most likely luck.

    Buffett says you need at least 3 years, absolute minimum, to begin judging whether it’s skill and I’m into that third year now. He also wrote that it’s performance during bear markets that really prove your mettle.

    I was up 18% last summer until the bottom fell out of commodities so we’ll see how the port holds up over next few months.

  3. Brian Says:

    Is there a reason BAM isn’t on your portfolio spreadsheet?

  4. Davy Bui Says:

    Yes. But I can’t really go into detail.

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