My 2014 Investment Performance

2014 was a good year. We made a Total return of 16.38% for the year. Not too bad, comparing that the S&P made about 13.69%.

For the past four years the value of 100 dollars has risen to 176.94 giving an annualized yield of 15.33%.

S&P returned 15.55% for the four years.

I am a long term investor so our goal is always to find good and cheap securities and build wealth.

Despite we beating the S&P in 2014, the 2015 story is very interesting as Oil and Gas prices have gone down to record low. This can affect my 2015 performance but in long term it should be good as I have gobbled up some nice investments during this downturn.

I was asked to given an example of how my investment style works.  I have tried to explain to people that I do not trade and do not indulge in any fancy mechanisms. I have found a better example in recent times to explain my style – “I am planting seeds today and hopefully in 3-5 years these seeds will grow up to wonderful plants and trees and I will enjoy the benefits of the seeds I have planted.”

Reach out to me if you have any questions.

Summary of my returns over the years:

For Year 2011 –  3.65%

For Year 2012 – 12.32%

For Year 2013 – 30.60%

For Year 2014 – 16.38%

The Lawyers advised me to add this disclaimer – “This is not an investment advice nor solicitation for any investment. If you do investments based on my ideas and lose money, I cannot be held responsible.”

 

Significantly Overvalued

This is the news I am hearing on all fronts about stocks. But do I really worry about it. NO!!!!

Look at this chart from gurufocus that shows you the history of GNP to Valuation over decades.

One thing I will have to agree is that stocks in certain sectors are priced higher than it used to be. So I am not finding any bargains today except in the Oil and Gas sector.

There are still a lot of banks and community financial institutions that still sell at 2009-10 depressed prices. There is a good chance one will make money there if they read the annual reports. I own a couple of community banks that are no-brainer holdings. I am looking for more :)

In all other sectors, I find majority of the stocks to be overpriced. So this brings a question for most of us. Should I invest now or not do anything?

Given how much a GIC/CDs are making in North America, it is unwise to keep that money idle. The biggest difficulty is finding the right kind of investment. If you need that money in the next couple of years, I highly recommend finding an institution where they guarantee your principle.

If you have a run way of 3-5 years and are not ready to invest on your own, stick to mutual funds that are value investing oriented and especially the ones that have shown results over long term.

If you are ready to invest on your own and can understand accounting ( the language of business), then start looking at the sectors and companies that are down, especially in the Energy Industry and in Financial Institutions. You can find gems in this market.

Personal note:

We just received statements from our portfolios and would be soon publishing my investment return FY 2014. Please note that they are not audited and serves as no guide to your investment philosophy.

A look back at 2014

2014 was one hell of an year for 5reds. Publishing here regularly has given me some interesting insights into what you look forward to reading.

The top posts for the year were:

  1. Mutual Funds: Introduction to Oakmark and Bill Nygren
  2. Shipping Industry, Bankruptcy 
  3. Alternative Investments: Crowdsourced Lending
  4. How do you save 60k dollars

Most of the readers were from the US, followed by Brazil ( wow!!) and then by Canada.

I got my book released in a limited edition got some very amazing feedback from you all. Thank you so much !

The way I see the book is that it will be more like a software with releases coming at regular intervals. Expect to receive an updated version shortly. The Amazon release will have to wait for 2015 as I am incorporating your feedback in to the upcoming release.

My personal achievement was that I read an amazing list of books this year averaging at least one book a week.

We also have a new logo.

cropped-logo.png

There is a story behind this logo. Usually when companies want to hide something they put a * near their success and that star will take to a page where they talk in detail about their failures. This is the disclaimer section in an Ad and the Notes to Financial Statements in an annual report. I love to read them as they make or break any investment decision. That is the story behind this.

Thanks for being a loyal subscriber and as always if you find my writings useful, please forward it to a family or friend.

If you think I am boring or causing you a lot of inconvenience, still please forward it someone who is not in your favorite list :)

Enjoy your NYE and all the best to you in 2015.

Analyze any stock in just 5 minutes – Is it possible?

This is what I got in email today from my online broker. They were recommending how to buy and sell stocks in JUST 5 minutes.

I wish things were that easy. I usually spend about a week or two before making a call on an investment. In bigger investments, I spend more than a month analyzing the industry and the variety of competitors.

Very rarely, very very rarely, I end up buying a security on the same day I read about it.  I spend more time on reading through the financials especially when it is recommended by somebody else and not my own research.

I buy probably about 1-3% of the securities I analyze. That means a I spend a whole lot of time doing nothing but reading more and more about the companies and their industries. Once in a while, you run into something and you feel all the things lined up correctly in your investment criteria and then begins the phase two of the analysis. This is what Charlie Munger always quotes – “Invert, always Invert.”

One needs to see what are the worst case scenarios and see if your thesis holds up in those scenarios. Often, when you invest, it is very easy to see the glass half full than rather half empty. As a very positive person, it is very tempting to see the glass being more than half full than being half empty :) But when it comes to investing, it is a very necessary thing to keep your emotions in check as emotional investing yields terrible results.

To sum it up, spending time to analyze a stock is very key. Very often, the security you are analyzing may go up in value very quickly and you may feel that you want to rush your analysis. But as I have seen my investments through this past decade, these securities come back in prices you want from time to time. And of course, there are thousands of securities to buy. So be patient, the 5 minutes of stock analysis is not for a long-term investor.

Thoughts on recent trends:

If one may notice when filling your gas/petrol tank, the prices of oil has come down. This in turn has affected a lot of oil and gas companies in the US and in Canada. Some of them are not doing well and lot of good companies are sold at cheap. This is a good time to buy shares of oil and gas companies that are financially stable.

 

Is Confrontation good for you? The Story at Intel with Andy Grove

I have spent a good deal of time at startups, working for them, running them and have tasted all the different pallets of it. One thing that I have always enjoyed and known for is confronting ideas when I feel it is weak or unsupported. In fact one cannot work in a startup, if they don’t have confronting ideas about the progress of the product/company.

Some people do take it very personally and they are terrible for working with. But I always feel it is better to let a bad idea die than to make it survive because the person delivering the idea is too nice.

Here is a wonderful write up by Andy Grove on how to make constructive confrontation.

How to make confrontation work for you?

At 5reds, I do throw up ideas that doesn’t go with many of your beliefs and I do it for a reason :) To make you think why Srini writes like this. I welcome your confrontation so we can shake out bad ideas of mine.