Friday, March 30, 2012

Returns as of Q1 2012

Well I'll just come out and say it... this was a great quarter!  As you may recall, after a rough 2011, I entered 2012 with a very concentrated portfolio of just 5 companies.  Interestingly enough, two of these companies (BAC and SHLD) had been major contributors to last year's poor performance.  Here's a quote from my year end write-up (

So what went wrong in 2011?  Three things: SHLD, BAC, and JOE.  And I'm not sure whether to call it stubbornness or arrogance, but I've effectively doubled down on Sears and re-initiated a significant position in BAC.  My hope is 2012 will prove to be a better year for these struggling companies, and with Sears's assets and BAC's core business, they both have a ton of potential. 

So far it looks like my stubbornness has paid off, as both companies have rallied quite a bit.  Here's a quick summary of where I stand overall:
  • I came into the year with $138,179.  As of 3/31/2012, my portfolio had appreciated to $246,569, for a total gain of $108,390.  Since I didn't deposit/withdraw any money, this increase was straight appreciation.  
  • My portfolio is up 78% YTD, while the S&P is up 12%.
On a cumulative basis, my returns for the last 6 years and 3 months are summarized below vs. the S&P (click all pictures to enlarge).  I also updated the "My Returns So Far..." page to the right.
Here's a waterfall graph that shows a little more detail.   The blue bars are the beginning and ending balances, the green bars show appreciation/depreciation, and the red bars represent deposits.
Below are my current holdings, along with their current value, cost basis, and any unrealized gain/loss.
I also added a new display - a bridge between 12/31/2011 and 3/31/2012.  As you can see, I exited one position during the quarter (SHLD Jan 2013 calls for $18.2K), which is reflected in the increased cash balance.
As for closing remarks, I'd like to stress that with a portfolio as concentrated as mine, sometimes the stars will align and things will work out for no other reason than dumb luck.  Going forward, I don't expect to ever have another quarter like this one, nor do I expect to continue beating the S&P by the almost 20% per annum I've done historically.  However, my hope is I'll continue to beat the market by a reasonable amount, after all the name of my blog is "Me vs. Efficient Market Theory."

As always, I'm happy to answer questions and I appreciate comments.  Feel free to email me at

Sunday, March 11, 2012

He who rides a tiger is afraid to dismount...

That Chinese proverb just about sums up my feelings on Sears Holdings, which has been on an absolute tear in 2012.  Nonetheless, after much deliberation (and honestly, angst), I decided to trim my position once again.  Specifically, on Friday I sold my remaining 25 contracts for the Jan 2013 $95 options at $6.80, generating proceeds of $16,986 (I'd sold the other 10 contracts in February 2012 for proceeds of $1,239).

For those of you following my blog, you know I first bought these particular options all the way back in November 2010.  Between then and August 2011, I added to my position 3 more times (click on the "zz Sears" label to the right to read about all my Sears transactions).  When all was said and done, I'd invested $14,592.  Then came December 2011, which was not kind to Sears investors.  In fact, as of 12/31/2011, my 35 contracts were worth $210 (that's no typo, my $14.6K investment had shrunk to two hundred bucks!).  Now, less than 3 months later, those same 35 contracts have been sold for total proceeds of $18.2K!

But why sell now, after all things are just getting interesting?  Well remember, I'm not selling out of Sears, but rather just trimming my position.  In fact, back in December when things were looking really bleak, I bought $18,329 of stock plus an additional $4,012 of Jan 2014 $55 options.  So, given my significant exposure to Sears from these purchases, I could no longer justify holding options that were both 1) out-of-the-money and 2) had less than a year until expiration.

Questions?  Comments?  Email