Saturday, January 12, 2013

2012 Returns

Well, it looks like we've got another year under our belts.  And while 2012 was not particularly exciting in terms of activity/trading, it was absolutely thrilling in terms of performance.  In fact, relative to the S&P, 2012 was my single best year!

So how'd this happen?  Well, if I had to guess, I'd say it was some combination of luck and temperament (with luck getting the lion's share of the credit).  As you'll recall, I came into 2012 with just 5 companies (AIG, BAC, JEF, LUK, and SHLD).  During the year I completely sold AIG, and from time to time tweaked my SHLD position.  Otherwise, I basically just sat on my ass for 12 months.

In terms of what drove performance, AIG and BAC (both TARP warrants) were the major contributors.  Between 12/31/2011 and when I sold in April, AIG/WS went from $5.51 to $12.65 (not bad for 5 months!).  BAC/WS, which I still hold, started the year at $2.02 and finished at $5.42.

As for 2013, it should be another interesting year.  LUK and JEF are scheduled to merge in Q1, which will leave me with only 3 companies (excluding spin offs, which are not a meaningful % of my portfolio).  In terms of position sizing, this is easily the most concentrated I've ever been.  However, with 42% of my portfolio in cash, I think I can handle a little company-specific risk.  Also, I get pretty nervous with the market trading around multi-year highs, and cash helps me sleep better at night!

Lastly, my expectations are still high for Sears.  I think Eddie taking over as CEO is interesting, and my hope is we'll see more asset sales and/or corporate transactions as a result.  Who knows, if Sears really does become the next Berkshire, maybe more people will start reading my blog!

Anyway, here's a quick summary of 2012:
  • I started the year with $138,179, and in June I withdrew $10K from my account.  I ended the year with $213,090.  That's $84.9K of straight appreciation.
  • My IRR for 2012 was 63.3% vs. 15.2% for the S&P (assumes dividends reinvested and $10K had been withdrawn from my "Hypothetical S&P" portfolio, thus keeping the comparison to be apples-to-apples).
Below are the following: 7 year performance summary, waterfall graph, holdings summary, and quarter-to-quarter bridge (all values are as-of 12/31/2012, click to enlarge).

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