Sunday, February 16, 2014

Some Changes...

Well folks, I hate to do this, but it's time for some changes...

As you know, one thing that makes this blog unique is that I post all of my transactions in real time and real dollars.  The great thing about this is that I have an audit trail and verifiable track record.  However, there's also a downside...

For one, the blog is now mostly focused on logging my trades, which isn't much fun for me and probably isn't that interesting to you.  I mean aren't you tired of all my posts on buying/selling Sears?!  I'm also worried about blogging induced style drift - am I more risk adverse, does "talking my book" create commitment bias, etc.?

Now, I might have been willing to live with this if it were just my own money, but recently I took on outside investors.  This means I need to be very careful about anything that can bias my decisions or impede my investing process.

So, where do we go from here?  For starters I will no longer log my trades.  And as for the rest of the blog, well I'm still trying to figure that out... stay tuned!

Questions?  Comments?  Email

Tuesday, February 4, 2014

Trading out Sears common...

Man, Sears is really struggling these days!  Frankly, with things as bleak as they are, it wouldn't surprise me to see some big changes in the near future - perhaps we'll see significant store closings, or maybe a large real estate transaction.  Your guess is as good as mine.

So, with their stock in the mid-30's, I figured it was time to swap out the common and add some options!  Specifically, I sold my 400 shares at $34.25 (for total proceeds of $13,698).  I then bought 15 SHLD Jan 2016 $60 contracts at $4.40 (for a total outlay of $6,607).  Wish me luck!

Questions?  Comments?  Email

Sunday, January 12, 2014

2013 Summary

Alright folks, 2013 is over and 2014 is underway.  Frankly, I'm not sure what to think about last year's performance.  On the one hand, my absolute returns were decent, and that's despite my very conservative cash position.  On the other hand, I under performed the S&P, which is never a good thing.

Speaking of the S&P, it was up an astounding 32.3% last year!  On a percentage basis, that's better than the bounce we saw in 2009 (which was only 30.4%).  In fact, this is the market's single best year since I began investing (which was 8 years ago).  And, on top of all that, this is the 5th straight year market's been up.

So where does this leave us?  Well frankly, as a value investor, this has all been a bit frustrating.  After all, the more "stretched" valuations become, the more difficult it is to find companies trading at a discount to their intrinsic value.  In fact, right now the most compelling opportunities are the ones that have something "wrong" with them (like Sears and Strayer).  If companies like these can be "fixed," the payoff can be huge, but there's execution risk...

Anyway, here's the summary:
  • I started the year with $213,090 and finished with $267,482.  Since I didn't deposit or withdraw any money, this increase is straight appreciation.
  • In percentage terms, my portfolio was up 25.5% in 2013, whereas the Hypothetical S&P appreciated 32.3%. 
And here are the exhibits (8 year performance summary, waterfall graphs, holdings summary, and quarter-to-quarter bridge, click to enlarge):

Questions?  Comments?  Email

Friday, November 15, 2013

Time to be fearful?

The best time to be fearful is when others are greedy, and with that in mind I reduced my Sears Holdings position yet again.  Specifically, I sold my 10 SHLD Jan 2015 62.50 contracts for $11.30 (for total proceeds of $11,288).  You'll recall I purchased these back in July at $3.65 per contract (here's the post:, so it was a very profitable 4 months!

Questions?  Comments?  Email

Wednesday, October 23, 2013

Out with the old, in with the new...

Today I traded out my shares of SD for a new position in CNQ.  Specifically, I sold all 4000 shares of SD at $6.46 (for proceeds of $25,835), which isn't bad considering I just bought them in April at $4.93.  I then purchased 850 shares of CNQ at $31.36 (for a total outlay of $26,661).  Unfortunately I don't have time for a full write up, but here's the elevator pitch...

Management is extremely talented and well aligned with shareholders.  If you have spare time read about Chairman Murray Edwards, he's the real deal.  Furthermore, I think CNQ is a high quality company (at least compared to other E&P's) and is selling at a compelling valuation.  In other words, at current prices I think CNQ is a much better risk-reward bet than SD.  Anyway, that's it for now, wish me luck!

Questions?  Comments?  Email

Thursday, October 3, 2013

Q3 Discussion

Well folks, looks like it's time for my Q3 discussion and analysis.  And while I hate to count my chickens before they're hatched, it looks like my portfolio has finally awakened from it's slumber.

More specifically, an unsustainable short interest in Sears coupled with a bullish report from Baker Street Capital caused the stock to shoot up in September.  I responded by trimming my position and locking in some gains.  However, as you'll see in the exhibits below, Sears is still very much a core holding.  

So what else is going on?  Well frankly, I'm as nervous as ever about valuations in the market, and as a result I'm holding a lot of cash (37.4% of portfolio).  Furthermore, although I continue to search for new opportunities, I repeatedly come up empty handed.  In fact, these days the market reminds me a little of 2005-07.  Maybe this makes me the investing equivalent of Chicken Little, but at least I sleep well at night.

Anyway, here's the summary:
  • I came into the year with $213,090 and ended the quarter with $268,074.  I didn't deposit or withdraw any money, so this increase is straight appreciation.
  • My portfolio has increased about 25.8YTD (35.6% IRR), whereas the Hypothetical S&P has increased about 19.7% YTD (27.2% IRR). 
And here are the exhibits (7+ year performance summary, waterfall graphs, holdings summary, and quarter-to-quarter bridge, click to enlarge):

Questions?  Comments?  Email

Monday, September 16, 2013

Easy Come, Easy Go...

Well folks, this is going to be short and sweet...

Similar to my previous post, SHLD has continued its steady march upward.  So today I trimmed my position yet again.  Specifically, I sold 10 SHLD Jan 2015 $60 contracts at $11.70 (for a total proceeds of $11,688).  Given that I bought these contracts less than a month ago at $2.95 ( this was a nice little gain!

Questions? Comments? Email

Monday, September 9, 2013

Know when to hold'em?

For those of you keeping track, you know I've recently been buying a lot of SHLD LEAPS.  Then, much to my surprise and delight, SHLD went on a tear starting in late August.  Today it went up over 12%... on no news whatsoever!

Now I know SHLD is ripe for a short squeeze, and it seems like we're in the middle of one right now (~90 MM shares are held by long-term owners and index funds, ~16 MM are shorted, and there are only ~106 MM shares outstanding, hmmm...).  However, the truth is I have no idea how to trade around this type of thing, and with the run-up SHLD has become a significant % of my portfolio.  So today I let prudence take over, and sold both my SHLD Jan 2015 $72.50 and $85.00 LEAPS, for proceeds of $3,438 and $4,681, respectively.

Now it's not like I'm bailing on SHLD, after all I still hold the common, as well as the Jan 2015 $60.00 and $62.50 LEAPS.  Rather, today's transactions were more about managing my portfolio's composition, keeping an eye on risk, and holding my temperament in check.

Questions? Comments? Email

Monday, August 19, 2013

Call Me Crazy...

You know, it isn't easy being a value investor, and this is especially true when you blog about your picks in real time.  After all, just about anything I buy has significant "headline risk," and is likely in the midst of some sort of turmoil.  In other words, I have to be willing to look dumb now with the hope of being right later.

So what's new?  Well, I'm not just waxing philosophical on a Monday afternoon.  In fact, this post is to alert my readers that I bought more SHLD options today.  Specifically, I bought 20 SHLD Jan 2015 $60 contracts for $2.95 (for a total outlay of $5,919).

Now I can almost hear the collective groan through my screen, "oh geez mevsemt, not more Sears!"  But here's the thing, SHLD has a decent margin of safety.  I'm mean they've got real estate, brands, Lands' End, 51% of Sears Canada, owned inventory, etc.  Of course they also have things on the other side of the balance sheet (like that pesky pension), but suffice it to say I think the assets far outweigh the liabilities.

There's also another interesting dynamic that could be going on here (warning: the following is idle speculation).  First, Eddie has been selling/trimming everything in his hedge fund except Sears, and I think he personally owns somewhere around +30 MM shares.  Concurrently, Bruce Berkowitz (a long time supporter of Eddie), has recently been accumulating Sears, and is now up to roughly 20 MM shares.  Hmmm... 50% of SHLD in friendly hands... could Eddie be winding down his hedge fund?

And ultimately, even if Eddie has no intention of quitting the hedge fund business, SHLD still represents an opportunity to invest alongside an incredibly talented investor and businessman at a reasonable price, and these situations don't happen everyday...

Questions? Comments? Email

Thursday, July 18, 2013

More Sears...

It seems like Sears can't catch a break.  And, while everything else has been rallying this week, SHLD proves to be the problem child yet again, and is actually down.  So what do I do?  Well, I buy more of course!

Since I've talked about SHLD ad nauseum, I'm not going to rehash my whole investment thesis here.  Rather, this is just a courtesy post to disclose a new purchase in real time.  Specifically, I bought 10 SHLD Jan 2015 62.50 contracts for $3.65 (for a total outlay of $3,662).  Wish me luck!

Questions?  Comments?  Email