During the week of inactivity (a.k.a. vacation) I had time to reflect on the year that was 2008. If I had to describe 2008 in one word it would definitely be historic and shocking. OK that’s more than one word.
Historic
2008 will long be remembered as the year in which large institutions disappeared in the matter of weeks, sometimes days. Some will argue Wall St. exists anymore as we saw century year old institutions disappear right in front of our eyes.
Shocking/Sad
Shocking was the rate at which most people lost their jobs and the number of businesses that had to close shop. Many business friends of mine lost large amounts of money in the market which affected their retirement plans.
Buffett
2008 was another year in which Warren Buffett made his presence felt be releasing personal facts in “Snowball” and his NY Times article. If memory serves me right, Buffett had talked about the market in the early 70’s when he felt “oversexed” and the late 90’s speech warning that markets are overvalued (speech is detailed in Snowball).
Magic Formula/Value Investing
From reading several sites,blogs,forums,groups,etc. 2008 was not a good year to be a value investor (including myself). I could go down a list of well known names who had major blowups in their portfolios and thus suffered in performance. I will not single out any one individual but I can say many of the blowups could have been avoided and not repeated if the individual(s) took the time to read the filings (or at least try to understand them).
Portfolio and Lessons Learned
I will under perform in 2008. I will not make excuses and will comment instead on the lessons learned. First, I have to keep some cash on hand and build positions slowly. Too often I jumped into positions without cash on hand to average down. Secondly, continue to ignore the market noise. I have made great strides this year, but there’s still work to do. Third, take this year as a learning experience in crisis investing.
The best way to describe my portfolio is black and white. The first half of 2008 I held a portfolio of stocks that was on autopilot. The portfolio consisted of a) minimal security analysis b) diversification c) a bet on the magic formula system. The second half of 2008 was the complete opposite and a portfolio policy I plan to continue in the future. Below are my holdings with brief commentary (potfolio details will be available in early Jan.).
American Express (AXP)- High quality business selling at a very good price. Credit concerns are exaggerated in my opinion as clients have solid credit scores.
Boeing (BA)- I have been riding it since it hit $60 and have averaged down as temporary bad news continues to hit it. Has been in the magic formula list for quite some time.
BCE (BCE)- Great presence in Canada (duh!). Actually, it received great attention due to its takeover battles with the “teachers”. I bought it on the basis the deal WILL NOT go through. The company produces tons of free cash flow and has taken a step in the right direction by reinstating its dividend.
Conoco Phillips (COP)- An old favorite of mine as I have owned it before. It does not get as much attention as Exxom (XOM) or Chevron (CVX) but it has a dual play in oil and natural gas. Buffett built a large position but he might be late to my party as I have been on this puppy for a while now (at least I think I beat him to the punch). Anyway, the companu continues to produce a ton of free cash flow and if energy prices pickup as I expect them COP should benefit. COP actually appeared in the magic formula but you would have ad to screen the top 100/ 2 billion market caps, something in which I rarely do.
Dr. Pepper Snapple (DPS)- The “Greenblatt” stock as its both a spinoff and a magic formula stock. The drama with Guns n Roses was funny IMO but the company should be fine as it enjoys life as a free bird. Ackman and Einhorn have pretty sizable bets in DPS so something good might happen but I’m definitely not taking a position because they hold it.
Pacer International (PACR)- Another old favorite of mine. Enjoys an extra cushion through its import and export operations but no matter what happens, it will always be considered a non-asset based logistics provider. PACR has been on the magic formula list for so long, I am trying to remember a day in which it has NOT been on the magic formula list. I continue to love its balance sheet.
WellCare (WCG)- A very frustrating year to be a WCG shareholder. So much bad news surrounds this company that I will not even bother to list them. Throughout the second half of the year I held a small position in WCG. The stock plunged from $19 to $9 as it continues to delay its SEC filings. Now that Berkowitz has taken charge of its bank debt, that is one less headache to worry about. I did follow Berkowitz into WCG and have done my own research on it. Come to think about it, WellCare is the company I have spent the most time analyzing and thus represents my largest position.
Western Digital (WDC)- Another magic formula stock that simply does not get taken off the list. Due to its commodity based products, I plan to hold it as soon as it reached my estimated IV.
WellsFargo (WFC)- Arguably the best bank in my opinion.
WellPoint (WLP)- Best of breed IMO. WLP has been a long favorite of mine and other value investors. I have owned it in the past and have re-bought as I continue to like the business.
Transparancy and the blogosphere
When I started this blog one year ago there was only a handful of value blogs available online. As of today, I now have more than 50 value blogs in my Google reader and I hope the list continues to grow. I love taking time to read what others are looking at and how they “write it down”. I hope more blogs come online and bring nothing but good high quality content. I will take a blog that posts infrequent but high quality content over a blog that posts every day “pooh”.
I also hope bloggers become more transparent in what they hold. I will do this by creating a page revealing my holdings and the price and date they were purchased. I tried to do this earlier in the year but the idea was always on my “to do list”. I will continue to focus less on individual stocks and more on value investing as a whole.
The Site
I will apologize in advance as the site will be re-designed AGAIN, hopefully for the last time as I will actually pay for the sites look. I plan take the blog to the next level and a new design will be needed. Finally, I enjoy taking the time to write on here and I hope anyone who stumbles across this site finds the content valuable. I do not write everyday as I believe in quality and not quantity. Happy New Year!!!
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