Up Close to 2x S&P 500 YTD–4 Month Performance Report

As of May 1, 2015 the Value Stock Guide portfolio is up 5.93% YTD compared to 3.03% returns you could have had investing in a S&P 500 index. A comparison with the most relevant benchmark shows VSG portfolio up 5.93% compared to a 2.32% return on Russell 2000 small cap index in the same period. All returns include dividends. VSG returns are net of commissions paid while S&P 500 and Russell 2000 index assume zero commissions and expense ratios (in practice the index returns will be lower if you invest via a mutual fund or an etf).

If you had invested $100,000 in the VSG portfolio at inception, you could take out your original investment and your portfolio would still be higher than someone else who invested in one of these indexes at the same time.

As of May 01, 2015. Inception: Jul 23, 2009. Last Year and Last 3 Years data is for calendar year
Year VSG SP500 Russell2000
Value of $100K since inception $342,974 $237,114 $220,979
2015 YTD 5.93% 3.03% 2.32%
Last Year 4.98% 13.69% 4.89%
Last 3 Years 92.28% 74.59% 69.42%
Cumulative since Inception 242.97% 137.11% 120.98%
Value Stock Guide Premium Portfolio Performance

 

More details on the portfolio performance and past trades is at our Performance page.

2015 Investment Activity

In 2015, we initiated positions in 3 new stocks and strategically increased our stake in 1 existing holding. Our investment in an oil sector company at the end of January turned out to be as close to the bottom as we could expect, and this stock is now up 72% since the investment 3 months ago. Two other new positions were added in April and are up 14% and 6% in less than a month.

We have not sold any stock in 2015 as of yet.

In many ways, 2014 for us was the time when we patiently waited for new opportunities to occur. We have started seeing pockets of opportunities in 2015 in select industries and we are taking advantage of these.

How much did our low level of action in 2014 affect our long term returns? This is of course arguable. If we were fully invested at the beginning of 2015, we would not have been able to act on these incredible opportunities in 2015 that we did. Over a typical investment horizon I will confidently tell you that discipline and patience have a positive ROI.

As of today, the VSG portfolio is now 93% invested and 7% in cash and we are expecting an exit or two in the next few months to free up more capital for new investments.

While we are waiting for the promised stock market crash of 2015 to materialize …

Such forecasts are made each year and this year the voices predicting a crash are shriller than normal. The fact is that any portfolio declines in a flash crash is typically made up very quickly. Mediocre returns are far more dangerous to your wealth than a market crash or even a drawn out bear market. Suboptimal investing as you worry about a possible crash will put you behind in the retirement derby or a wealth building exercise.

The point is, that while black swan events can have high impact, they are rare, and if they do occur, the market adjusts very rapidly in its wake. The rarity of the event indicates we should not spend too much time worrying over it, but at the other hand the high impact keeps people up at nights. Great thing about value investing is that at an individual company level, we invest when the price of a stock has already crashed relative to its value. When there is a real market crash, cheap stocks go down less than the average market. At the overall portfolio level, the market valuations dictate the level of cash we hold in the portfolio. When valuations are rich, a value investor’s portfolio will tend to sport high cash levels. When the markets crash, all this cash is put to use. Therefore a large portion of the “high impact” risk of a black swan event is mitigated by the investment methods.

Most investors disproportionately amplify the risks that are rare if they seem large enough.

Premium Membership Update

Starting 9:00 pm US Eastern time on Sunday, May 3, 2015, the membership fee for new members will increase to $2,000/year. Members who have signed up before this time will continue with their existing rate for as long as they continue their membership. The Lifetime membership option is full and is no longer offered to new members, except in very rare cases. If you have considered joining before, you should sign up now to take advantage of the current rate.

With the new pricing, VSG Premium is still a better value than Seeking Alpha PRO that can cost between $2,400 – $8200/year, with the added benefit of not having to separate bad ideas from good at VSG. I do not get paid to write an article here – I get paid to make money for my members and in my own portfolio. You invest with me for my proven long term track record. At Value Stock Guide Premium, you not only get recommendations with research, but you also get suggested allocations and advice to sell when appropriate.

Comments

  1. Anthony Foutz says

    Hello Shailesh,

    What is your take on the affect of marcoeconomics on value investing and evaluation? In the past, Warren Buffett, Charley Munger, and Bruce Greenwald all felt that a top-down view was to be ignored, but most recently have stated publicly that we are in unforeseen territory and that value investors must now consider the risks of macro effects from monetary and fiscal policy, debt deleveraging, and currency devaluing. Thanks for your time!

    Anthony

    • says

      Hi Anthony,

      I have been giving macro factors more consideration now for the last few years as it just makes sense to understand the industry dynamics, cycles and the positioning of the companies in the industry. The way I look at this is that macro trends can lead me to an industry or a sector where I am more likely to find depressed valuations. Once I start looking at the individual stocks, than it becomes much more of a bottoms up analysis.

      I recently answered a similar question in one of the Facebook groups I am part of. If you have access to Facebook, you may want to review it as it has a little more detail.

      https://www.facebook.com/groups/20906694945/permalink/10150511932129946/

      As for the specific query about currency and debt trends, this is generally hard to model. There are a few things we can do however, such as in an inflationary environment we can consider reasonably leveraged companies as potential investments while in a deflationary environment debt kills so we may want to avoid highly leveraged companies. I do not have a view on the currency dynamics as it eventually reflects back into interest rates and inflation and these 2 things are something much more tangible to work with.

      Regards,
      Shailesh

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