2012 Performance review and comments
2012 was a very good year for the blog portfolio. Overall performance 2012 including dividends and interest) was 37,4% vs 26.6 % for the Benchmark (50% Eurostoxx, 30% DAX, 20% MDAX), resulting in a relative outperformance of 10.4% for the year 2012.
Further details can be found in the following table:
|Bench||Portfolio||Perf BM||Perf. Portf.||Portf-BM|
The December 2012 outperformance is mainly a result of some significant year-end effects in some of the stocks like Total Produce, SIAS and Buzzi to name a few.
Also many of the stocks are rather “boring” low beta stocks. Therefore the 2012 outperformance should be viewed more as lucky timing of special situations than anything else. In a normal “bull year” like 2012 the portfolio should significantly underperform. In 2012 however, some of the special situations (esp. AIRE KgAA and Draegerwerke) catalysed unexpectedly early and let to this outperformance. From an overall strategy point of view, i would assume that my portfolio outperforms in bad years and underperforms in bull years.
To be honest, I don’t think that the current portfolio has an equal upside potential like in the beginning of last year, mostly due to the lack of really interesting special situation investments. For instance, the upside of athe Draeger Genußschein was much higher when it trades at ~2.5 times the pref shares than the current 4.5 times. On the other hand, I think the portfolio is well protected to the downside which should be the major concern of any (real) value investor.
The only change in the portfolio in December was the purchase of some Sol Spa shares in the last few days, taking advantage of the significantly dropping share price.
|Name||Weight||Perf. Incl. Div|
|AS Creation Tapeten||4.1%||22.2%|
|BUZZI UNICEM SPA-RSP||5.5%||16.0%|
|Tonnellerie Frere Paris||4.9%||31.5%|
|KAS Bank NV||4.7%||9.6%|
|Drägerwerk Genüsse D||9.2%||96.5%|
|DEPFA LT2 2015||3.0%||52.6%|
|Short: Focus Media Group||-1.0%||-3.7%|
|Short Lyxor Cac40||-1.3%||-5.7%|
|Short Ishares FTSE MIB||-2.2%||-7.5%|
|Terminverkauf CHF EUR||0.2%||5.0%|
The cash quota of ~10% is within my usual target range.
Outlook and comments:
If I would be in the “tactical” Asset allocation business, I would expect a rather strong start into the new year.(Edit: Is started writing this 2 days ago…) So many investors have watched the stock market from the outside and momentum looks quite strong. It looks like the fear of missing out another strong year is overcoming the fear of Euro crisis, fiscal cliff etc. or to quote Howard Marks: “when greed is stronger than fear”.
On the other hand, as a bottom up value investor one should be more cautious than ever. When greed is trumping fear, naturally for a value investor times get harder as under valuations are fewer and harder to find. The temptation rises to invest in “weak” stocks or turnarounds without much downside protection.
This goes together with the behavioural bias of “overconfidence” which usually is getting stronger after good years.
So the main focus for value investors will be to “stay the course” and not get lured into more risky and only superficially “cheap” stocks despite another period of potential underperformance against major stock indices.
The “harvest” will come when everyone is “on board” in the stock market and the next (inevitable) correction or contraction will come.