Portfolio Update December 2009

January 5th, 2010

Old School Value Stock Portfolio Performance 2009

Portfolio Performance

WOW what a year it was. The Old School Value portfolio ended 2009 with a gain of 289.88%! Compare this to the market 24.71%. In December alone, the portfolio gained 24.08% compared to the market’s 2.81%.

The absolute gain since inception is now 52.09% compared to -0.75% for the market.

I’m actually surprised at much the portfolio has grown over the past year. I was so close to hitting 300% but the weak volume during the last week of December kept things flat. But to produce a return in excess of 100% itself is a dream to me.

2009 Portfolio Movers

So how did this happen?

Well I was very fortunate to have kept buying and contributing to during the fall. I doubled down on stocks that I felt were already cheap but were even cheaper when it dropped another 50%!

People were calling it junk and all sorts of other names but having confidence in my analysis proved to be the right decision.

Winners

GGWPQ is my first 20 bagger (2000+%).
VVTV is the second 1000+% for the year.
ROIAK ended 2009 at 687% since when I bought it in August.
SALM ended at 460%
ETM up 100%
and many other current holdings and sold positions well over 25%.

Losers

But nobody is perfect and I have had my fair share of losers

Greed got the better of me in my EMAG investment. It became the turning point of my investing outlook and completely changed my focus.
Sold KSWS and CRDN for loss of less than 10%. Would have broken even easily for KSWS but I need the cash for better opportunities.
So far INSM is a loser by the numbers but I’m confident in INSM. Downside is well protected.
DISK… defaulted on their loan and now down 83%. Yikes. Glad it was less than 2% of my portfolio to begin with.

December Portfolio Trades

I only made one trade in December.

Bought GRVY

Very late to this when I think about when I first came across it. Heard about it from Manual of Ideas and then had a couple of people asked me directly but it finally took a forum member’s write up on GRVY for me to view it more carefully.

Looking Ahead to 2010

With my current holdings, I’m sure my portfolio will continue to perform well and grow. Even if the market in 2010 stays neutral, since I focus on beaten down stocks, performance ins’t related to the market. For all I know, my performance beta could be 10 and I couldn’t be happier. Who wants to be stuck with a beta of 1??

The best time to invest in 10 years has passed, but it still isn’t too late with cheap, downside protected companies. You gotta be in it to win it.

Disclosure

I own GGWPQ, VVTV, ROIAK, SALM, ETM, DISK, GRVY at the time of writing.

Are your stocks cheap or overvalued? Check with the stock valuation spreadsheets

- Vaidas

Congrats! Your 2009 portfolio return is unbelievable.

- Jae Jun

Thanks Vaidas. 2009 was truly unbelievable.

- Alex MacKinnon

Thank god for you and this site. That’s all I can say.
I’m a die-hard fwallsteet guy… and now a die-hard OSV site.
I’m located up in Alberta, Canada – where does OSV hail from ?

- Ankit Gupta

Can you explain your thought process on SALM? Their cash flow looks great, but what worries me is both, the current debt and LTD.

Great calls and great performance, glad you had a good year!

- edward

Good question Ankit, I would agree SALM has far too much debt. I would also like to know about INSM, granted as it stands with cash and short term investments it is worth a little more than it’s trading for but I just don’t feel there is enough protection as the future is unknown. PRCP might be a more logical choice…your thoughts?

@ Alex,
Welcome. We share a common interest of being fwallstreet fans I’ve literally read every single post from the beginning when Joe started his site and it’s where I learnt the most.

@ Ankit & Edward
I actually wrote about SALM here and there in the comments and forums but not a specific post.

To sum it up briefly, if you look at SALM on its own, it is a debt ridden company. But if you look at the economics of the industry and business, it becomes very attractive.

High penetration rates, high ad effectiveness, lots of FCF.

So if you have a proven business that produces much more FCF than the interest payments and the company has been paying off debt and within the debt covenant, what’s there not to like?

The idea and reasoning is really simple actually.

- tuoki

Hello

I want to know what you think about of potential KFT and Cadbury merger? Do you think that merger with *new* sweedened deal will destroy shareholders value as Buffet thinks?

- Mechanonuke

@Edward

PRCP seems interesting. Shr price is made up of ~78% cash/equivalents. Very close to 0 NNWC with very little debt. And an on going business in an out of favor sector. Worth a more detailed look.

@Jae

In the NNWC spreadsheet the Inventory BV multiplier is set at 50%. Do you ever use less? Reason I ask is because I tend to use a lower multiplier based on the type of business, dependent on if I guesstimate that the inventories are illiquid or only sellable at firesale prices.

@ tuoki,
I haven’t read much about it so I don’t have much of an opinion, but my bias is to usually side with Buffett when it comes to these things.

@ Mechanonuke,
I usually keep it set to 50% but you are right. In a fire sale, assets could go for 25% but in the likelihood that the company isn’t liquidating but just in a difficult period, 50% is more than fine with me.

- conan21

What about PDII, MHH and INSM? are you still long these stocks?

Yes I do still own those. I just didn’t include everything in my portfolio.

- Sivaram Velauthapillai

Hi Jae,

Happy New Year and all the best to you and your family… yes, I realize it’s a bit late

Anyway, great job with your portfolio. That’s an amazing return. Congratulations.
.-= Sivaram Velauthapillai´s last blog ..2009 Asset Performance =-.

- Tyler

Hi jae how can I set out how I performed against the market on excel cuz I’ve bought and sold aswell. Thx Tyler

Thanks Sivaram

@ Tyler,
Check out the post I wrote for the investment tracking spreadsheet.

- Ken

Congrats! Great performance. Thanks for the information on the site. I have done really well with VVTV and ROIAK, thanks for pointing them out. I never had faith in the the GGP idea, but obviously missed out, oh well . Hard to complain about missing opportunities with the all the good ones I have been able to take advantage off.
.-= Ken´s last blog ..ITEX 2009 Annual Shareholder Meeting Notes =-.

Hey Ken,

Im real glad that you took advantage of the good stuff.
I think I’m in some sort of a rut the past few weeks when it comes to finding ideas. I just don’t seem to be able to see something I like.

- 4cinvestor

Thank you for sharing with your results. Have you given up DISK yet? What is your thoughts on JH Partner’s 90% possible dilution if it goes through? Can JH partner turn around DISK? What would be the attractive price for the cigarette butt situation?

Thanks,

Josh

@4cinvestor,

My DISK position is only $98 at the moment so I haven’t bothered following it at all. But if I think about the economics of the company, it’s going to be real tough. After all, the assets dont’ cost anything to maintain but most of it is still intangible.

DISK will probably stay in my portfolio until it either recovers or goes bankrupt.

Thanks for your view.

Cheers,

- stocki711

Congrats on the year. I also wanted to say congrats on KTII great call on the fair value. I am happy I looked into BOLT more, I’ve been happy with DCU/EVI as I’m sure you are and I would only suggest IBCA. I know you mentioned you hate financial stocks but I can try to walk you through what I know to the best of my ability. Your spreadsheets are awesome and I’m going to look into google spreadsheets, seems like a much better option.

stocki711,
Hey thanks a lot.
I was just real lucky to find KTII. Awesome management, great boring consistent niche leader. Perfect recipe to be bought out. Sadly I didn’t see it at the finish line as I sold out a little early and couldn’t buy back in. BOLT is pretty rock solid as well so I think I got in at a real good time.

As for financial stocks, it’s not that I hate them, I just don’t know how to value them properly and with so many stock ideas I have already, just could never find the time to learn.
If you could write something up, that would be bloody fantastic!

- Susan

Hi Jae, congratulations! What do you think about ENT?

Thanks Susan.

I’m not very familiar with valuing energy trusts but from the looks of things, it looks like an opportunity.

Portfolio Update December 2009

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