Before we get into the performance I wanted to quickly discuss a few housekeeping notes. If you’d prefer to skip the background and head straight towards the results just click here.
A couple of quick thoughts though before we delve into the numbers…
First things first, I wanted to quickly thank all of the amazing readers of this blog, especially those who’ve taken the time to write me with their thoughts and ideas, to comment and to generally share there thoughts on all things value investing over the years. To say it’s been not only wildly fun but the learning experience of a lifetime is an understatement. I’m quite certain in fact that I’ve learned more from the contacts and lifelong friends I’ve made over the course of the years writing this blog than I’ve ever given back and so for that, as with so many other things in life, I remain eternally grateful for the support and ongoing dialogue.
In fact, when I started this blog years back the idea that anyone would actually read it struck me as borderline preposterous, but life’s funny that way and what began as a humble project to feed my addiction to all things value investing while journaling my investing ideas – and if I was lucky, harnessing the “wisdom of crowds” in my research efforts here and there – has managed to not only surpass those expectations, but in truth ultimately far exceeded even my wildest imagination. So in short thank you, the reader, for making this endeavor such a rich experience and better yet, for making me a much better, more thoughtful investor over the years.
Secondly, I want to provide some context for the creation of the “new” AAOI blog portfolio of which you’ll see here today for the first time. As the natural follow up to the blogs real money Spoke fund, I think some explanation is in order but the goal is in one critical sense the same, meaning its purpose is to continue on in the tradition of tracking my investment performance in the public square over the life of the blog. In regards to the original AAOI Spoke Fund® and its fate, the short answer is that my transition to a new firm in early 2011 along with the dissolution of wealth-front as originally envisioned only a couple of months thereafter made the spoke fund’s continuation an unfortunate impossibility. This was a tough break no matter which way you slice it given the Spoke fund’s consistent history of substantial alpha generation, particularly in light of getting so close to that magical three year hurdle all of us emerging managers naturally look forward to surpassing.
Nonetheless, at the end of the day theres no sense in crying over spilt milk and of course, new opportunities called and so I moved on. That said, within a few months I decided another portfolio was needed if I was going to continue on with the blog as originally envisioned, both because on a certain level I think I owe it to readers in order for them to better gauge whether I’m worthy of their continued support, contributions, time, and energy – and because on a personal level, I wanted to continue on with a portfolio managed solely by my own hand.
Third, I wanted to address that with this new portfolio came a key change of heart as it relates to the wisdom of the original spoke fund’s policy of total transparency (read 24/7 real time access) to the fund’s holdings by the public at large as opposed to the fund’s investors specifically. My obligations to the LP’s I serve must always and everywhere come first.
Why that’s relevant specifically here is because it explains the new portfolio’s policy of only updating the results on an annual, and depending on the opportunity set at any given time, a potentially semi-annual basis thereafter.
So with all that said (if your still reading :)), lets get down to the mission at hand…
Since inception on 9/23/2011 until Feb 1, 2013 the AAOI portfolio has generated a total return of approximately ~55% vs. ~33% for the S&P 500, ~23% for the Russell 2k, and ~(-20%) for the S&P/TSX Venture index.
While my goal has always been absolute as opposed to relative performance, I was particularly pleased with the relative outperformance of the AAOI portfolio vs. the S&P/TSX-V index considering the relatively dramatic differential when over 50% of my holdings were listed on the venture exchange, at least over most of the time period in question.
Regardless, I was more than pleased with the portfolio’s results from an absolute standpoint. While difficult to pin down exactly given the Sandstorm Gold and Star Buffet errors, (after adjustments) it appears the annualized return has clocked in at roughly 40% give or take a percent since inception.
If I can manage to somehow continue at this rate going forward I would obviously be ecstatic, but unfortunately something closer to half the current run rate is likely to be closer to what is achievable on a sustainable basis. That said, I should add that even with all the uncertainty in what I continue to believe is a risk-fraught global economic environment I can’t remember ever being so bullish on the prospects of my current holdings, specifically as it relates to my highest conviction pics. Turning back towards the question of future performance though, if I can manage to generate returns approximating even half the present run-rate over the long-run, rest assured your editor will be more than pleased.
Thanks again for everything and here’s too the next five years of low-risk, high-return investing at Above Average Odds Investing being even better than the last – and rest assured the search for opportunity and hence, for those exceedingly rare, one of a kind “epic investments for posterity” rolls on.
(1) The SSL error is a function of Investopedia’s failure to account for the 5:1 reverse stock split. Regardless, adjusting for the change, the quantity of shares owned should approximate 1700, so the value of my SSL position in the Canadian account is ~$21k, not $93k. Therefore, the Canadian account value should equate to ~148k (220k-72k), not 220k.
(2) Also, in case your wondering why I’m just now publishing these returns given that we are roughly four months past the one-year mark, the answer is twofold. First, originally I had held off in hopes that Investopedia could fix the Sandstorm Gold related error with the goal being to allow me to unveil the portfolio in a cleaner fashion. This seemed entirely reasonable at the time given that all the other journal entries related to the portfolio’s various corporate events had been accounted for, or if temporarily in error, at least promptly fixed by Investopedia’s admin. After about three weeks of trying to get the issue resolved that hope unfortunately turned out to be in vein, and for some reason still inexplicable to me, not possible. Anyhow, given this seemingly non-fixable error I’ve just decided to include an explanation on how I adjust for this above. The other reason was because shortly thereafter I found a handful of ideas (really one in particular) that imo required secrecy and hence necessitated a further delay. For what its worth, with a defined process in place going forward I don’t expect any future delays to be an issue.
(3) The Star Buffet position has recently emerged from bankruptcy and hence has lost the Q in its ticker as it begins trading again as a post bankrupt entity. Unlike with SSL, this change should be be accounted for shortly although, also unlike with SSL, the net effect will be pretty much immaterial in terms of its effect on the portfolio’s performance. I figured I should note it anyway.
(4) As always I also hope readers will point out any errors or discrepancy’s if they come across any, as I’m not entirely certain the Sandstorm Gold issue hasn’t effected the total and annual returns at the margin in a manner that I haven’t considered, but then again I don’t expect it to be material either. To paraphrase Buffett, the goal here was to be approximately correct rather than precisely wrong.
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