To start the total value of my portfolio is $4,841.92 (already up three freaking dollars since I started writing the article!) which is way down from the $5,380 that I have deposited into it. This is too depressing for me to calculate the returns on it right now, but last year it dipped below $4,500 so it is coming back. Maybe I should call this the stupid mistakes portfolio where I learned what not to do. Or on second thought that's a little too long and we'll keep it at ReaL Money - yeah like the soccer teams - at least for now.
Positions
K-Swiss 16.5%
Western Union 12.8%
Overstock.com 18.4%
Cryptologic 10.3%
Cant tell u Corp. 11.1%
CASH 30.9%
K-Swiss
Allocation: 16.5%
First Buy: 10/25/2004
Total Return: 15%
Initial Thesis K-Swiss was a magic formula stock before the book came out. The company had good growth, the best balance sheet and the best returns on capital in the industry and it was a small-cap stock. It did not possess a moat at all, but because 70% of sales came from its classic category, and this protected it from expenses and inventory loss on desiging new shoes. My initial valuation valued K-Swiss at >$45 per share.
Current Picture K-Swiss still has good returns and surprisingly good margins considering its revenue fell 40% domestically last year. But that's the problem its revenue fell 40% domestically last year. It has dealt with the cycles twice in the past and gotten through them so I'm confident it can get through it again, even if it doesn't - as mentioned on the conference call - it now has the ability to become a lot bigger in Europe and Asia then could ever be in the US in the future International Sales may be the driver behind K-Swiss. BUT, this domestic sales fall scares me - if it doesn't turn-it around this time then its overvalued.
Thoughts As usual I'm still debating within my brain what to do, I'm not 100% certain that it Will turn-around and if it does when. But I also believe it is a good company with able management and I already have 30% cash and am having trouble finding good opportunities.
Western Union
Allocation: 12.8%
First Buy: 10/17/2006
Total Return: 23%
Initial Thesis This one's easy I actually posted the whole write-up here. Suffice it to say it's a good company with a long history, good management, competitive advantages and undervalued. You know that usual value investing stuff.
Current Picture There hasn't been a lot of change. It's up over 20% which is pretty good.
Thoughts As you can see with the new position CRYP I usually buy more than once, I put about $500 in and then wait for it to fall - which it always did in the past - to buy more and get my basis up to around 15% of the portfolio. Unfortunately - a strange word for the situation I might add - WU shot up 20% almost immediately after I bought it and I never could do that second buy, I love it as a company but won't invest more now because it's not undervalued enough. That is why its allocation is only ~13%.
Overstock.com
Allocation: 18.4%
First Buy: 8/9/2006
Total Return: 13.6%
Initial Thesis I wrote about this one too. Suffice it to say it was a great business model but the stock price was depressed for two reasons: Wall St. thinks Byrne is crazy and it has yet to turn a profit. Amazon.com and Netflix each went up multiple 'bags' and neither were ever as undervalued sales-wise as Overstock.com is now.
Current Picture All the above plus they're getting positive results in the lawsuit and it randomly went up 5% the other day.
Thoughts This one is the opposite of Western Union and is my biggest position because I've been able to average down twice. But I'm also having seconds thoughts, if it is a no-brainer and its low-risk high-uncertainty then I should have backed up the truck and the position size is good. BUT if it's just high-uncertainty then I have too much in it and should probably reduce it to compensate for the risk.
Cryptologic
Allocation: 10.3%
First Buy: 5/10/2007
Total Return: -8.5%
Thesis Cryptologic is down way too far because of uncertainty that it will not be able to survive without US sales because of legislation that made its business in US illegal. Huuuhhh (me breathing in after that run-on sentence). But only 30% of its business came from the US a number that's down from recent years. Plus its management has a history of outperforming its own estimates and its growing very fast internationally. Plus, there's new legislation being introduced that would repeal the first legislation - that's a pretty good word btw - and allow it to do business in the US. Oh yeah and don't forget that Pabrai owns it.
Thoughts Evidently I'm not very good at timing my purchases 7% of the 8.5% it's down since I bought it happened the DAY I put in the order. Will probably average down soon.
Can't Tell You
The last stock I own is a special situation - specifically a going private transaction. I found it through a paid service, so I won't name it here, if you're interested subscribe to the service - well worth the price - and I'll send you a link to it.
Top 5 I Don't Own
Here are five companies I don't own, but am interested in and have initiated research.
Netflix
I saw this on the 52-week low list the other day, it just didn't seem like it belonged there. I know Netflix has a good model but has been effected by Blockbuster's increasing competition online. I also believe that Netflix can survive and thrive even with Blockbuster competing and the negativity may be overblown. I've also read about 39.5 articles about Netflix being a buy-out target in the past few weeks.
Starbux
I also found this one on the low list I don't know why it's there - remember I went about three months without paying much attention to investing - but I'm interested why it is. Morningstar raised it to a wide-moat rating today which pique's my interest.
Chesapeake Energy
I've been reading a lot about Longleaf and listened to a speech of there's where they mentioned this. I also read a post on it somewhere that interested me. Plus, I got the annual report in the mail on Friday.
Western Sizzlin
'Nuff said. But, also Friendly's announced it's getting bought out which takes a lot of risk out of my valuation.
Pinnacle
The more I look at this the more I like, plus Pabrai owns it!
Mas Libros
Buffett: The Making of an American Capitalist
The Sleuth Investor
The General Theory of Employment, Interest, and Money (Great Minds Series)
2 comments:
Re: Starbucks (SBUX)
Starbucks is experiencing a multiple compression - and deservedly so. Investors are realizing growth is likely to slow down. And let's face it, the stock is not cheap. They projected to earn less than $1 this year. Great company. But great company does not = great investment.
You are on the right track with Chesapeake, although there are much better oil stocks out there. ConocoPhillips is almost 30% of my portfolio, and I still think it's cheap. Buffett has a little chunk of it in his, too. When consumer spending dips or tanks, SBUX will not do well!...
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