Performance Report – April 1, 2014

This is a routine report of the portfolio and it measures our performance in the first quarter of 2014.




Details of the overall portfolio for 2014 thus far are as follows:


Portfolio Return                         1.7 % actual (7.1% apr)

Portfolio January 1, 2014                       $180.50 million

Portfolio April 1, 2014                             $184.20 million

Investment earnings 2014                      $3.05 million

Investment Earnings 1981-2014             $127.55 million




            The portfolio is now invested as follows:

January 1, 2013

April 1, 2014

Stock Domestic



Stock Foreign






Real Estate






Fixed Bonds

















          **** The stock figured is combined for January 1, 2013.


Portfolio comments


         As you can see the % invested in stocks has declined dramatically over the last 15 months. I have now broken it down into two categories – domestic and foreign.  I have found very few opportunities recently in either market although I search continuously. I am extremely patient and conservative and this frequently means that we will have large cash holdings (and/or hedge holdings) for prolonged periods. As I survey the marketplaces most areas seem overpriced or, at best, fully priced. We have had the opportunity to participate in a couple of special situations both domestically and as a result of geopolitical turmoil, but in the main, real opportunities are scarce.


         Our definition of opportunity, which is important, is that something is an absolutevalue rather than a relative value. The latter simply means that something is cheaper than its peers and doesn’t consider whether EVERYTHING is expensive. Absolute value is when something is considerably cheaper than a conservative valuation of its market value in a normal market.


           This too shall pass and we will, as is always true, be able to deploy money when bargains abound and when prices decline substantially. In the interim, patience is the smart approach and is the one we will take on your behalf.


                    As is true for most value investors, I am not making an asset allocation statement by my large cash holdings. I have no ability to predict the near term future, but Ican value assets. The cash position is a “default” position and it grows, and it shrinks, with the availability of attractively priced assets.


            The problem with most “value” investors is that they are forced to buy in less than optimal conditions as the mandate from their investors is to own value stocks/bonds. They get punished by withdrawals if they under perform in the short term. Many managers have decided the wiser path is to fail conventionally rather than take the risk of failing, or succeeding, unconventionally. As I have said many times, I would rather lose 50% of my clients than lose 50% of my client’s money.


              I am lucky that I have a stable client base who understand the value approach and who, in large part, have been on this journey for a long time and over some difficult market cycles.




To repeat:


           “In previous markets that were overpriced there were always sectors that were undervalued, but the current market is very unusual in that virtually everything is overvalued and that the dispersion is very narrow. I can guess that this is partly caused by the trend towards index investing and closet indexing. I am very much in favor of this trend for two reasons:


a.      Indexing is probably the best approach for most investors IF they can avoid the temptation (almost impossible) to sell when things are decimated and to buy when things are soaring. This approach won’t make them rich but they will, in the long run, do better than their “do it yourself” friends.

b.     Indexing creates weird distortions in prices and accentuates momentum and trend following. Over the years, I expect to take advantage of the “distortions”



           We take the responsibility that you have bestowed upon us VERY seriously. We continue to limit new clients to the children or parents of existing clients as we feel, strongly, that expanding our client base would have a negative effect on our existing clients. We are all in great health and look forward to working with you for many years into the future.