Performance Report – May 1, 2014

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




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


Portfolio Return                         2.8 % actual (8.4% apr)

Portfolio January 1, 2014                       $180.50 million

Portfolio May 1, 2014                              $185.60 million

Investment earnings 2014                      $5.05 million

Investment Earnings 1981-2014             $129.55 million






            The portfolio is now invested as follows:


January 1, 2013

May 1, 2014

Stock Domestic



Stock Foreign






Real Estate






Fixed Bonds
















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



 Portfolio Comments

          I wrote the following in the last report and it is worth repeating:


         “I have found very few opportunities recently in either domestic or foreign markets, 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 absolute value 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 I can 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 underperform 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.”


We have had some inquiries about our hedge positions, which we list as part of our cash equivalents. I wanted to clarify that our hedge fund portfolio is completely different from the hedge funds that you read about in the press. It now seems to be a term that people use for pools of money managed by individuals using a myriad of strategies that are light years away from the traditional hedge fund. Our hedge fund portfolio is very different and, in aggregate, is a useful alternative to cash inside our portfolio. It is an attractive alternative as long as short-term interest rates are, essentially, zero.  I only expect, through time, moderately positive returns from this part of the portfolio (low single digits), but it still offers a positive risk/reward.  The risks looking back over the last years show the following for a weighted equivalent of our current hedge portfolio (including the truly horrendous 2008 when everything was decimated):



2007   8.9%             2008   -2.6%            2009   10.3%           2010     4.5%
2011   0.5%            2012    3.0%           2013     2.0%            2014    -0.9%






           Our cautious approach will continue until we start to see more opportunities in the marketplace. We will continue to search for opportunities throughout the world and we will be, as always, patient.


 I have appended a chart of our progress over the years. We are, of course, at all time highs and $100,000 invested in 1981 would have grown to $2,129,000.


We are just starting our annual financial planning reviews and you will hear from us in this regard in the coming months. We are also integrating some new “state of the art” software, which should have very positive effects on how we manage all aspects of your financial planning. It is part of our updating of our online presence so that it can provide a secure interactive portal for our clients.


           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.



Mike, Nancy and Sheila