I mentioned last week that I was considering posting semi-annual results. Whelp, the first half of the year is over, so it’s time to hold up on the promise.
But before I do: some caveats.
- Many of my stocks are extremely thinly traded, with bid ask spreads over 15%, and trade by appointment (twice a month tops). This means that the value of my portfolio can swing wildly based on one trade that could have happened over two months ago!!!
- Because many of my stocks are so illiquid, they tend not to participate in big run ups or market crashes. This means my portfolio tends to outperform during down periods and underperform during up swings.
- While I post and discuss most of my holdings on the blog, there are some holdings that I don’t discuss or disclose for a variety of reasons. Just FYI
- Finally, I do use some margin in my portfolio when engaging in arbitrage opportunities. Because my portfolio is so small, the margin tends to be both costly and short lived. Also because of how small the stocks I hold are, the amount of margin I can get is quite small compared to the value of my portfolio, so the effects tend to be moderate. Again, just FYI.
- The way I track my portfolio is simply by taking the end of period balance and dividing it by the beginning of period balance. Because I don’t add money to my portfolio during the year, this should pretty closely track my returns, though there are some dividends “in the mail” that I lose credit for.
So, all that said, my performance for the first half of the year was up 16.45%. My benchmark, the S&P 500, was up 8.31%.
Obviously, the results were pretty good. That said, I’m a bit disappointed- I made more than my fair share of my mistakes in the quarter that kept my performance from being much better. So let’s do a quick post mortem to review what went right and wrong.
What went right
1- GTSI got bought out- GTSI was one of my biggest positions to start the year, and while I had trimmed it a bit through the year, it was still one of my largest positions when they announced a buyout at a ~50% premium.
2- A strong box office propelled RDI higher. Reading’s been one my largest positions for a long time, and a strong box office combined with their addition to the Russell 3000 and some activist presence pushed shares higher
That said, despite the strong performance I made several mistakes. It’s much, much more instructive to review and learn from mistakes with an eye towards avoiding them in the future
What went wrong
- Busted arbitrage plays- I mentioned this in my postmortem on HEARQ, but I made two mistakes where I invested in arbitrage plays without performing my normal amount of due diligence on friend’s advice and got burned. One was HEARQ, the other was a small name that hasn’t fully played out yet but I will write up at some point. The common theme in both of these was this- a friend who I respected got me excited at the potential for outstanding IRR on a very short time frame and I got lax. I’m actually very good at ignoring friend’s excitement in normal investments, but for some reason special situations get me excited and cause me to throw caution to the wind. I’m learning from the mistakes and will hopefully temper my enthusiasm / lax diligence in the future.
- ATPG bonds- this was my first experience in the world of high yield bonds, and, like HEARQ, I got too excited by the potential for a tight timeframe for great returns and ignored the downside risk. I fortunately sold out at a small gain, but in hindsight I took on way too much risk investing in ATPG. They had just about every form of risk imaginiable- financial leverage, operating leverage, commodity prices, economic risk, political, etc.
All in all, I’m pretty happy with my performance in the first half of the year, and excited to see what the second half holds. Despite the strong first half run, markets have been incredibly volatile and are offering some incredible (IMO) opportunities in the microcap land. I’ll be doing a post a bit later in the week discussing my top five holdings heading to the back half of the year.
disclosure- long RDI
Bringing you the content on this site involves a significant amount of time and effort. If you like my work, please support my site by shopping at amazon.com! Doing so costs you nothing (the prices are the same as if you went to amazon directly) but results in referral fees for me that I use to support my site.
The content contained in this blog represents only the opinions of its author(s). I may hold long or short positions in securities mentioned in the blog. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. Read that last line again. Also, this blog is not a solicitation of business. The content herein is intended solely for the entertainment of the reader and the author(s).