2016 Year-End Summary and 2017 Rankings

2016 was a pretty crazy year for me both personally and professionally. Professionally, I walked away from a couple of corporate fast-track opportunities in pursuit of a smaller company with more ownership opportunities and personality.

I also (finally) got to start living with my wife and kid, and now we have another one on the way! These confluence of events had me doing really weird stuff with my money. At one point I was something like 50% in cash in my 401k alone, aside from pulling all of my individual trading account cash out of the market as well.

I put most of my excess cash into Lending Club notes where I could earn a 2-5% annualized return (pretax) and not have to worry about a market downturn. As this money comes back out of the notes, I am building up my cash again.

Asset Allocations End of 2016

I’ve been stepping back into the market over the past 6 months in a mix of value, growth at reasonable price, and special situations or “workouts” as Warren Buffett used to call them, and a fourplex apartment complex as well (not captured in the above graph due to no significant equity stake at this point)!

I have only recently gotten back to blogging, so the closest thing I have to a 2016 ranking is from 3Q. Keep in mind that the results do not fully reflect my actual portfolio weightings.

Performance from October 14th to December 30th

Crossed out tickers represent stocks which were either not owned or sold. I failed to anticipate a Trumpictory on November 8th, and I bought CSAL too richly. I expect the 9.5% dividend and growing appreciation for the business to improve the stock’s performance in 2017. A 5.8% gain in a single quarter is pretty fantastic, but is overshadowed by the market’s 8% return over the same time frame. The market usually returns 6-8% annually, so I think expectations could cool down in the next month or two, and the likelihood of a mini-selloff is high.  Consequently I’m attempting to position myself to hold onto my existing gains rather than stretch for more. I sold INTC recently because I bought it on March 9th at a lower price and after a 20% gain I do not believe there is a strong catalyst to justify continuing to own at this valuation. I am also considering liquidating my investment in VTI if I can find more attractive investments elsewhere.

Current Allocation

I also plan to add WellCare (Ticker: WCG), as part of my recent interest in healthcare stocks, which seem to have been inordinately beaten down over the past year. I am sort of astounded that defensible sectors like telecom and healthcare aren’t doing better this late in the cycle, and I’m pretty happy to jump in.

I am still developing my strategy, but I don’t believe the M&A spreads which I have been seeing will persist over the next couple of years. With greater regulatory clarity post-election, I expect more traditional players to start sniffing around again. So I’m looking to rotate into small stocks which are more likely than mid or large cap stocks to be severely undervalued. A $16 million market cap liquidating trust like my most recent investment ENZN, is much harder for an institutional investor to step into, and I’d rather look for solid returns of capital than lots of greater fools after 7 years of strong stock market returns in 2017.













Author: secondhandstocks

The genesis for this blog stems from a Marine buddy and I came back from Afghanistan with more money than knowledge, and heedlessly tossed our hats into the stock market ring. A few months later, I remember discovering the classic book The Intelligent Investor by Graham and Dodd, and ravenously devouring my first introduction to value investing. That framework - with some generous additions by Seth Klarman, and Joel Greenblatt among others - guides my investment philosophy. I spent five years working in the intelligence field, both in the Marine Corps and then for a government agency after that. I speak Arabic and Pashto, have programming and analysis experience, and enjoy investing in technology companies as a hobby. I also spent a year on Wall Street working on a #1 Ranked Institutional Investor team, before deciding that that the Sell-Side was not for me.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s