This is an update for our private investment club.
We aren’t accepting any new members, but where the information isn’t sensitive to individuals (their balances, full names etc) I’ll be posting periodic results and information.
First of all, thank you Allan for your deposit. I’ll be keeping it in cash for now, and if another member can add a few dollars, we can consider another purchase.
As you guys are aware, the markets have moved up a bit over the past couple of days. That’s a shame, of course, because we prefer lower prices. That said, we don’t want to fall in line with most active money managers—and lose to the indexes.
Here are some one year return comparisons that you might find interesting. All performance levels are comparing the the 12 month return from September 2, 2009 to September 2, 2010.
- Compared to Vanguard’s total international stock market index, we are ahead by 13.4%
| Portfolio | IRR | Portfolio Value | |
| Maniacle Members of the Mausoleum | 18.9% | 486,041.57 | |
| Vanguard Total International Index Fund | (VGTSX) | 5.5% | 428,799.28 |
- We’re ahead of the emerging markets index by 0.2%
| Portfolio | IRR | Portfolio Value | |
| Maniacle Members of the Mausoleum | 18.9% | 486,041.57 | |
| Vanguard Emerging Markets Index Fund | (VFINX) | 18.7% | 485,335.91 |
- We’re ahead of the European stock index by 17.7%
| Portfolio | IRR | Portfolio Value | |
| Maniacle Members of the Mausoleum | 18.9% | 486,041.57 | |
| Vanguard Euro Stk Index Inst | (VESIX) | 1.2% | 410,564.05 |
- And we’re ahead of the energy index by 12%
| Portfolio | IRR | Portfolio Value | |
| Maniacle Members of the Mausoleum | 18.9% | 486,041.57 | |
| Vanguard Energy Index FD ADM | (VENAX) | 6.9% | 434,812.45 |
- We’re ahead of the S&P 500 by 7.6%
| Portfolio | IRR | Portfolio Value | |
| Maniacle Members of the Mausoleum | 18.7% | 486,041.57 | |
| Vanguard 500 Index Fund | (VEIEX) | 11.1% | 485,335.91 |
We have built a very substantial lead over the S&P 500 index (which is our main, comparative benchmark). If we can remain ahead of the market by January, it will by our 9th year in a row of beating it–and extending our lead.
That said, those who try to beat the market every year, in my opinion, are silly. It’s just a statistical aberration that we have beaten the market for 8 consecutive 12 month periods.
Our goal is to beat the market as badly as possible, over a very long period of time. If our stocks underperform during one or two (or three!) 12 month periods, so be it. But overall, we care less for comparative volatility than we do overall, long term results.
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18 comments
Kevin@InvestItWisely says:
September 5, 2010 at 8:39 am (UTC 8 )
“That said, those who try to beat the market every year, in my opinion, are silly. It’s just a statistical aberration that we have beaten the market for 8 consecutive 12 month periods.”
I’ll still say congrats on a job well done.
Mich @BTI says:
September 6, 2010 at 7:02 pm (UTC 8 )
Very nice results Andrew,
I’m looking forward to walk in your steps, maybe i’ll be as lucky (you agree there is a luck element spicing up the skills)
I know one can buy the whole index in a fund and turn it on autopilot for the best results/effort, but come on, where’s the fun of picking and analyzing ? where would be the challenge?
Keep it up!
Mich
Financial Cents says:
September 6, 2010 at 10:54 pm (UTC 8 )
Nice work Andrew and others! Thanks for sharing the update – it’s inspiring.
The Biz of Life says:
September 7, 2010 at 1:23 am (UTC 8 )
Pretty impressive results. What are you invested in?
Think Dividends says:
September 7, 2010 at 10:22 am (UTC 8 )
Famous money manager Bill Miller once said that if the year didn’t end on December 31 he wouldn’t have beaten the S&P 500 Index for 15 years in a row.
Andrew Hallam says:
September 7, 2010 at 12:24 pm (UTC 8 )
@Kevin@InvestItWisely
Cheers Kevin,
We’ll take it–thanks! On another note (related to the previous post) it’s funny that we both had the same view on Madoff, and what he could/should be doing today, to make amends and add some kind of value to his life and others.
Andrew Hallam says:
September 7, 2010 at 12:35 pm (UTC 8 )
@Financial Cents
Cheers Mark,
We hope to keep inspiring you! If we do, it means we’re making money, right?
Cheers!
Andrew Hallam says:
September 7, 2010 at 12:41 pm (UTC 8 )
@Financial Cents
Cheers Mark,
We hope to keep inspiring you! If we do, it means we’re making money, right?
Cheers!
@The Biz of Life
Andrew Hallam says:
September 7, 2010 at 12:45 pm (UTC 8 )
@The Biz of Life
Cheers Biz,
We don’t trade a lot, so we still have many of the holdings that we had when I penned this piece: http://andrewhallam.com/how-we-beat-the-market/
We own BRKB at a cost base of $50; JNJ at a cost of $57; SSD at a cost base of $22; Fastenal at a cost base of $31; Coke at a cost base of about $39; Wesco at a cost base of $318 ish; GE at a cost base of $10, USG at a cost base of $9 and the first world international index (VEA) at a cost base of roughly $29.
We’re bottom feeders—liking to average down on what we already own.
Andrew Hallam says:
September 7, 2010 at 12:48 pm (UTC 8 )
@Think Dividends
It’s interesting you say that. There are many fund managers that (overall) gave Miller a good pounding during his “streak” years. But they didn’t become as famous as he did–even though their returns beat his. People like looking at the bizarre idea of beating the index each year, rather than pounding it long term.
Andrew Hallam says:
September 7, 2010 at 6:43 pm (UTC 8 )
@The Biz of Life
Hey Biz,
I forgot something. We sold all of our Fastenal at about $51 a few months ago, and we sold almost all of our USG at $17. We had a member withdraw, so we had to decide what to let go of. Our turnover is incredibly low. We generally only sell when something hits a silly price.
I know that USG and Fastenal are both lower than they were when we sold, but I still regret letting go of them. Long term, they’re fabulous businesses with economic moats. Check out Fastenal,(FAST) especially, if you have time. If the markets fall heavily again, I think you could load up on it with full confidence. What a fabulous business it is.
Andrew Hallam says:
September 8, 2010 at 8:17 am (UTC 8 )
@Mich @BTI
Thanks Mitch. And I surely agree with you about the fun/challenge of choosing stocks. But at some point (perhaps after 5 years or so) perhaps the investor has to ask himself/herself a really important question: Given the same allocation of stocks and bonds in indexes, would I be ahead or behind my active purchases after all fees and taxable consequences? With the investment club, I’ve always told members that if the market catches us, we’re going to index the whole thing. Perhaps I should be saying “When” the market catches us. The statistical odds of beating the market are about as high as falling in a fire and coming out unscathed. It happens, but it’s rare. The irony is when someone does fall in that fire, comes out burned and says, “I’m going to try that again.” I think most investors are like that, unfortunately. It’s part of our “wiring”—we’re resilient. And as investors, that isn’t always such a good thing when you can index a portfolio and beat 90% of the pros who all think they can jump into that fire themselves, and walk out with nothing but a glow.
Mich @BTI says:
September 8, 2010 at 9:38 am (UTC 8 )
Totally agree with you Andrew, In fact I won’t be waiting for the market to catch up since I am under no illusions of what is at stake. My DIY portfolio will remain a fraction of my total investments. Just enough to satisfy the armchair general in me looking for a fight!
Andrew Hallam says:
September 8, 2010 at 11:35 am (UTC 8 )
@Mich @BTI
I think that’s a great way to think about it Mich. We need to feel like we’re battling in some way. It’s fun. And keeping part of our portfolio for that is definitely a wise option.
The Biz of Life says:
September 9, 2010 at 5:47 am (UTC 8 )
Hi Andrew,
A most Berkshire like portfolio with the exception of FAST and VEA. I’m familiar with FAST, and see their trucks driving around my area. At the right price they could make a great investment. Also, if the US housing market ever revives USG could be a $100 stock, but they are very economically sensitive.
Andrew Hallam says:
September 9, 2010 at 6:12 am (UTC 8 )
@The Biz of Life
Hey Biz,
I think you need to be saying, “when” the US housing business revives. I can understand your reservation. During the depression, when people talked about it ending, others often laughed as if it was permanent. You’ve been in the game to long to fall victim to the “recency phenomenon”. What do you think? It’s just going to take a really long time. And I like that—because I can keep buying great building/material businesses on the cheap. And when I’m 70 (30 years from now) I’ll be glad I did. I hope to be doing the Ironman by then!
The Biz of Life says:
September 11, 2010 at 9:02 pm (UTC 8 )
Yes, “when” the US housing business revives. It always comes back eventually and the strong companies in the housing business will be there to reap the rewards. My bet it that it will come back faster than people think, whenever unemployment begins to drop.
Andrew Hallam says:
September 12, 2010 at 7:57 am (UTC 8 )
@The Biz of Life
Hey Biz,
Whenever it does come back, we can be sure of one thing. Nobody will expect it. It could be in ten to fifteen years, and completely written off. Or, like you suggest, it could be in 3 years. If that’s the case, with the small memories of man, many of us will be saying, “what was the big deal anyway?” Memories of economic traumas and successes tend to be short for people sometimes.