2011 Performance and Thoughts

Another tough year.

I was down around 4%. Not too bad, but certainly not good.

Where did I go wrong?

The biggest issue was position size. I strayed too far and didn’t have any cash when the market tanked. I had to sell cheap to buy cheaper.

My ideal portfolio would have 3-5 core holdings making up 40-60% of my portfolio and 6-10 smaller positions. The core did OK in 2011. What I did was average down mindlessly. The two best examples are AEY and MGO.to.

AEY was kind of cheap when I first bought it around $3. Then I bought more at 2.75, 2.50, and 2.25. Not a bad idea, but I ended up overweight the company. Now I face the dilemma as to whether I should sell at this really cheap price or hang on. I still haven’t decided. Don’t get me wrong, I think AEY is a buy. But I only want 5% of my portfolio in at these prices.

MGO I also averaged down. I didn’t fully understand the risk of Chinese RTOs at first. Only after I turned my attention from operations to legitimacy did I made a mistake. Maybe MGO.to is a buy, but I only have so much room in the portfolio.

In order to prevent this in the future I have decided to make harder rules for position sizes.

The other factor was just my timing of adding to my portfolio. I was quite unlucky this year. Money was tight for a while as I was on parental leave for 3 months and also had some emergency house issues that required immediate attention. I seemed to add right at the peak and ran into liquidity issues at the wrong time. For example, when FES.to went below 10 I would have bought hand over fist. But I didn’t have the cash.

I have also learned to watch comps yoy. Really understanding where the company is on the industry map is important. Many companies are growing top line numbers, but with rising commodity prices have a lag in time before they can pass on costs. This is what is happening to HPS.A. They had some margin pressure, but have passed on higher costs. This means that 2012 comps should be better than 2011 as long as the top line sticks where it is at (or improves).

Let’s hope 2012 proves to be better.

Dean

1 Comment

Filed under Portfolio Performance

One response to “2011 Performance and Thoughts

  1. Pingback: 2011 Performance and Thoughts - Petty Cash - B-Hive - WAGGLE

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