Portfolio update March 2012

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	18.25%	20.55%	31.06%	21.42%	18.24%
S&P 500	11.25%	7.34%	22.68%	11.66%	1.29%

Portfolio update Feb 2012

Ticker	% Portfolio
Combined	100.00%
Cash	15.55%
BK	13.73%
BAC	12.20%
WFC	10.41%
BRK-B	10.26%
IACIX	7.82%
JEF	7.03%
TAVIX	5.60%
BP	4.59%
HLDCY	4.28%
MSFT	4.12%
PTP	3.18%
bacA (custom)	1.21%

Total Returns:

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	16.35%	14.85%	21.13%	14.10%	17.05%
S&P 500	13.76%	6.39%	17.01%	8.73%	0.72%

Portfolio Update Dec 2011

Current Holdings

Ticker	Portfolio %
Bank of America Warrants (Exp 2019)	0.77%
WFC	10.69%
TAVIX	5.56%
PTP	3.37%
MSFT	3.96%
JEF	7.33%
IACIX	8.34%
HLDCY	3.82%
Cash	14.87%
BRK-B	11.54%
BP	4.70%
BK	14.18%
BAC	9.30%
ALR	1.56%

Returns

Ticker	Two Years	One Year	Six Months	Year To Date	Since Inception
My Portfolio	13.15%	2.05%	-1.48%	1.67%	13.60%
S&P 500	7.71%	1.06%	-3.00%	0.78%	-1.43%

Portfolio Update

Haven't updated my portfolio info on this blog in a while. During this volatile market I was able to acquire some stocks at very attractive prices.

Bought JNJ @ 59.43

The position makes 2% of my total portfolio and depending on the price movements I will be willing to put 5-10% of my portfolio in it.

JNJ had a tough 2010 and will have a tough 2011. But prospects for the company and the stock look good in the long term.

At 59 $/share I paid around 10.5x free cash flow of 2010 which is not too expensive but not cheap either. But as Buffett says "rather buy good business at a fair price than a fair business at a good price".

Other shares that are currently competing for my money are PKX, MSFT,BK and WFC

I bought this in my IRA account to avoid taxes on the dividends.JNJ pays around 45% of its FCF as dividends and buybacks.

Portfolio Update October,2010

Another very busy month for me and hence could not spend enough time researching stock ideas. Still I did find an opportunity to put some cash to work.

St. Joe (ticker: JOE) stock dropped due to a short thesis presented by David Einhorn. I also found out that T2 partners are also short St. Joe. On the other hand Bruce Berkowitz(FAIRX) at fairholme capital and Michael Winer(TAREX) at Third Avenue have been bullish about its long term potential and have JOE in their portfolio as a long term holding.

Since I have followed all of the above investors for quite some time I know their respective investment styles.Both T2 and Greenlight are long/short funds and they do trade in and out of their positions quickly to take profits or if a better idea shows up or if their thesis is wrong. While both Bruce and Michael tend to make long term bets and are willing to wait for the investment thesis to work out. So to agree with the short or long thesis on JOE you need to know your own investment time horizon.

I personally like to make very few bets and feel guilty if I am doing lot of trading. My favorite stock would be the one which I never have to sell(besides for tax reasons). So I don't mind if St. JOE is dead money for sometime since I do have ample cash in the portfolio to invest. I don't know much about true value of St. Joe and this purchase is a pure call based on my trust in the fund managers that own it. If in future they trim their position that would be a red flag and I may sell out of this position also.

Total Return vs IRR

As you might know I use IRR to state my portfolio returns. But it is a bit misleading. For example on September 30th of 2010 my IRR return stood at +19.9% YTD vs -3.49% for the S&P 500 index. But if you check any other website you will see that S&P 500 returned +2.34% during that time frame.

The difference arises from the fact that IRR takes into account the cash flow decisions you make i.e. buying and selling of stocks during the time frame as well as penalizes you for holding cash.

Even though the IRR makes it difficult to compare my returns with other portfolio returns I believe its a better metric for me to judge my performance. This method not just gives weight to my stock selections but timing of purchase and sale.

Following is a discussion of various ways to measure returns from Morningstar.com

	Portfolio Returns When portfolio performance is evaluated, the return should be concerned with the total change in wealth. One common measure of this change is Total Return, which is a generic term that defines performance as the change in the total dollar value of an investment over a given period of time. This methodology captures both the income component and the capital gains (or losses) component of a return. The two elements are reflected in the changing value of the portfolio, assuming dividends are reinvested. Therefore in the simplest case, the market value of a portfolio can be measured at the beginning and ending of a period, and the rate of return can be calculated as: This calculation assumes that no funds were added to or withdrawn from the portfolio by the investor during the measurement period. If such transactions occur, the portfolio return, as calculated, may not be as accurate a measure of the portfolio’s performance. For example, if the investor adds or subtracts funds during the measurement period, use of this equation would produce inaccurate results, because the ending value was not determined by the appreciation/depreciation of the portfolio’s holdings. Instead, any cash flows in or out of the portfolio, excluding dividends, will alter the value of the portfolio, which does not reflect the performance of the holdings. Although, a close approximation of portfolio performance can be obtained by backing out transactions within a given measurement period timing issues will still create a degree of error in the return. The following two means of return measurement help alleviate these problems and when compared, provide valuable insight into your portfolio:
			Total Return
			Total Return is a common performance methodology applied by mutual funds, because it does not consider the effect of investor cash moving in and out of a fund. Since managers do not have control of cash flows this method allows for the evaluation of their investment management skill between any two time periods without regard to the total amount invested at any time during that period. Basically, Total return is independent of the total amount invested. To generate Total returns apply the fund’s share price or NAV to the formula provided in the Portfolio Returns section. The NAV is calculated by dividing the total value of the fund’s underlying holdings by the number of shares outstanding. When an investor purchases or sells shares in the fund the number of shares in the market is re-calibrated to maintain the NAV value. So while the assets under management fluctuate, the adjustment to shares outstanding insure that the NAV values used in the Total Return formula do not reflect the movement of cash in or out of the fund. For instance, for a one year period the total return for a fund could be 25%. However, this does not consider that during this year the funds assets shrunk from $1 billion to $330 million. In the following illustration, we demonstrate how the Total return is calculated with cash flows occurring in four different periods. In addition, let’s assume other funds performed better than Fund XYZ, which resulted in net asset outflows. By reading down each column you can see how the fund performs, as well as the fall in assets under management.
			Using the total return calculation we would give equal weighting to each time period in calculating the annualized return:
			Personal Returns
			Personal Returns measures the actual return earned based on the beginning portfolio value and on any net contributions made during the period. Therefore, how an investor exercises control over cash flows is crucial in assessing their investment skill. Once again we will demonstrate using the table from above, but apply the Personal Return methodology to the figures.
			On a more technical note, the true definition of the Personal return is the discount rate that equates the cost of an investment with the value of the cash generated by that investment period. So, by setting the above equation to 0 the result will provide the value for “r”, which represents the discount rate that will provide a net present value cash flow equal to zero. The final step to Personal return is: To make the point even clearer if we were to reverse the order of the (%) gain or loss by quarter you can see how the Personal Return is adversely affected by smaller returns on the larger initial balances.
			Comparing Returns
			Clearly the examples provided above show significant differences between the two methodologies. However, this is not always the case. Sometimes the two may be very similar depending on distributions and cash flows. For instance, if there are no transactions related to a particular holding in your portfolio then the two returns will be the same. The same holds true for your portfolio, which is why we only provide one set of figures for Watchlist portfolios. So, in a three month period a holding will have the same Personal and Total return if: • No shares are purchased • No shares are sold • No dividends are re-invested A gap between Personal return and Total return indicates how well investors timed their stock purchases and sales. When the Personal return is less than Total return it means that investors didn’t participate equally in the portfolio’s monthly returns. In other words, the investor purchased a holding after a big run up or held on too long before selling as the share price fell. This sometimes happens when investors chase returns and assets flow into holdings when their performance starts to peek. This effect can be exacerbated when investors aim to break even and refuse to sell a losing holding. On the other side of this, when Personal return is greater than total return it means that an investor participated in a holdings upswing or sold their position before the price hit a downswing. This can happen when investors are committed to a diversified strategy and continue to invest new monies into a holding, even when its style of investing has gone out of favor. It is important to remember that if you want to compare the performance of your portfolio to an index, mutual fund or another portfolio that you use Total return figures and not Personal returns. This is based on: • Indices calculate their performance based on total return methodology • Mutual Funds calculate their performance based on total return methodology

Portfolio Update September,2010

September was yet another boring month. Only activity in my portfolio was to sell BBEP at beginning of the month. I have been very busy at work and have hardly got time to look into more investment ideas. As you can see with over 50% of portfolio in cash I need to find good investments. But having a lot of cash is a good problem so long as you have the perseverance to wait for the right opportunity.

I wrote my opinion on BBEP`s valuation before here. The DCF value of the stock is between 16 and 21. But DCF does not take into account the leverage required to achieve the cash flows. At EV/FCF of 10 it certainly wasn't cheap. The positives that might drive the stock higher is relatively low inflation and demand for high dividend paying investments. The negatives that might tank the stock maybe high interest rates(has $552M of floating rate debt) without natural gas prices shooting up because of excess supply. Also there is an overhang of california increasing taxes on the oil production which would screw low margin producers like BBEP. BBEP has 10% of its production from california. Also the CEO sold 30k shares at 17.2 on August 23.I sold my entire position at 17.39. I might have sold too early but I was happy with the price I got for my shares. Here is my history of buys and sells with BBEP stock.

Portfolio Update August,2010

In my 401k account I moved all of the money from ITRIX to VIFSX. I have held ITRIX(T. Rowe Price Capital Appreciation) since January 2009. It is a balanced mutual fund with value oriented managers. The reason for selling it was that it has 25% of its assets in treasuries and bonds. In my opinion both are overvalued presently. I bought VIFSX more out of dislike for other MF`s than liking for VIFSX. Its a low cost index fund tracking S&P 500.  Besides that I did a round trip trade in Amedisys stock which I have explained in one of the write ups before.

Basically it was a pretty uneventful month.

Portfolio Update July,2010

I will be updating my total portfolio,monthly transactions and returns here every month in this format.