Tuesday, July 8, 2014

IGValue portfolio: May 2014 lessons & review

This update is long overdue. Markets are rallying to dizzying heights and I find it harder day by day to find new opportunities. I am happy to sit on a large allocation of cash.

Lessons this month

  • Prices of stocks don't move just on earnings - they move on earnings expectations. So, all else being equal, if the market expects earnings to be down 10% and they are only down 5% the stock will probably rally
  • When the price of a security falls for reasons you don't understand - and even if the move is in stark contrast with the market - don't doubt your analysis. Make sure the analysis is solid and you keep up with the news. If the price falls its time to buy.
  • Position sizing is the key. Of the 3 stocks in the Apr portfolio one is up 30%+, another up 14%+ and another flat. If the positions I had taken were bigger the returns would have been much better.
  • High conviction value investments are hard to find. Several reports have to be read before you get some right. Deploying even 50% of the capital takes time.

Inception to end of May 2014

Of all the companies I have reviewed so far and have found only 12 with the right kind of moat of which only 3 were trading at the right price. At the end of May 2014 the portfolio comprises of cash and these 3 stocks.