Portfolio Returns

Since the first stock I bought in mid-1998, my portfolio has returned 12.88% annually (8.33% CAGR) versus 4.32% (2.43% CAGR) for the S&P 500. This is a 183% gain since inception versus 36.65% total return for the S&P over the same period.

Both "portfolios" assume $100,000 of initial capital that compounds to $282,877 for the portfolio and $136,648 for the benchmark.

The main deviation between the two occurred in 2009 with the portfolio's relative outperformance. I expect the spread between the two to increase overtime due to compounding, even if the portfolio barely outperforms the S&P.

An obvious problem with the portfolio is that there is too much correlation to the benchmark. In my defense much of the correlation was in my younger years and while I wasn't as familiar with value investing as I am now, still, there is much room for improvement. I don't want to mimic the index, so more alpha needs to be generated here. It is useful to see that the trends are very similar between the two, I can learn from this. What can be done?

1) Concentrate the portfolio: My portfolio is invested in around 40 names which is about 30 more than my goal. Like Seth Klarman and Monish Pabrai (recently evolved), I want to focus on the 3, 5, 10% approach where I have positions that are concentrated among fewer names, but not so much where I have 10 positions with 10% allocated toward each - taking my portfolio down to 10 positions is too extreme for now. Monish Pabrai mentioned at his recent Annual Meeting that he discussed this with Charlie Munger and decided to switch over to this type of portfolio allocation because it is easier to come back if one of his stock's tanks.

2) Value investor portfolio's typically do not follow the market at all. Michael Burry frequently expressed in his investor letters, http://scioncapital.com/index__letters.html, that the S&P was a poor benchmark to judge his performance. This is because a value portfolio will be in names that have higher volatility, less liquidity, a smaller market cap, have a catalyst, etc.. My portfolio needs to transition into stocks that are all focused on deep value principles. Since I have a small enough capital base, I will focus more on the Ben Graham approach then the Charlie Munger approach which is quantitative before qualitative.

Why this is not another Value Investing Blog

The theme of the blog is to keep documentation of my thoughts, ideas, and processes to better my investing. While I should have started this blog three years ago when I had the idea, it is more important than ever to have an investing journal of which I can easily reference. Ultimately, my work here is the first of many steps to eventually starting my own investment partnership.


I am not trying to recreate the value investing/personal finance blog wheel, so there will seldom be sections on "top value investors," "best finance books," "timeless articles," etc... This is simply a place where I can write about trades I've made and the analysis I went through. Frequently, there will be posts about places to get ideas, checklists I go thru, and articles that may help me become a better investor.


I will try not write about old positions or knowledge I've gained that has proved helpful- the blog will best be served as forward looking. Still, I hope others may stumble across here and find some insight or ideas that can enhance their own strategies.


Mentors of whom I've not met but I continue to learn from will be referenced many times here: Seth Klarman, Warren Buffett, Monish Pabrai, Charlie Munger, Chris Browne, Sardar Biglari, Donald Smith & Co, & Leucadia.