Against the Sky 2008 Portfolio Performance
2008 was certainly a difficult year to start a portfolio. The Net Asset Value of the portfolio fell from $100 to $70.32, a decline of 29.7%. The Against the Sky Portfolio still outpaced the S&P 500 by 1.19%. However, this is due in large part to the deliberate pace of investment of the portfolio’s cash rather than any investment skill.
A chart of the portfolio’s performance is at icarra.
Holdings
Performance of various holdings is largely a result of when the investment was purchased. Below is a summary of the portfolio’s holdings as of year-end.
| Company | Allocation | Return |
|---|---|---|
| S&P 500 (SPY) | 10.59% | -33.9% |
| Mid Cap 400 (MDY) | 7.12% | -36.5% |
| ADP (ADP) | 5.50% | 0.8% |
| Stewart Info Services (STC) | 3.94% | 7.9% |
| Enterprise Prod Pt (EPD) | 3.79% | -15.6% |
| Genesee Wyoming (GWR) | 3.45% | -4.5% |
| RGA (RGA) | 3.40% | -14.8% |
| Markel (MKL) | 3.39% | -27.5% |
| Yamana Gold (AUY) | 3.24% | -20.2% |
| Middleby (MIDD) | 3.16% | -49.1% |
| Frontier Comm. (FTR) | 3.00% | -23.4% |
| Chipotle (CMG) | 2.93% | -18.8% |
| Otter Tail (OTTR) | 2.56% | -34.2% |
| Under Armour (UA) | 2.54% | -13.4% |
| Duke Energy (DUK) | 2.48% | -17.0% |
| Dawson Geophysical (DWSN) | 2.11% | -61.0% |
| Apple (AAPL) | 2.01% | -45.3% |
| Jones Lang LaSalle (JLL) | 1.88% | -59.1% |
| CapitalSource (CSE) | 1.82% | -62.9% |
| Baidu (BIDU) | 1.46% | -38.7% |
| SmartPros (SPRO) | 1.36% | -34.8% |
| Duke Realty (DRE) | 1.31% | -53.4% |
| C-trip.com (CTRP) | 1.28% | -51.4% |
| JupiterMedia (JUPM) | 1.04% | -78.4% |
| Managers Global Bond (MGGBX) | 10.46% | -22.3% |
| Harbor International (HIINX) | 8.75% | -37.6% |
| Cash | 5.40% | |
| Combined | 100.00% |
I remember thinking sometime around the middle of the year that at some point soon, the market is going to have a bad day. On that day, I planned to try to get some of the stocks I was interested in at a discount. That day came, but it was followed by many more down days. As I look back, when I bought is probably as important as what I bought this year.
Index ETF (SPY & MDY)
These are supposed to be the anchors of the portfolio. The performance of these two funds demonstrate how bad the year was this year. The S&P 500 ETF was down 33.9% based on my entry points for the year, and the Mid-Cap 400 ETF was down 36.5% based on my buys. Looking at these returns with the mid-cap proving more volatile than the large caps certainly holds true for the small caps in the portfolio as well.
ADP
ADP is a stalwart for this portfolio. It is a solid company that is very well run with a steady and growing dividend. It is the perfect company for this portfolio.
Stewart Info Services
Stewart is a title insurer, so I’m probably too early on this buy. Still, it had a 7.9% return based on my buy point at the end of the year. I will likely exit this holding sometime around the second quarter of 2009. I anticipate that there will be a wave of refinancings in the first quarter due to current low mortgage rates that may even turn earnings positive. Should prove to be a good exit point.
Enterprise Product Partners
I bought this for the yield. The company owns pipelines and gets paid by volume rather than price. I need to dig a little deeper into this company, but so far I like the dividends.
Genesee Wyoming
Nice little railroad company that had a change in management a while back. I’ve been pleased with how they’re run. I took a close look at this company back in 2007, but I probably need to circle back for another look.
RGA
A life reinsurer that is pretty conservatively run. Their portfolio has held up pretty well, and much better than the market gives them credit for. This company has demonstrated some pretty steady growth and recently gained their independence from Metlife.
Markel
This company would be nicer if it paid a dividend, but the investment manager of this company could probably manage a portfolio better than I could by far. I won’t complain too much about them retaining their earnings. This specialty insurer is considered to be a mini-berkshire by many due to their book value growth and company culture. Definitely a long-term hold for this portfolio.
Yamana Gold
Yamana has demonstrated strong production growth that has been clouded by recent acquisitions. If gold stays close to where it is now, this holding will prove to be a great performer in a couple years. Again, a big if, but growing production provides a hedge to a drop in gold prices.
Middleby
I’ve held this company for a while in other portfolios, and I love their management. Many restaurant chains have slowed their growth, but his oven maker has a good deal of new technology that will save energy and provide good ROIs for their customers. It will probably not be as negatively impacted by the economy as their share price indicates. I currently view this as a core long-term holding.
Frontier Communications
Another company I bought for their yield. I need to take a close look at their financials and determine the sustainability of their dividend, but so far I like what I see from this rural communications provider.
Chipotle
Shares were priced for amazing growth, and now their growth will be slightly less amazing due to the economy. Still, I like the quality of their food and their ability to return cash quickly on new locations.
Otter Tail
This company is a utility company that has diversified into other industries, with the most prominent being wind towers. My timing was bad on this one as a bought on a small dip that was followed by a much bigger dip. Still, the yield is nice, and this is a well-run company.
Under Armor
This is a great brand, and I hope I got a deal on the shares that may pay off in the long-term. Right now, though, anything that is sold retail looks painful.
Duke Energy
I like their diversification into alternative power generation, and I like their yield. I need to take a closer look at this company, but in the meantime I’ll enjoy the dividends.
Dawson Geophysical
One of my favority companies and one of my worst performers. This company gathers seismic data for some big natural gas players in the US. With the decline in natural gas prices, however, many of Dawson’s customers are scaling back on their spending. Knowing their reserves may not be something they can scrimp on, but the market is certainly expecting some tough times ahead. I think it probably will turn out better than the market is expecting.
Apple
What a brand and what a company this is. It’s been hurt by the economy, and I likely bought shares too soon. Steve Jobs just took a leave of absence, which further weakened the shar price. It looks like a good value now.
Jones Lang LaSalle
This one is painful. It’s a solid company where the market is anticipating some nasty things. It is a real estate services company that is diversified globally. I don’t think things are as bad as they seem. It should recover quickly once the market recovers.
CapitalSource
I have to wait and see on this one. It’s gone from a finance company to a bank. Still they have a nice health care portfolio that should be spun off when the market recovers. It seems that this company’s parts may be worth more than the whole somehow.
Baidu
The Chinese version of Google, but the Chinese market seems to be slowing rather dramatically as well. I need to take a deeper look at this one, but the demographic trends in China certainly should help this company in the long term.
Smartpros
A micro-cap stock that provides online training to institutions. The company is performing well even if the stock price is not. It’s a microcap, so it will have some wild swings. Still, the company’s business clients may not be so eager to maintain their training programs in this market. Half their share price is held as cash on their balance sheet.
Duke Realty
I suspect that this REIT will turn out better than the market thinks. Debt maturities in 2009 have the market spooked. I need to find out if this is warranted.
C-trip
Travel in China was growing rapidly as the middle class expanded. Their dramatic growth has slowed. Long-term trends may still favor this company, but it may be rough going for a year or two.
Jupitermedia
The company has been cash flow positive, and they recently an offer to purchase the images portion of their business. The market is giving no credit to the company of Getty’s purchase of their images business. Still a value despite weak execution by management in recent years.
Manager’s Global Bond Fund
This was supposed to be a conservative holding, yet it is down over 22%. This doesn’t include the nice year-end interest, however.
Harbor International
I was thinking that the global economy might be more resilient than the US with the whole subprime mortgage crisis. It turns out that the world is still pretty connected. I like the diversification that this fund brings despite it’s disappointing returns over the last half of 2008.
Outlook
I’m not sure what 2009 will bring, but I will be focused on replacing some of the weaker companies among the holdings in this portfolio with some long-term stalwarts. I’m hopeful that the smaller companies will weather the storm and advance much faster than larger companies to give this portfolio an edge over the indexes.
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