2014

Investment Analysis Clubs Saul’s Investing Discussions
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2014 was a very tough year for me, and for a lot of people that invest in small and mid-caps instead of large cap stocks. Over time (any ten year period) the small caps always win (because they can grow faster), but this was not one of those years. I was down 9.8% on the year, partly due to some of my own mistakes, which I have recounted here. I started keeping track of my results yearly in 1989, because my wife and I had a baby and I was hoping to retire in about 7 years (I did), and I decided I had to get serious about investing. I then started keeping track weekly as well as annually in Jan 1993.

We are talking 25 years from 1989 to 2014 and that’s a lot of time for compounding to accumulate. As of the end of 2013, I had a 273 bagger on my entire portfolio. As of the end of 2014, with my 9.8% loss, that had fallen to a 246 bagger.

Figuring from 1993, I had a 73.4 bagger on my entire portfolio as of 2013, and a 66.2 bagger as of the end of 2014, if anyone wants to keep track.

I hope (and expect) that this will be a better year.

Best to you all.

Saul

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Thats a formidable track record to match Saul. Like yours, 2014 didn’t work out for me either. I was down about 5% too. Hopefully 2015 will be much better year. Many congratulations though.

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Hi Saul,

Those of us investing in small caps had a though year. My IRR on USD denomination was 3.8%. Many of my larger position either did nothing or saw meaningful declines, with the exception of AMBA and SWIR, which did very well. I did okay in terms of AUD because USD steadily gained strength this year. I haven’t tracked S&P IRR for my cash flows but I 'm sure I trailed the S&P index.

Anyways, its a new year and we hope to work towards a profitable 2015.

Happy New Year to all.

Anirban

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Hi Anirban, I’ve missed your posts. You must be back from your vacation travels. I hope you’ve had a chance to read the seven year end stock reviews that I’ve finished up to now. I’d welcome your comments.

Best, and Happy New Year to you too.

Saul

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2014 was a very tough year for me, and for a lot of people that invest in small and mid-caps instead of large cap stocks. - Saul

I’d like to say that I feel better now about my -2.9% return for the year…but I don’t. :frowning:

Saul, your statement caused me to go look at something for my holdings. I have a program that I wrote that I use to follow what they are doing. One view possible is a column chart that shows the total value and how much gain or loss. When I sort it by market cap it divides large, mid and small at 10B and 2B. Then I can select a time frame; today, YTD, Forever. Forever would be for as long as I’ve owned each. It only shows active holdings. What struck me was that the large caps were (except for a couple of small, short term holdings with small losses) all gainers, mid cap gains outweighed losses a little bit (on “Forever” but not for the year) but small caps were majority losers on both counts. I own more small than mid and more mid than large. Looking a little closer I’d say most of the small cap losses came this past year.

I’d say that maybe I should think about getting out of small caps…but then now would be the time for them to outperform, so I’ll just hang in there.

I’d certainly agree that it was a tough year. Let’s hope this one is better.

Thanks for all you share here Saul.

Steve

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Wow…a 246 bagger…in 25 years…

A 100k portfolio is now worth over 24 million…

That’s amazing…

Great job on your success…even greater job for your willingness to share, teach, and guide fellow investors…

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Hi Saul,

Thanks. I have been back from holidays since Dec 27th but with school being off (its summer holidays here) and visitors to entertain, I haven’t had as much time to read and post on the boards. I did read through your CELG post in detail and it was excellent. I fully agree with your assessment and my plan too is to let that position ride for a while.

CELG & GILD are two biotech holdings that I feel are well-positioned with their current products and pipeline to reward shareholders.

Anirban

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What struck me was that the large caps were (except for a couple of small, short term holdings with small losses) all gainers, mid cap gains outweighed losses a little bit (on “Forever” but not for the year) but small caps were majority losers on both counts.

Steve

A lot of us agree that small caps should outgrow large caps but that does not mean that it will happen every year. A question to ask is why not? From a longer term prospective, I would speculate that when a market is approaching a top, small caps should be the first to be sold off as investors rotate from opportunity to security.

My 2014 started out gangbusters, then crashed, then recovered to a 6% gain mainly on my largest position. My other small caps fared terribly.

And in 2014 I discovered Saul’s Investing Discussions! :wink:

Denny Schlesinger

PS: PFIE down 27% :frowning:

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I was up 9.2% this year, which has honestly been disappointing, with the large caps (primarily from MF Pro with a few Inside Value picks mixed in) buoying the portfolio. MF Pro did very well again in 2014 – up around 18% I believe.

It’s common, historically, for large caps as a category to outperform small caps as a category as bull markets mature. Here is what Ken Fisher writes in his book Markets Never Forget (But People Do):

But history can tell you coming off the bottom of a bear market, owning small caps is typically a good bet. Of course, that would require you to time bear market bottoms well–and if you could do that, you wouldn’t really need to time narrower categories. But still, small caps near the end of a bear and in the earlier stages of a new bull typically outperform.

The flip side of that is during the mature stages of a bull market, you want to own larger cap stocks. The more mature the bull market, the bigger you should likely go. Of course, history alone can’t tell you whether a bull market is in its early or more mature stages because bull markets don’t run a predictable length of time. But there’s a strong historical precedent for owning small caps early on and then large caps in the later course of a bull market.

I don’t know where we are in this bull market, but it’s possible we’re seeing what Fisher describes. Unfortunately, that means it’s also possible that small caps will underperform for awhile until they finally get hammered when the next bear market shows up (another quote from that book: “the descent of most big bear markets has seen small caps do worse than big caps”).

But nobody knows what will happen, and – even if Ken is right – all of that is about categories, and most of us are investing in individual companies. Certainly there are headwinds and tailwinds as the market shifts around, but ultimately the combination of earnings and share supply will drive prices in any given company – the weighing machine. At the end of the day, I still believe in trying to buy great businesses at a reasonable price and then letting them do their thing. We won’t always be right, but that’s why we own a diversified portfolio of companies instead of just one.

Regardless of what markets do, here’s to a great 2015.

Neil

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Hi Saul:

I posted about my 2014 performance here:

http://discussion.fool.com/1081/my-2014-performance-31564335.asp…

I did reasonably well, but my portfolio was heavily weighted in AAPL, TSLA which did well, NFLX, GOOG and SCTY which didn’t do so well.

I agree that 2014 was a tough year for small caps. The average Stock Advisor stock was only up 6.5% compared to 11.3% for the S&P 500, and there were a lot of stocks down 50% or more.

I’ll take your 25 year returns any time if I have to put up with a 9.8% loss in one year!

Best wishes for 2015.

John

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Mostly a lurker here, (and thank you for all I get to lurk around!) but wanted to join in here about 2014 performance as your reports may not be so uplifting to yourselves but have greatly buoyed me. So thank you!

Saul said:
I was down 9.8% on the year, partly due to some of my own mistakes, which I have recounted here.

foolchandra said:
I was down about 5% too.

sagewren said:
I’d like to say that I feel better now about my -2.9% return for the year…but I don’t. :frowning:

I was down, too, compared to the above I can even almost “only” -.40%. Although being down is never something to smile about, even "only -.40%, what was most disconcerting to me was the comparison with my 2013 performance which was out of the park in the opposite direction, up 63%. (Talk about volatility!)

Of course, I did not expect 2014 to equal that munificence, but I did expect a bit more growth than -.40%, and couldn’t help feeling that the great disparity might have signified 2013 being due more luck than skill, while 2014 more of a pointer on things to come (and at its least, humbling).

I can of course easily look back and see some mistakes I made that had I not chosen that path would have made for a better year (such as not topping off and taking some profits and at least reducing my oversize position of DDD when it reached bloated peaks). That, while my DDD position is still profitable, made a big dent in 2014 performance.

However, being reminded that 2014 was not a good year for many of us helps to bring some balance to my evaluation of my own overall performance and returns some stability to my belief and hope that 2014 will be better for me (as well as many others) as well as my confidence that I am still learning and growing as an investor and may not always soar but in the long run, am still traveling on a path whose direction is up.

Thanks for this and thanks for this board!

okapimoon

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