First of all, I wish you a Happy New Year!
In 2014, the portfolio gained 8.65% against an increase of the benchmark of 6.80%.
It is noteworthy, that the average cash holding throughout the year was 56% of the portfolio. Most fund manager’s mandates do not allow for such high levels of cash. Even if it is allowed, the risk of underperforming the benchmark temporarily cannot be borne by most managers. While I agree that last year’s cash level would not be sustainable over the long run, I am following the approach of other (fundamental) value investors (e.g. Longleaf) to increase the cash level when there are not enough attractive investment opportunities out there. This was the case for many public equity markets in 2014.
Another aspect is that roughly 30% of my portfolio is currently invested in relatively illiquid investments with an expected holding period of three to five years as I have discovered a number of mispriced securities off the beaten track. As a consequence, I need to hold a certain percentage of the portfolio in liquid assets to remain flexible. As most mid/large cap stocks are fully priced (at least from my perspective), I prefer to hold cash.
At the end of 2014 the portfolio’s cash ratio was at 33%. I am planning to reach 20% to 25% until the end of the second quarter 2015. This might be lower, if volatility returns to the financial markets.
Below you can find a more detailed presentation of the portfolio’s performance (WertArt) against the benchmark:
I believe the following table is helpful to get an understanding of the performance attribution for 2014. You can see that two investments (Fairfax and City of London) generated more than 50% of the portfolio performance. 17 investments gained while 7 investments lost in value:
Portfolio overview as of 12/31/2014
1) incl dividends/interest and fx movements
2) Eredene Capital delisted in December 2014 from the AIM. I have valued the investment at cost representing a 52% discount to the company’s NAV. Eredene is currently in the process of selling its assets and distributing the net proceeds to shareholders.
Portfolio transactions in Q4 2014
During the fourth quarter I have acquired four new positions (Steico, Telefonica Deutschland, Renk and Axa Immoselect). I added to UMS, Eredene Capital and AO Johansen. I reduced my position in City of London Investment Group and accepted a tender offer for 12% of my shares in Eredene Capital at a premium of 87% to my original investment.
Apart from that, I received distributions from Axa Immoselect, Lancashire, City of London Investment Group and Retail Holdings.
The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!