Sunday, 9 November 2008

My Portofilo: Year 2, 12 month return

Well, what a difference a year makes. Last year I reported a 45% return and this year gave almost half of that back with a -21.3% return after brokerage and dividends. That compares to a decline in the XAO of -39% over the same period. The graph shows my relative poerformance compared to that of the XAO over the past 2 years.

The outperformance in the past year compared to XAO is due in most part to a timely trade in ANH taken back in January. The companies I have held on to, PWK and REF have both declined by more than -40%.

I'll continue to hold these companies as I think they are strong businesses and will outperform over the long term - and that is what my aim is. I want to own shares in strong businesses that will outperform over the full market cycle. If own such businesses then my overall portfolio should outperform that of the broader market.

A note of reality here. My portfolio is hardly what you would call a portfolio. There is a reason I only own shares in two companies and that is because I have had an unfavourable view of the markets for the best part of a year now - most of my assets are sitting in cash.

However, I expect to put some more cash to work in the coming year. There are already compelling valuations out in the market but I am also aware that they could get even more compelling as economic reality comes home to roost.

I don't expect the overall market to have a great year in 2009 but I do expect to able to add some good businesses with sound fundamentals at reasonable prices to my portfolio.