Review: First Half of 2011
Posted on 06. Jul, 2011 by TheFreeInvestor in Investing Philosophy, Portfolio
First half of 2011 ended in green for my portfolio. Period return for my portfolio was approximately 11% vs 5% S&P 500 return for the first half of the year. Of course, I am more interested in the long term return as I am not planning to liquidate the portfolio any time soon. Over long term, my cumulative portfolio return since beginning of 2006 has been 86.9% which is way ahead of S&P 500 return.
Recent Thought Process
After I lightened up some of my overweight positions (i.e., CTSH, NFLX), I have been on a hunt for early stage companies with good growth potential. I outlined some thoughts about early stage investing in my previous post. I am continuing to execute that strategy till I invest most of the proceeds from the sale of the overweight positions.
As I mentioned in my “about” page, I don’t bucket myself in any specific defined category of investing styles (e.g., value, growth, small cap, large cap etc). My previous investments, as can be viewed in the portfolio page, are a mix of value stocks selling at discount, early stage growth stocks, turnaround stories and international stocks etc. So, in that pursuit of a mix of different styles, my current focus is on early stage or high growth companies in emerging industries.
During the recession of 2008, lots of companies in most industries looked like bargains. (Though I couldn’t invest much due to lack of cash). However, the market has been going up since early 2009. So, finding typical value bargains in mature/semi-mature businesses is getting more and more difficult. In order to deploy cash in the current market environment, it is better to look at emerging or unloved industries and companies. But, as we saw in the dot com bubble days, in case of emerging industries, a majority of start ups can be worthless in long run. So, the trick is to find the winners (e.g., AMZN, EBAY etc of the dot com era) and avoid the hyped up worthless business models (e.g., Pets.com). There is no silver bullet to avoid the losers other than disciplined thought process and due diligence of the business model and industry structure etc. These days social-media seems to be the new dot com. Undoubtedly, few of these companies will be long term winner, but the majority of the companies will be worthless in few years. Other than SINA, I am staying clear of most of the social-media hype.
Looking forward to the next earning season in few weeks and, who knows, the continuing debt ceiling political saga might present with some buying opportunities !
[Note: The performance numbers are from my personal spreadsheet, therefore subject to human errors. As of the publication of this post, I hold long position in NFLX, AMZN, SINA and CTSH. Please read the full disclaimer on this website.]
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