Welcome to my semi-annual portfolio review, a bit of due diligence that is easier when the portfolio is growing, and an exercise in openly assessing the situation when the stocks are sinking. Personal finance is easy when everything works. The last few years have been the test of the personal side of personal finance; looking at an unpleasant situation, but looking at it objectively. Just like it is easy to ignore the fundamentals when stocks are rising, it’s important to pay attention to the fundamentals when stocks are sinking. Fundamentally, the majority of the companies I am invested in are improving. Quantitatively, their stocks aren’t. Trusting fundamentals isn’t easy when there’s a large gap between cause and effect; but, that’s why long term buy and hold emphasizes the holding for a long term.
Allow me to restate my statement from six months ago.
“As usual, I expected my portfolio to end 2015 in a much better position that it was in at the end of 2014. Relative to 2014, 2015 looks good. Relative to where my portfolio was before my Triple Whammy, 2015 didn’t make much progress. The stocks bounced around a bit, with ups and downs. The companies, however, are in much better shape. Eventually, that improvement should show up in the stock price, too.”
Should is not necessarily would, and definitely isn’t did. Except for AMSC, every stock is down, RGSE disastrously so. And, even RGSE had revenues in the tens of millions. Many people will be blaming Brexit, but this has been the case for several months. Good news is followed by a declining stock price. Bad news is followed by a declining stock price. When almost everything is heading in the same direction, it probably isn’t the individual actions but is something more systemic. The world is not a happy place.
Let’s see if anything else can be copied and pasted from December 31, 2015. (The old stuff is in italics.)
AMSC may not have received the positive news from the Chinese courts about the intellectual property theft case, but they are receiving new orders. AMSC is up 23% since mid-2015.
Basically the same story, but with different numbers. Now up 37% since EOY-2015.
AST is still in early clinical trials for regrowing damaged nerves, but some of the responses have been so encouraging that for a while the stock quadrupled, until a competitor had good news, too. AST is down 14% since mid-2015.
The trials continue though, so evidently the competitors haven’t clinched the race. AST, however, is down 32%.
GERN is also in clinical trials, but it is further along and navigating the FDA and international regulatory agencies on its way to possible approval of a cancer treatment that has great implications – if they can get approval for at least one specific cancer. GERN is up 13% since mid-2015.
The trials continue, hopefully one year closer to applying to the FDA; but the stock slumps by 44%.
GIG under-promised and over-delivered by saying little, then achieving GAAP profitability. The little company is getting a lot of attention as the year closes. GIG is up 143% since mid-2015.
Except that now it is down 18%, which may have more to do with yet another merger and acquisition action that confuses finances.
MVIS was perceived as over-promising and under-delivering, but even with that, they are making progress, have record revenues and backlog, and continue to maintain an impressive potential – that will be realized within the next few months (which has been the case for several years.) MVIS is down 7% since mid-2015.
Realized within the next few months? Yep. Supposedly “several OEMs will announce products this year.” Again. With nothing significant announced. Again. But this time will be different. Again. Right? In the meantime, down 34%.
RGSE has managed to somehow stumble in the high-growth, high-demand industry of solar power. The company is worth less than many homes in America. It dropped so far and so fast that even selling now wouldn’t buy me much of anything else. RGSE is down 50% since mid-2015.
Now it is down another 64% to about $3M, so I am regularly paid to write about houses that are worth more than a company with more than $40M in revenue.
My patience has been tested so thoroughly that it has put down its No. 2 pencil and is sitting back to see what happens with the grading. Aside from some minor adjustments, and one fortuitous profit-taking trade, my portfolio remains in a reasonably good position in terms of company progress, which has only begun to show hints of portfolio progress, and which is well-enough positioned that 2016 may be the year when I get to regularly share good news again.
Not so far. My patience is shifting to resignation. What will be, will be. Of course, that could be good.
I feel that I am witnessing a race between the advancement and progress of the companies I’ve invested in, and the troubling signs I see in an economy that is at least bifurcated and possibly destabilizing. (Much of the economic news is over on my blog for “news for people who are eager and anxious about the future” (aka PretendingNotToPanic.com). In the best scenario, everything is awesome for my companies and stocks, and the economy. In the worst scenario, everything falls into the Reprise of the Great Recession, or as I call it, the Third Depression. In a bizarre scenario, as the economy trips on itself, some of my stocks provide the economically appealing new solutions to energy, health, and information issues thereby ratcheting up their stock price premiums. It could happen. What’s most likely to happen is something I haven’t listed.
And then, there was the oil price wars, China’s slowdown, negative interest rates, and Brexit. While most of my stocks are down, they could become lifeboat stocks, stocks that are in companies that are finally succeeding while markets are falling. Supply and demand can create as much irrational optimism as the recently experienced irrational pessimism.
The likelihood of my portfolio doing well has improved. My positions haven’t changed much, and my portfolio continues to hold enough potential to allow me to re-retire, or at least to begin transitioning to something less than a seven day a week work schedule. That’s been the case for years. Patience and a Long Term Buy and Hold strategy remain that classic conundrum of doing the same thing and expecting something different (a delusion) or proving the value of perseverance. Some time between now and the next semi-annual portfolio review, I should know better. In any case, stay tuned as the story continues.
And, the story continues, and continues, and – well – patience is inherent in long term investing, though patience can be quite inconvenient when paying bills is involved.
For the details of my investments, I post the semi-annual review of each of my stocks on various discussion boards. I could post the entire collection here, but 1) it would be very long, 2) the more public the conversation the more valuable it becomes, and 3) reading my posts on those boards introduces you to individuals who have different perspectives, strategies, and experiences. Collectively, those communities are more powerful than large financial institutions because the motivations and incentives are those of similar individual investors rather than that of profit-minded corporations.
Here are the links to the discussion boards I use. Feel free to comment here or there, and to pass along links to others. The bigger the discussion, the better the chance of valuable insights (as long as the trolls and flamers are moderated appropriately.)