I have to say that Jim and I in the last few years (and I gather this from private e-mail as well as here) have had synchronicity in terms of our market view, but he has been much more successful than I in terms of actually yanking his money out of the market and rescuing his returns. From our discussions, i'd give a wild guess it's added about 10% more to his yearly gains than mine.
So here I am, with my portfolio up 15%. I haven't seen the holdings of Royce, but it wouldn't surprise me if there was overlap. The distribution of my holdings by market cap:
two < 50M
three 100 - 500M
three 500M - 1B
four 1B-2B
two 2B-3B
two 5B-10B
one 15-20B
I'm small cap since I'm mostly in <3B market caps but I'm really just looking for value where I can get it. I'm also now 15% cash. (and I'll stay that way at least until my funds are unfrozen)
What works? Well, diversification among undervalued names (as Paul Senior has preached) is the tack I'm taking. I've come to appreciate the value of diversification. Tapdog, if your portfolio is similar to mine, and you aren't up 10-15% yet this year (there was a significant Jan effect this year), then there's probably a management issue rather than a selection issue in your portfolio. And maybe diversification is the key. The way small caps are going, some are taking huge hits which could turn portfolios upside down. WHX, my worst performer, is down 15.5% this year. But it's just a few percent of the portfolio, not 15% like it would've been a few years ago. And I've found that predicting movements in individual stocks over even a few years is very, very hard. Midway and Deswell have taught me that.
FTR, my portfolio more or less moves with the market now, and usually daily fluctuation is less than 1%. Except it has been outperforming mainly by being down less than the market on down days, with occassional moderate outperformance. Today, the S&P is down 1.94%, and I'm down 1.39%. That's been typical. And I owe Paul and Al Frank for the improvement in my money management because they helped me see diversification as tool not just of the weak. If anything that Buffett's done can be said to have hurt value investors, IMO it's his witticisms regarding diversification as a weapon of the ignorant or lazy.
Mike |
