In immediately’s submit I’m sharing my 2021 efficiency assessment and the way I’ve produced 22.9% common annual funding returns within the portfolios I’ve managed over the past decade.
Discovering a couple of nice shares after which sitting on my ass continued as a pattern from from 2016 by 2021 which Charlie Munger fondly describes as “sitting in your ass and doing nothing.”
Charlie Munger mentioned this, or one thing comparable, and it’s what I’ve completed for greater than 5 full years now.
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I’ve purchased ZERO new inventory investments since April of 2015 – virtually 7 years in the past as of this writing – once I purchased a couple of nice companies, and haven’t completed a lot since.
At the least by way of shopping for investments.
As a result of the market nonetheless continues to go straight up and valuations on ALL belongings worldwide are nonetheless at or close to all-time highs.
I’ve now mentioned this for six straight years.
For this reason I’ve spent my time constructing companies and coaching others within the final virtually 7 years.
However persistence offers us an unlimited benefit as deep and disciplined worth traders over the long run.
I WILL NOT alter my standards simply to purchase an funding.
Even when its been virtually 7 years since I’ve purchased one.
I’ll stay affected person and diligent, and proceed to study and look ahead to valuations to come back down.
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The above quote from Benjamin Graham is one in every of my favorites.
It means within the short-term – feelings and psychology drive the market, however within the long-term – the market and particular person shares, get judged on how nicely they’ve operated and grown over time.
That is nice information for us as long-term – oriented worth traders.
If we are able to discover a couple of nice corporations at low-cost to honest costs, and maintain them for the long-term, we’ll have nice returns over time. Why? As a result of…
“Time is the buddy of the fantastic firm, the enemy of the mediocre.” – Warren Buffett.
With this as a backdrop, beneath is the 2021 efficiency assessment.
For hyperlinks to the prior years’ efficiency opinions, you should use the hyperlinks beneath.
Additionally, as famous above in a number of the particular person posts, I made a number of errors in 2013 and 2018 when calculating my returns. The numbers beneath – which present the ten full years between 2012 and 2021 – are appropriate.
2021 Efficiency Evaluation
Once more, how have I continued beating the market with out shopping for something new within the portfolios I handle?
I nonetheless personal all the businesses from 2014 and 2015 besides for 8 of them. I purchased 3 new corporations in 2015, ZERO new investments in 2016, ZERO investments in 2017, ZERO in 2018, ZERO in 2019, ZERO in 2020. and ZERO in 2021.
Investments which can be now not owned had been among the many following – merged, gone non-public, liquidated, offered.
The remaining investments within the portfolios I handle produced a median GAIN of 17.13% in 2021.
Under is the total spreadsheet going again over the past 10 years of my returns…
Outcomes had been up this yr as a result of continued rise within the markets and the person shares I purchased years in the past within the portfolios I handle.
One other two components affecting this yr’s outcomes had been:
1.) Since I final purchased a inventory in 2015, there at the moment are 8 corporations I owned which have been offered / bought-out / merged / gone non-public. Aside from 1 of those corporations which I made a mistake shopping for, the others had been a number of the finest corporations I owned.
2.) The typical money place within the portfolios I handle is now as much as 64.6% with new money additions, gross sales of shares, and proceeds from merging / going non-public transactions.
This huge money place is a large lag on efficiency… If I used to be totally invested – which I not often am so I can hold open for alternatives – this could enhance outcomes additional. For instance of this, if I had been capable of purchase the 7 shares I needed to purchase in the course of the Covid Crash in March 2020 – the portfolios I handle would have been up 98.3% this yr as a substitute of the 48.3% they had been up.
However shares went again up so quick my purchase orders by no means bought stuffed.
So what does this imply for cumulative full nine-year returns now?
10 Full Years Of My Funding Returns
Listed here are Buffett’s returns that I reference beneath…
The Buffett Partnership Returns
I don’t evaluate myself to Buffett as a result of I wish to be the following Buffett, however as a result of everybody is aware of who he’s, as he’s regarded by most as one of the best investor ever.
Reasonably, I wish to be often called the primary Jason Rivera when my profession is over.
In the tip, I wish to be often called a greater investor and capital allocator than Buffett and to supply higher returns over time than he has so I can assist tens of millions or billions of individuals everywhere in the world.
For the primary six full years in my profession I used to be reaching this lofty purpose…
Within the seventh yr with my first ever down yr I fell behind… And within the eighth – tenth years I remained behind and can probably stay so for the foreseeable future since its now been virtually 7 years since I’ve purchased one thing new.
Within the first 10 years of my profession, I’ve produced common – non-compounded – returns of twenty-two.9% annually. Or a complete cumulative return of 229.1% over that interval.
Within the first 10 years of his profession, Buffett produced common – non-compounded – returns of 23.5% annually. Or a complete cumulative return of 235.3% over that interval.
This implies within the first 10 years of our careers, I’ve produced returns, now 0.6 share factors LOWER annually, than Buffett did within the first 10 years of his profession. For this reason Buffett’s number one rule is to by no means lose cash.
For the primary 6 years of my profession in comparison with his, I used to be successful… However after one down yr I’m prone to keep completely behind Buffett now as a result of that one dangerous yr… And since I nonetheless can’t discover something to purchase.
To my nice shock, we truly caught as much as Buffett this yr… Final yr my yearly common returns lagged his by 0.75 share factors.
What does this 0.6 share level extra return per yr imply in greenback phrases over this era?
Assuming we each began with an asset base of $10 million at the start of the nine-year interval, I’d have grown that $10 million into $78.62 million after 10 years.
Buffett would have turned his traders $10 million into $82.54 million in that point.
For this reason each level of extra returns is so vital, and why you want to pay attention to any charges charged to your account by your cash managers.
Over an extended interval – or on this case 9 years – ‘solely’ an extra 0.6 share factors annually would have made Buffett’s traders $3.92 million additional when in comparison with my numbers.
And this additional illustrates the ability of compounding over time.
I defined why I’m now shedding to Buffett, and why I’m not nervous about this in additional element additional beneath.
However I’m nonetheless beating the market. Though now barely as a result of its continued skyrocketing.
And Nonetheless Beating The Market
From 2012 by 2021, the Dow Jones Index produced a complete cumulative return of 160% for the ten years or 16% per yr on common.
The S&P 500 produced a 202% complete return for the ten years or 20.2% per yr on common.
And the Russell 3000 index – the closest factor to a small cap index – produced a 251% complete return or 25.1% per yr on common.
As a result of markets continued skyrocketing and the portfolios I handle persevering with to be in 60%+ money the final a number of years, the market has began to catch as much as me.
Outcomes have been nice to this point, higher than I anticipated.
However there’s nonetheless loads of work and enchancment essential to proceed this, particularly with valuations nonetheless at or close to all-time highs.
And likewise due to mergers / gross sales / acquisitions, the portfolios I handle are down to five corporations owned, and the portfolios at the moment are on common in 64.6% money.
We’re now shedding to Buffett, and the market is catching up… However the markets rise is unstainable…
During the last 120 years or so the market does about 10% yr on common… In the previous few years its crushed that as asset costs – and valuations – have continued to skyrocket.
I don’t count on us to beat Buffett any time quickly due the components above. Right here’s what I mentioned about this within the 2017 and 2018 efficiency opinions…
Worth investing works finest with a falling or stagnant market, so with valuations at or close to all-time highs, and reaching new highs on an virtually day by day foundation nonetheless, that is anticipated.
Except the market corrects someday quickly, I’d count on Mr. Buffett and the market to proceed catching as much as or presumably passing us within the close to future.
As I mentioned final yr presently, barring a serious sell-off, I count on so as to add few to no corporations once more in 2018.
It is because I’ll solely purchase one thing that meets my ultra-strict standards. On no account will I purchase one thing as a result of I haven’t purchased shortly.
This helps hold us solely in nice corporations and actual property investments and may assist us proceed producing distinctive returns over time.
It doesn’t matter what the market continues to do although over time, I’m assured we’ll proceed to beat the market by a large margin, and proceed to compound our wealth over time.
And with the market’s march ever increased, it’s allowed me to take the time to study different worthwhile enterprise abilities.
This can assist us much more over the long run as we get again into shopping for public corporations inventory, and into shopping for non-public companies and multi-family actual property investments as soon as we attain sufficient income and money circulation.
Right here’s trying ahead to a good larger and higher 2018.
That is nonetheless true immediately…
With valuations both at their highest stage ever or their second highest stage ever nonetheless, relying on which metric you have a look at, I’ll probably proceed underperforming Buffett.
Thanks a lot to everybody who’s been part of this journey to date, and please let me understand how I can proceed to enhance issues going ahead within the feedback beneath. I hope you study one thing from my expertise this now decade lengthy journey.
Right here’s trying ahead to a good higher 2022 to maintain this momentum going.
At all times in your service,