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Helical Portfolio 2nd annual update - Part 1



January 03, 2013 – Comments (0)


Helical Portfolio 2nd annual update  (Part 1)


Before delving into the annual portfolio update I have a comment on this blog.  I have been unable to commit the time to provide the weekly healthcare notes.  The exercise of recording notes on what I read was useful, but it turned a 30 minute per day exercise into one that took well over an hour, and had the unfortunate consequence of my too often putting off the reading if I could not commit the hour.  Additionally, for note taking to be a truly effective effort, there needs to be a regular review period (although the exercise itself is usefully reinforcing), and there was none.  So, while I enjoyed the practice, I had to cease it to keep up to date myself.  Maybe someday I can revisit should this ever be more than an overly obsessive hobby. 


Last year, I broke the annual update into 3 parts and intend to nearly mirror that this year.  I do like to start an annual review by first reading the last one and remind myself of any lessons I noted at the time

(did I truly learn them?).  Part one of the 2011 review considered comparative performance and outlook.  Part two examined investing performance through an internal lens (did I add value) and part three considered the risk profile of the portfolio as well as examining individual transactions.  To start the 2012 review, I echo the sentiment I recently read in a GaveKal research report (subscription) Never was a bull market as unpopular as the one that unfolded in 2012”.  Which I suppose is an excuse-ive way of introducing that I did not outperform the market in 2012.  My own earlier outlook statement for 2012 was as follows:


“I enter 2012 much like 2011, with low expectations.  There could be the opportunity for double digit returns if Europe doesn't blow up, but I think it will -- or at least it will continue to look that way.  I plan to be aggressively defensive in 2012 i.e. still own higher risk securities, but with a quick trigger and a focus on money management.”


Well, Europe did not blow up and the Mayans were wrong (or just incomplete).  In the US, the leap off the fiscal cliff was done, but with a wingsuit which caught an immediate thermal updraft.  I held form on my strategy of booking early gains and being ‘aggressively defensive’, with the result of mistakenly sitting out some of the later part of the year with a large cash balance.  Since my last portfolio update at the end of October through the end of the year, there were no transactions in the portfolio (just some dividends).  I would have liked for there to have been a bit more anxiety over the fiscal cliff this past December, so I could contrarily add to the portfolio holdings, but I did not see enough of an opportunity.  I did however make a move yesterday (on Jan-2 – ironic as it was a big up day), so will hold off on detailing the portfolio holdings until the weekend in accordance with the Fool policy.


The Helical Portfolio ended its second year at $68,398.43.  Cash on 12/31 was still just over 1/3 of the portfolio at $23,051.07.  The 2012 performance was an IRR of 11.8%.  As previously noted, I added $5,000 on 4/10/2012 but did not deploy it.  The 11.8% IRR trails the ~16% return on the S&P500, so I underperformed the market in 2012.    The added cash does of course aid in the CAGR of the portfolio which was +21.5% in 2012, and +16.7% for the past 2 years.  The IRR of the portfolio over the 2 years since the introduction in 12/31/2010 has been a respectable +12.0%.  I am satisfied with this performance to date.  I’ve carried a large cash balance since the middle of 2012.  It has been nice to have this luxury, but I have missed out on some positive market moves due to my caution. I am still quite cautious, but am looking more for an opportunity to deploy the cash.


My outlook for 2013 is for modest gains.  This bull rally is well past long in the tooth.  I expect a lumpy + single digit return, but would not be surprised by a substantial dip.  Another >+15% year from the broad market would surprise me.  Yet there are signs of an economic recovery, if not stability (though managed stability should make one nervous), particularly in healthcare, a sector which did dodge a fiscal cliff bullet with the late deal.  The US congress seems content to do only enough to avoid problems, not address them, which is disappointing.  I’m hoping that late 2013 will be promising, but I enter it glad I have cash available.  I’ll resist chasing the market, but will systematically deploy a bit more cash than I have, perhaps targeting and allocation of 20 to 25% until I feel a better opportunity presents itself.


I plan to continue to blog the portfolio here into 2013 but may look for opportunities to expand on it a bit, an as yet amorphous concept.



Helical Investor


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