Tag Archives: Bestinver

Our investment fund in 2013

It is 5 years now since Luca and I started investing together. This is the 4th year publishing this post in which I explain how our investments fared along the year (1). In previous years’ post I had explained how we had adopted for our personal investments the same approach mutual open-ended funds have.

Brief recap for newcomers:

As I explained last year, we had to define a net asset value per share (valor liquidativo de la participación) at the beginning of the period. This net asset value per share rises and decreases as the aggregate share prices of the stocks in the portfolio rise or decrease. When an investment fund informs about its yearly results it is referring to the performance of this net asset value per share.

Each time that there is an addition of capital (new investments, in this case by Luca or me) it is treated as an issue of new shares to ourselves. It doesn’t matter that we are the only “shareholders”. Depending on whether the net asset value has increased or decreased we are acquiring the new shares at a higher or lower price than we acquired the previous ones. Exactly as it works in a fund.

Let’s go to this years results: How did the year 2013 go? In line with 2013 good year for stock markets it wasn’t a bad one.

In 2013 we have not been very active investors, not doing many transactions nor adding lots of funds to the investments (with a wedding in sight for mid year and a baby to come we had a preference for cash). We mainly held previous investments and sold a couple of positions which already earned what we expected (2).

During 2012 I took note of the fund value about 22 times, so we could get an idea of how the fund evolved. As you may see in the graphic below, the net asset value per share at the beginning of 2013 was 44.63€ while at the end it increased to 51.03€, that is +14.34%. That was the performance of the fund in 2013 (not good enough to sell subscriptions to the fund! :-) ).

J&L investment fund performance during 2013.

J&L investment fund performance during 2013.

How does it compare with the main indexes?

  • S&P 500, +29.6% in $ terms [+23.9% in € terms, after taking into account F/X (3)] (this is the target index)
  • Dow Jones, +26.5% in $ terms [+20.9% in €]
  • NASDAQ, +38.2% in $ terms [+32.1% in €]
  • IBEX 35, +21.4% 
  • Euro Stoxx 50, +18%

The gains of the fund since its creation in January 2009 have been+66.51%, with a compounded annual gain of +10.85% (remember this always refers to the net asset value per share – marked by the first 2 positive years – and cash gains cannot be directly derived from the net asset value performance times the total assets).

Two years ago, I introduced the comparison with leading Spanish value investing fund managers from Bestinver (4). Let’s do the exercise again:

  • Bestinfond, +31.82%;
  • Bestinver Internacional, +32.54%;
  • Bestinver Bolsa, +29.72%.

All in all, 2013 has been a good year to present results, though it would had been even better if we had a bigger stake in Bestinver ;-).

I’ll keep you informed next year of this year’s results.

—–

(1) See previous posts showing 2012, 2011 and 2010 results.

(2) Unhappily among others we are not any longer shareholders of Metlife (will miss the iconic view of its landmark building in NY) and GE (will miss the good feeling when seeing a GE truck anywhere)…

(3) Since our investments account is based in the Euro zone, it is important to take into account dollar-euro exchange fluctuations for good and bad. Take a look at this website for interesting graphics, perpe. The USD gained 4.70% against the EURO in 2013 (or the EURO lost a 4.49%)

(4) Disclaimer: Since sometime in 2011, we have also positions in Bestinver, though I don’t get any fees for promoting it in the blog. (Our positions with Bestinver are excluded from the calculations of “J&L” fund to allow for clean comparisons).

NOTE: “J&L fund” numbers are pre-tax of capital gains realized, include dividends (twice taxed) and are net of transaction costs & brokerage commissions.

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Our investment fund in 2012

It is 4 years now since Luca and I started investing together. This is the 3rd year publishing this post in which I explain how our investments fared along the year. In previous years’ post I had explained how we had adopted for our personal investments the same approach mutual open-ended funds have.

Brief recap for newcomers:

As I explained last year, we had to define a net asset value per share (valor liquidativo de la participación) at the beginning of the period. This net asset value per share rises and decreases as the aggregate share prices of the stocks in the portfolio rise or decrease. When an investment fund informs about its yearly results it is referring to the performance of this net asset value per share.

Each time that there is an addition of capital (new investments, in this case by Luca or me) it is treated as an issue of new shares to ourselves. It doesn’t matter that we are the only “shareholders”. Depending on whether the net asset value has increased or decreased we are acquiring the new shares at a higher or lower price than we acquired the previous ones. Exactly as it works in a fund.

Let’s go to this years results: How did the year 2012 go? As last year, this is going to be a humbling exercise :-).

In 2012 we have not been very active investors, not doing many transactions nor adding lots of funds to the investments (with a wedding in sight we had a preference for cash). We mainly held previous investments and sold a couple of positions which already earned what we expected (1).

During 2012 I took note of the fund value about 30 times, so we could get an idea of how the fund evolved. As you may see in the graphic below, the net asset value per share at the beginning of 2012 was 47.28€ while at the end it fell to 44.63€, that is -5.6%. This was the performance of the fund in 2012 (again not good enough to sell subscriptions to the fund! :-) ).

"J&L" investment fund 2012 performance (built in Google spreadsheet linked to Google Finance data, thanks to a friend's invaluable suggestion).

How does it compare with the main indexes?

  • S&P 500 ~ +13.41% (this is the target index)
  • Dow Jones ~ +7.26%
  • NASDAQ ~ +15.91%
  • IBEX 35 ~ -4.6% 
  • Euro Stoxx 50 ~ +13.65%

The gains of the fund since its creation in January 2009 have been+53.69%, with a compounded annual gain of +11.3% (remember this always refers to the net asset value per share – marked by the first 2 positive years – and cash gains cannot be directly derived from the net asset value performance times the total assets).

Two years ago, I introduced the comparison with leading Spanish value investing fund managers from Bestinver (2). Let’s do the exercise again:

  • Bestinfond ~ +16.52%;
  • Bestinver Internacional ~ +16.89%;
  • Bestinver Bolsa ~ +14.88%.

All in all, 2012 has been a good year to present general results, except in Spain and for us, due to some shipping and mining stocks that didn’t fare well in 2012. Let’s see how they go in the coming years.

I’ll keep you informed next year of this year’s results.

—–

(1) Unhappily we are not any longer shareholders of Pzifer, with its bluish star pill

(2) Disclaimer: Since sometime in 2011, we have also positions in Bestinver (which we increased in 2012), though I don’t get any fees for promoting it in the blog. (Our positions with Bestinver are excluded from the calculations of “J&L” fund to allow for clean comparisons).

NOTE: “J&L fund” numbers are pre-tax of capital gains realized, include dividends (twice taxed) and are net of transaction costs & brokerage commissions.

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Our investment fund in 2011

Luca and I have been investing together for 3 years. Last year I wrote a post in which I explained how we had adopted for our personal investments the same approach mutual open-ended funds have.

As I explained last year, we had to define a net asset value per share (valor liquidativo de la participación) at the beginning of the period. This net asset value per share rises and decreases as the aggregate share prices of the stocks in the portfolio rise or decrease. When an investment fund informs about its yearly results it is referring to the performance of this net asset value per share.

Each time that there is an addition of capital (new investments, in this case by Luca or me) it is treated as an issue of new shares to ourselves. It doesn’t matter that we are the only “shareholders”. Depending on whether the net asset value has increased or decreased we are acquiring the new shares at a higher or lower price than we acquired the previous ones. Exactly as it works in a fund.

And why do we go through all this hassle? So we can now handily compare how our investments fare in relation to broad market indexes or specific investment funds.

How did the year 2011 go?

Let’s start with the humbling exercise :-). I had taken along the year above 50 samples, so we could get an idea of how the fund evolved. As you may see in the graphic below, the net asset value per share at the beginning of 2011 was 57.19€ while at the end it fell to 47.28€, that is -17.3%. This was the performance of the fund in 2011 (not good enough to sell subscriptions to the fund! :-)).

"J&L" investment fund 2011 performance (built in Google spreadsheet linked to Google Finance data, thanks to a friend's invaluable suggestion).

How does it compare with the main indexes?

  • S&P 500 ~ +0.07% (this is the target index)
  • Dow Jones ~ +5.5%
  • NASDAQ ~ -2.3%
  • IBEX 35 ~ -13.1% 
  • Euro Stoxx 50 ~ -18%

The gains of the fund since its creation in January 2009 have been+57.8%, with a compounded annual gain of +16.6% (remember this always refers to the net asset value per share – I will come back to this point in a future post, as cash gains or losses cannot be directly derived from the net asset value performance).

 Last year I introduced the comparison with the leading Spanish value investing fund, Bestinver (*). Let’s do the exercise again:

  • Bestinfond ~ -10.3%;
  • Bestinver Internacional ~ -10.1%;
  • Bestinver Bolsa ~ -12.7%.

All in all, 2011 hasn’t been a good year to present general results (for us, Bestinver or some indexes) however from the value investing perspective it hasn’t been that bad for buying (we performed 18 buy operations, while we only sold shares of 4 companies).

As any investment fund would do, prior to buying shares of a specific company we calculate the range in which we believe the target price shall be for us to sell the stock (and if the margin of safety is wide enough we buy). Taking the conservative values for each of the shares in our portfolio, we believe the target net asset value per share should be around 159€, thus having an estimated potential upside of about x3.3.

The latest factsheet of Bestinfond [PDF, November  2011] informed about a potential upside of x2.3. We may be optimistic; time will tell. And precisely that, time, being long-term value investors, we have plenty of :-).

I’ll keep you informed next year of this year’s results.

(*) Disclaimer: Since sometime in 2011, we have also positions in Bestinver, though I don’t get any fees for promoting it in the blog. (Our positions with Bestinver are excluded from the calculations of “J&L” fund to allow for clean comparisons).

NOTE: “J&L fund” numbers are pre-tax of capital gains realized, include dividends (twice taxed) and are net of transaction costs & brokerage commissions.

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Invest in real assets (pencils if need be)

My previous post discussed why it is better to be invested in real assets vs. cash or bonds in order to protect your savings in case of a recession.

Even though all the references were to stocks, I kept the word “assets” instead of “stocks” in the title and conclusion of the previous post in order to come back to it a later time, in this post.

Bestinver fund managers, in their conferences, have often given examples of assets to be invested in to protect your wealth such as pencils, chairs, and, this year, books.

If by the time a recession came and inflation started to build up, you had all your fortune invested in pencils, the same discussion that was made in the previous post with stocks would hold true for pencils.

For example, say that Southern Europe (Greece, Portugal, Italy…) in a near future needs to kick Germany out of the Euro due to its fiscal irresponsibility. Germany would then have to use another currency, e.g. the Deutsche Mark. Say that at day one the mark would be worth 2DM = 1 Euro, as it was more or less 10 years ago.

Due to the inevitable capital runaway from Germany, Germany would most probably undergo a period of hyperinflation and mark devaluation that could very well end with 1 Euro being worth ~ 2.000 DM. Obviously, the prudent Bavarian who had all her savings in cash would have nearly lost all of them.

However, if this Bavarian had instead purchased pencils in order to protect her wealth, she would have seen a different outcome. Say a pencil cost 0.5€ at the beginning, or 1DM. After all the hyperinflationary period, and if German students still needed pencils for their classes a pencil would sell for ~1,000DM. Thus, as the theory goes, the Bavarian investor would have protected her wealth just by being invested in real assets, i.e. pencils.

Of course, if you wanted to see your wealth grow pencils wouldn’t be the best assets to be invested in, as they do not reproduce, or any other assets are taken out of them, but to protect your savings they would work just fine.

 

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Inflation and assets

During the last weekend, I spent some hours watching the webcast of the annual investors’ conference of Bestinver, a Spanish investment fund.

I find the conference itself not only entertaining and informative but quite funny due to the way the fund managers show their value investing principles and how stubborn they’re with them (luckily for investors). The experience is comparable to that of Berkshire Hathaway annual general meeting.

As in previous years the managers defended how not only to have profits but to defend your savings during recessions it is much better to be invested in real assets than to have your money in cash, state bonds, etc.

This time they raised the case of Mexico during 1979-1988 (in previous cases they had referred to the Weimar Republic or Argentina), based on an analysis by Marc Faber (a presentation containing the same info can be retrieved here, PDF 4.8MB). During those years the Mexican peso suffered an extreme hyperinflation explained in the Wikipedia as follows:

In spite of the Oil Crisis of the late 1970s (Mexico is a producer and exporter), and due to excessive social spending, Mexico defaulted on its external debt in 1982. As a result, the country suffered a severe case of capital flight and several years of hyperinflation and peso devaluation. On 1 January 1993, Mexico created a new currency, the nuevo peso (“new peso”, or MXN), which chopped 3 zeros off the old peso, an inflation rate of 10,000% over the several years of the crisis. (One new peso was equal to 1000 of the obsolete MXP pesos).

Mexican peso evolution vs USD. Source: Ron Griess

Obviously, anyyone who either held savings in cash in pesos or Mexican bonds at that time virtually lost all his money.

However, the same author made the analysis of what would have happened during those years to an individual holding Mexican stock, for which he used the Mexican Stock Exchange Index. The result is that at the end of the decade that person would have kept his wealth in US dollar terms, as the nominal value of the Mexican stocks raised at par with the hyperinflation and peso devaluation going on in the country.

Evolution of Mexican Stock. Source: Marc Faber

Conclusion: better be invested in assets if only to keep your savings safe in the long run.

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My investment fund

After two years of investing for fun, I was troubled because neither the ING internet banking tool nor Google Finance enabled me to correctly monitor the profitability of our investments.

  • Google Finance shows each new addition of capital as an increase of assets (price) in the same way as if a particular stock had increased its market price. So after a year our portfolio showed an increase of 97%… but most of it was due to new additions of capital.
  • While with ING, each time we added some cash it lowered the profitability as it went directly to the denominator of the equation (the same happens with Google Finance “gain”).

I discussed this with Luca, read a little bit and then I found out that the best way would be to treat ourselves as a mutual open-ended fund (fondo de inversión). I had to define a net asset value per share (valor liquidativo de la participación) at the beginning of the period and then treat each addition of capital as an issue of new shares to ourselves.

After spending sometime digging in the files and emails of the past two years, reading a bit about how to treat these values, etc., from now on we can readily compare at any moment our “J&L investment fund” with any other fund, stock or index. So did I…

If we had a commercial mutual fund we would announce ourselves with something like:

  • In the year 2010 the gains of the fund were +22.8% compared to
    • S&P 500 ~ +13% (target index)
    • Dow Jones ~ +11%
    • NASDAQ ~ +17%
    • IBEX 35 ~ -17%
    • Euro Stoxx 50 ~ -10%
  • The gains of the fund since its creation in January 2009 have been +86.6%, with a compounded annual gain of +37.6%.

Not bad.

Nevertheless, if we compare it to the leading Spanish value investing fund managers from Bestinver, in 2010:

  • Bestinfond ~ +19%;
  • Bestinver Internacional ~ +26%;
  • Bestinver Bolsa ~ +5%

Since January 2009 both Bestinfond and Bestinver Internacional have fared better than “J&L”, though not Bestinver Bolsa.

Today, now that is already defined, the net asset value per share is 57.19€… however “J&L fund” is not yet that open-ended: it’s open to our own additions to the fund but not to third-party capital… maybe in a couple of years we go and set up an investment club or fund :-).

After reading Ben Graham’s book “Intelligent Investor” I wanted to give it a try with investing, this is why I invest in stocks myself, but, clearly, if you are tempted to follow third-party advice, rumours, tips, etc., you’ll be better off just investing in a low-cost index fund (a strategy described by Burton G. Malkiel’s book “A Random Walk Down Wall Street”) or take a look at the above-mentioned value investing managers.

NOTE: “J&L fund” numbers are pre-tax of capital gains, include dividends (after-tax) and are net of transaction costs & commissions.

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Stocks vs. Bonds, 200 years

Some weeks ago I had two different conversations with friends. The issue: whether Greek bonds would be a good investment given the yields they are being offered at. I then argued that I didn’t think it was a safe investment, that many countries had defaulted payments, and as a value investor in the making I tried to explain that a much better investment would be to find out there some great stocks at a big discount.

I was also looking for some graphics to send them to prove the point. I had seen those graphics at the annual investors’ forum of the asset management firm Bestinver in different years. They represented how different the outcome of an investment would be for a person living either in Germany in the 1920-30’s or in Argentina in the last 15 years in case this person had invested in the stock market or in government bonds, supposedly safer.

In both cases the investment is much better off when it’s composed of stocks, as they represent a portion of a real company that continues to operate after the crisis and the currency devaluation/hyperinflation period that typically follows. The value of the investment in bonds is suddenly reduced to nearly zero… At that time I didn’t find any of those graphics in the Net, but the other day I found a similar one. Here it goes (note the scale is logarithmic):

Stocks vs. Bonds, 200 years comparison.

Please, note the difference especially between German and Japanese bonds and stocks. But also with US and UK stocks and bonds the difference persists.

The managers of Bestinver year after year repeat the same example: in those situations is much better to be invested in real assets, be it portions of an enterprise (stocks), chairs, and pencils, even houses… all these are assets that once the crisis is over will retain the value they have. However the paper money has no value once the nominal value is devalued.

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