2018 end-of-year portfolio review

With another year behind us it’s once again time for the obligatory annual performance review. For the first time since I started blogging the MSCI All Country World Index ended up in the red, thanks to an action-packed 4th quarter, while my portfolio produced its worst result since 2011 as well. And while 2019 is still very young, so far it looks like that more excitement is on it’s way. Of course, exciting is most likely going to mean that I’m going to lose a bunch of money, but hopefully it will also offer opportunities to scoop up some bargains. So far I haven’t done a whole lot of buying. Sure, lots of stocks have gotten cheaper, but most of them were pretty expensive to begin with. But with so many stocks going down around the world I’m sure there are some new fresh bargains out there, waiting to be discovered by me :).

Year Return* Benchmark** Difference Old Return Delta***
2012 18.44% 14.34% 4.10% 18.53% -0.09%
2013 53.38% 17.49% 35.89% 53.04% 0.33%
2014 30.11% 18.61% 11.50% 27.72% 2.38%
2015 24.23% 8.76% 15.47% 20.23% 4.00%
2016 64.97% 11.09% 53.88% 43.58% 21.39%
2017 29.04% 8.89% 20.15% 30.12% -1.08%
2018 13.07% -4.85% 17.92% 13.21% -0.14%
Cumulative 606.75% 99.46% 507.29% 489.15% 117.60%
CAGR 32.23% 10.37% 21.86% 28.83% 3.39%

* Return in euro’s after transaction costs, net dividend withholding taxes and other expenses
** Benchmark is the MSCI ACWI (All Country World Index) net total return index in euro’s
*** Delta between previous reported return (Old Return) and new performance numbers (Return)

With a double digit positive return there is little I can complain about for the year, although that’s probably not going to stop me from doing exactly that in the next few paragraphs ;). But before diving a bit deeper in my portfolio I think I should explain what’s going on in the table above. When I started tracking my performance I tried to keep things simple by only tracking my main account(s), and ignoring stuff like the tax credits that I generate when dividend taxes are being withheld from my account.

Some time ago I decided that I should track things properly, and keep track of my results across all investment accounts and account for tax credits as well. At the same time I kept using my original methodology for the blog, but keeping two sets of numbers just for that is unnecessary complex. So that’s why I have provided in this table above a full reconciliation of the new numbers with my previous reported numbers, and going forward I will only report using the new and improved methodology. Adding the performance numbers of some small accounts doesn’t impact the yearly results in a huge way, except for 2016. That was an awesome year, mainly thanks to one special situation, that unfortunately enough will never repeat itself again.

Anyway, enough about the boring accounting stuff. Time to look at some numbers. As you can see HemaCare was the driving force behind the performance of the portfolio. Even though the stock gave back a decent amount of its gains in the last quarter, it still ended the year up 221%. Other stocks that did well were Viemed Healthcare and PD-Rx, while there were a lot of things that absolutely didn’t go in the right direction. This is without a doubt the performance attribution graph with the most red in it since I started making these.

The special situations bucket was, as usual, a good contributor to my performance, but to be honest, this year was a bit disappointing. A lot of situation that I entered in previous years payed out. Examples of these include two BINDQ liquidation payments (+115bps), Tejoori (+84bps), the Dyax CVR (+78bps) and the Casa Ley CVR (+57bps). With so such a big tailwind this years results certainly could have been a lot better. Unfortunately, I participated in some deals during the year that didn’t work out, withΒ Rosetta Genomics being the biggest failure with a 202bps loss. At the same time, the missing distribution on the Sorrento Tech shares that I bought at the end of 2017 caused a 188bps loss. I’m somewhat hopeful that this loss will be reversed this year since the company says it’s working with DTC to correct the issue, but for now I have valued the position at zero, just like my broker is doing.

One thing that my regular readers probably noticed is that I didn’t blog as much during 2018 as in previous years. My New Years resolution is to bump up that frequency a bit again, and I hope 2019 will have some profitable situations in store for us. Happy new year!


Author is long most of the stuff in the performance attribution graph

23 thoughts on “2018 end-of-year portfolio review

    1. Harris

      Best value blogger on the internet for years, hands down. Solid process, and can’t argue with the results. Keep it up.

  1. Gianluca

    Hi Alpha,

    Happy new year and congrats for your great results! I have a question on special situations: in general a special situation portfolio will have a high turnover and will thus incur in higher transaction costs and above all a lot of capital gain taxes. What Is your experience in this regard? In particular:

    1. Would you like to disclose your average turnover for SP?
    2. Could you disclose the after-tax return on your SP portfolio for this year?

    Thanks a lot and many happy returns! πŸ˜‰

    1. Alpha Vulture Post author

      Thanks Gianluca! I don’t pay capital gains taxes in the Netherlands, so that’s not very relevant for me. But yes, for an US based investor it would generate mostly short-term capital gains and not so much long-term capital gains using this strategy.

  2. Cardano

    Excluding HEMA your performance would have been +6.8%.Taking out the second largest contributor, you would have been +2.18%. Taking the 3, 4, 5 & 6th best contributors away… you would still beat the MSCI World benchmark. My conclusion can only be that you are an exceptionally good investor. πŸ™‚

  3. Michael Boller

    Yes, that was a very good performance. Congratulations.
    But luck can also play a big role. Anyone who bought a single stock- Amazon – seven years ago, for example, would have made a fortune. Or the MSCI Russia made a return of 25% p.a. from 1994 – today. You could have captured this return with a single ETF. I think you can find many such examples.

    1. Alpha Vulture Post author

      Thanks, and absolutely true! Unfortunately it’s nearly impossible to distinguish between the two. Because is it still luck if your thesis was for example that Amazon was undervalued and things played out exactly like you thought they would in the next seven years? For me personally, I think it’s encouraging to see that my gains throughout the years have been driven by numerous different positions and different kinds of stocks. Makes it a lot less likely that it has (all) been luck.

  4. Sean

    Congrats, i am amazed by your consistent performance.
    May i ask how do you buy all these international stocks from all different countries. Which brokers do you use? Thank you.


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