This post is about my “Fun Fund.” I am going to discuss the performance of this actively managed investment account in the fourth quarter of 2023. I will also take a look at the last five years.
As a reminder, most of the prior posts about this account (which is really just a small Roth IRA that I am tracking more closely than my other investments) are located on this page.
Q4 2023
In the fourth quarter, this account was up 17.47%. It seems that I benefited strongly from the so-called “shitco” rally. People, words can be hurtful. hah!
The Q4 performance was a little better than the $SPY [+11.64%], and also beat RPV and QVAL, which were up 9.62% and 12.24%, respectively. All those figures are total returns from Koyfin and are 01/01/23 through 12/31/23.
I guess I was just lucky that I had the lowest quality portfolio of all.
2023 ANNUAL FIGURES
For the full year 2023, I was up 22.12%. I have the SPY up 26.18%, VT at 22.02%. RPV was up 7.98%. QVAL was up 28.40%
5 Year CAGR
I went ahead and calculated my Compound Annual Growth Rate from 01/01/2019 to 12/31/2023 and got 12.85%. This compares to 15.44% for SPY, 10.49% for RPV, 12.19% for QVAL, and 11.63% for VT.
ATTRIBUTION and Discussion
My largest position now is cash at ~13%. This is up from ~8% as of the end of 2022.
Some of this increase is due to the sale of $BAC during the 4th quarter of 2023. It was trading at approximately 1.4x trailing TBV and I thought that seemed fairly valued.
As I have discussed before on this blog, I have implemented rules for selling positions in this account. I am only allowed to sell if I decide to do so for fundamental reasons and the security price exhibits negative time series price momentum (negative price trend). The sale of BAC violated this rule. I justified this by planning to maintain the exposure to BAC via another security. I have not been able to acquire the position at the desired price at this time. I am considering substituting a position on another bank that I like just as much but with a cheaper valuation.
$DFH is now my second largest position (after cash/bills). DFH was up 310.28% in 2023. That’s pretty good. CMCSA is now my third biggest position. CMCSA was up 29.08%. Then comes $LAMR. $LAMR returned 18.56%.
During the year, banks were around 30% of the portfolio (BAC, WFC, BK, and USB). There was some real dispersion in the 2023 returns among my banks. $WFC is my fourth largest position at about 8%. $WFC was up 22.94% in 2023. $BK was up 18.52%. $USB and $BAC were both detractors from overall performance. They were each up about 4.8%.
$SMG is my next biggest position at just over 6%. SMG was up 36.92%. I also hold about 5% in GOOGL. That was up 58.32% in 2023.
My worst performer was $CAG. CAG was down 22.82% in 2023. This is about a 5% position now. I also had some other staples losers: $K down (13.09%); $KHC down (~5%); and $KLG lost (-21.59%).
I missed most of the negative performance in $K and $KLG as I bought/added after their declines. For example, I actually have a gain of about 35% in the $KLG position. I planned to buy more $KLG. I was planning to take it up to a 5% position, but it kind of ran away and left my desired prices. It’s a 3% position now.
One final loser during 2023 was $PARA. This is about a 4% position. It was down (10.43%). I think the business is cheap, good, and it seems like it is “in play.” I have therefore considered selling the common stock and replacing it with an options position.
FIN
In conclusion, during the fourth quarter of 2023, I participated in the “low quality rally” to an almost offensive degree. [But I’ll take it.] It wasn’t enough to help me beat the SPY for the year, but I made a race out of it.
My CAGR over the past 5 years is aiiight. “This is fine.” I lost to the SPY by 259 basis points, but this has been a strong period for large capitalization “quality” businesses (i.e., the “magnificent seven”). That is going to be a tough period to beat the SPY.
During the entire 5 year period, I have held more cash than I should (if I want to have a shot at beating the SPY). In the first couple of years I was “starting up.” Yet, I went into 2023 with about 8% in cash. I think that is the lowest allocation to cash over the entire period. Still, I ended up 2023 with over 13%. With short term yields of 5% the drag in 2023 was not as harmful as the prior four years, but the cash has been a significant drag over the 5 year period. I should get the cash deployed. Of course, deploying it well is the hard part.
I did beat RPV and VT by a percentage point (or two) over the 5-year period. If I had a high degree of confidence that I can continue to beat RPV by 2% annually, I would move a significant portion of my invested assets (as discussed in my net worth diary) out of index funds and allocate them to this “strategy.” Over the long term, I suspect that beating RPV will result in a very pleasant outcome. I do not, however, have that confidence at this time and will maintain my overall allocation.
Overall, I think my performance in the Fun Fund (over 2023 and the last five years) can be summed up thusly: “Not great, not terrible.”