2020: an end of year investment summary note
My first end of year investment review
“Lost dollars are simply harder to replace than gained dollars are to lose.” Michael J Burry, MD
For the 12 month period 1 February 2020 to 31 January 2021, my portfolio grew by 158%, compared to the S&P 500 index which grew by 14.95% (16.44% including dividends).
We started 2020 with such optimism and hope, only for a pandemic to be declared and watch the world descend into what can be best described as the Hollywood catastrophe film, Contagion. However within times of crisis, there are opportunities. Paraphrasing Ben Graham from the Intelligent Investor, to be the enterprising investor, one must be a net buyer during a market crash. The probability of market crash occurring is one, the problem is usually determining with some level of certainty when.
Experiencing my first stock market crash, I learned the need for keeping sufficient capital in reserve to take advantage of acutely presented opportunities. The market euphoria which followed the crash (arguably still present) and throughout the r/WallStreetBets saga of GameStop ($GME) forced me to identify as a value investor. During the year I came across $GME as a value play; it was selling for less than net working capital and the upcoming console cycle would act as the macro catalyst for increased value. However towards to end of 2020, $GME became the interest of a particular subreddit and as a result, the share price increased from $20 to its peak of $483 in January. Speculative mania. Taking the lesson I learned less than 12 months earlier, I decided to take profits at a price which felt hugely overvalued the underlying business.
So what do I think will happen in the year ahead in the market? The market will fluctuate. That’s about as far as I am willing to forecast. Mr Market is unpredictable, and my investing philosophy focuses on following two Warren Buffet rules. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
My investment result this year looks fantastic, but I must add a note of caution. This is only one years’ result. The real question is am I able to replicate this over a longer period of time?
Maybe next year I’ll figure this investing thing out.
Disclaimer: All information provided in this article and/or publication is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. All views and opinions presented are that of the individual and not representative of their employer or any organisations they work with. The author may have positions in the stocks mentioned.