In July, I reviewed my portfolio performance for 2011 Q2 here with the intent of doing a review every quarter. We are already a month into the third quarter, so here is a very late review of my year-to-date performance.
Coke’s Account’s return (also referred to as my individual account) is +17.46% and my Roth IRA ‘s return is 27.02%. The S&P 500′s return is 0.49%.
I consider myself a fundamentalist. This means that I source investment ideas the old fashioned way — reading the filings with the SEC, analyzing the company’s financial statements, reading the conference call transcripts, and observing the world. I enjoy reading and consuming content. I believe only by consuming large amounts of unrelated content and thinking about the implications of the content can individuals identify large shifts in the way the world works. This often leads to excellent investment opportunities.
I have a tendency to invest in high growth, high PE stocks in what would generally be considered momentum investing. I think this terminology is a bit misleading, however, as I am more comfortable with mean reverting strategies. It may be helpful for readers to think of my style as the opposite of value investing.
I consider myself well versed in technical analysis, however I rarely use any technical analysis indicators in my trading.
One area of active personal research is algorithmic trading. I have spent a good amount of time brushing up on R, a programming environment for statistical analysis that is popular among the quantitative finance community. I hope to write posts under this subject area as I develop simple models.
I also wish to switch my mindset regarding my portfolio performance away from comparing my performance to a benchmark (in this case, the S&P 500) and more towards an absolute return mindset. In particular, I hope to structure my trades and investments to maximize my sharpe ratio. The sharpe ratio is a measure of a portfolio’s return relative to the portfolio return’s standard deviation. It is generally desirable to minimize the volatility of your portfolio’s returns given a level of return. The volatility in August, September, and October were emotionally draining and potentially very damaging to my portfolio.
I have experienced excellent returns in the past three years, mainly due to the performance of Chipotle, which has increased by approximately 600% during this time period. Chipotle remains my largest holding at approximately 40% of my portfolio. Long-term I am still highly optimistic, however, I feel that Chipotle is appropriately valued at the moment. I anticipate my performance in 2012 to reflect this fact. I plan to write covered calls on my position to supplement my returns.
I would like to reiterate that I encourage readers to discuss trading ideas with me or to suggest content that you would like to see on this blog. Part of the reason why I started this blog was to aid me in my study of financial markets, and one way to do that is to find a group of like-minded individuals to collaborate. I welcome any comments, submissions, or questions.
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