The Rizzi Capital portfolio delivered returns for 2014 of 25.3% This was just under our historical CAGR of 28.3%. All details concerning the yearly returns of the portfolio, including a month by month breakdown as well as dozens of portfolio ratios, average drawdowns and other details can be found at HedgeCo.net (You will need to sign up, for free, to HedgeCo.net in order to view all the data)
In 2014 the portfolio benefited strongly when it’s largest holding, Bell Aliant, was taken over by BCE. We had predicted that this would happen in 2014 and we actually even accurately predicted the takeover price. It’s another example of how careful research and good positioning can lead to over sized profits. More details concerning our predictions on this takeover can be seen here.
The majority of the portfolio is concentrated in 5 companies. We remain focused on Canadian companies which deliver stable growth and throw off a heavy dividend.
Although we do not actively purchase American based companies, we do follow the US market and enjoy making market calls on particular stocks, when clear dislocations are visible. We outlined some of these predictions on our SeekingAlpha page and, below,we will give a rough summary of how those predictions performed in 2014.
Accurate Predictions in 2014:
NETFLIX: It’s been a darling stock performer for the last decade, increasing in value by over 4000%. In January 2014 we saw trouble. We predicted that growth would stagnate and it was finally time to sell the stock. We were absolutely right. Netflix was a roller coaster in 2014 and in the end it was dead money.
INTEL: Intel had been a stagnant stock for the better part of 14 years, moving in a tight range and never gaining any traction. In March 2014 we called the bottom, almost to the day, and knew it was time to buy. The stock has been on a upward trajectory ever since. It was up over 30%, not including the dividends.
GOOG: Google has been a powerhouse since it went public, but we knew that the uptrend was getting long in the tooth. In January 2014 we advocated selling the stock. We were right again. Google stock shed over 6% in 2014
HP and MSFT: We predicted that both companies would have a good year. And they absolutely did, rising by 40% and 25% respectively in 2014.
IBM: Despite years of relentless stock price appreciation, we predicted that 2014 would be a very tough year for IBM. And it absolutely was. The stock dropped by almost 9% after our prediction. The fundamentals were clear in this case, but our prediction was definitely against the grain. We received a lot of negative feedback from readers after we made this call, but, in the end, we were right, and they were wrong.
As mentioned earlier, we did not have a position in any of the above mentioned companies. We are firm believers in investing in Canadian companies. Nevertheless, we understand the allure of American stocks and enjoy analyzing these companies and predicting future growth prospects. We use the same methodology when making investments in Canadian companies, and so far we have been richly rewarded.
We see trouble in the Canadian economy, but we remain almost fully invested. Our companies have proven to be adept at driving shareholder value regardless of the general economy and also deliver strong dividends, which we re-invest as much as possible. Furthermore, we have some large positions in companies which we believe to be clear takeover targets. should a takeover occur at any of these companies, it will have a significant, positive impact on our overall portfolio returns.
Although we anticipate delivering a portfolio return for 2015 which might be smaller than in 2014, we still are confident in delivering positive growth and beating the performance of the TSX average once again.