February portfolio update

February was a very interesting month. I mentioned in my last update that I had identified some potential opportunities to deploy capital. As a result of this work, I added one security during February. While I am reluctant to provide too many details, the position deserves some explanation as it now accounts for about 44% of the portfolio. 

Those who have read my earlier writings — in particular my very first post and my comments on Mohnish Pabrai's book — will be unsurprised that this particular business is stable, with an operating history of more than 10 years, and well-run. More importantly, the stock provides safety of capital and was bought well below any reasonable estimate of its intrinsic value. Stocks that display such attractive characteristics are hard to find. As an investor, if you are presented with such an opportunity, you should load up. To borrow words from Charlie Munger: "Opportunity meeting the prepared mind — that's the game." In my view, there is an extremely low probability that owners of this particular stock will earn less than a double-digit return over the next five years. (A return in the low-to-mid teens is far more likely.) The risk of permanent capital loss is extremely low to negligible. This is why it now speaks for nearly half of the portfolio's assets.

A number of my holdings reported interim results during the month. There were no big surprises — either good or bad. Despite this, the portfolio fell 2.27% over the month. Some of this drop can be accounted for by the significant purchase. While that stock has not fallen in value, my purchasing increased the overall size of the portfolio by about 70 per cent compared to January, which had the effect of diluting the impact of my existing gains. The benchmark was up 0.36% over the month. Since inception, the portfolio is trailing the benchmark by 4.45%.

The portfolio now consists of seven stocks. During the coming month, I expect to purchase an eighth security and add to at least one existing holding.

	August 3, 2017	February 28, 2018	Since Inception	Annualised
G&W Portfolio	1.0000	1.0356	3.56%	7.45%
Benchmark (SPAX2F0)	61,250.80	66,153.94	8.01%	13.98%

Until next time.