When you structure a portfolio with an eye to having some positions that should do well, even if the bulk of your portfolio is doing poorly, then you expect that you will always have some losers. You just hope that your winners will outweigh the losers, and expect that the ‘countervailing’ positions will help in a drawndown. This has worked reasonably well for me for some time, and especially since 2000. The falls haven’t been as dramatic as the market, and the returns to new highs have been quicker.
There are a number of different measures that I look at to determine how I am doing; one of them being, how well I am doing in each position year to date. Of the 46 stocks that I have a position in, only 3 are down YTD. 29 are up by double digits. I do not delude myself. This is not strictly due to great stock picking. This is largely due to a ‘bull’ market, for which I cannot take personal credit.
Putting together that I expect to have some losers and the fact that I have so few, leads me to the conclusion that this is getting close to ‘too good to be true’. I lived through a long period of time (’83-’99) where this went on and on and on. So I know that ‘irrational exuberance’ feeling up close and personal. I also remember what it is like (from my youth) to wake up with a hangover, and I don’t have to do it again to remind me.
Once you stop trying to guess the top, you can relax. You have given up on being the best, winning the whole thing, for the satisfaction of taking home something. Over time that something, might just be better than average. Hey, we can call it the Lake Woebegone School of investing.