lundi 27 février 2017

Sequoia fund, waiting for a correction too - EDIT

I’ve said it numerous times : I like Sequoia Fund.

...Even after the unforgettable fiasco they made when they put about 35% of their total portfolio on Valeant, they still fascinate me. 

However, they don't seem to fascinate people as before. Check below for the total value of their portfolio over the last 10 years. The decrease in value may be explained by two things: 

1- Bad investments;
2- Investors taking their money off the fund because they believe other managers or themselves can do better.  

Value of Sequoia fund over the last 10 years (4th quarter of each year) :

2006 : 3.39 billion dollars

2007 : 3.41 billion dollars

2008 : 2.04 billion dollars (CRISIS)

2009 : 2.4 billion dollars (CRISIS)

2010 : 2.69 billion dollars

2011 : 3.65 billion dollars

2012 : 4.7 billion dollars

2013 : 6.57 billion dollars

2014 : 7 billion dollars

2015 : 6.24 billion dollars (beginning of the valeant fiasco)

2016 : 3.6 billion dollars

So, if you had invested 1000$ with Sequoia Fund during the 4th quarter of 2006, you'd have 1062$ ten years later. 
What a FUCKING SHITTY PERFORMANCE. Ten years for 62 bucks. Anybody could have done better than those super managers with 1000$ over that period. A fucking hobo can get 62$ in a day or two if he looks dirty enough.

That part above in red is absolutely wrong. I hope that this blog will never be a credible source of information for you. The value of the fund is not an indicator of the performance of the fund. Like Etienne Pouliot wrote in comment section, the performance of Sequoia has been about 85% over the last 10 years. It's not that good, but it's way better than the 6,2% that I suggested.

These guys destroyed value with a single stupid idea. And they destroyed many years of hard work with that too. Because it will take years for them to regain their credibility.
But, all the fault was on Goldfarb's shoulders! The others did nothing wrong! Since he's gone, everything should be OK. 
Let's take a look at their new brilliant investments.

During the last quarter, Sequoia reduced almost all their positions. But they raised their stake on Carmax (KMX) and Dentsply International (XRAY). They also initiated a position in Amazon (they had a position in the past if I remember well).

Their biggest cut :

Mohawk (-54%) to about 3% of the portfolio

Fastenal (-38%) to about 3.9% of the portfolio

TJX (-22%) to about 7.3% of the portfolio

Berkshire (class A and class B)  (-17.5%) to about 19.2% of the portfolio

Mastercard (-10%) to about 7.7% of the porfolio

I don't get at all where these guys are going. Am I fucking dreaming or they really reduced their stake with their most solid stocks like TJX, Berkshire and Mastercard to buy more of that cyclical and expensive Carmax? What the cunt? 
Why cutting Mohawk? Their recent earnings have been pretty good (the stock is up about 15% over the last 3 months and remains at an historical low PE). Maybe they still can't digest how bad it went for them 8 years ago with Mohawk. Maybe they believe it should only be a 3% position? I don't know. But I know that I prefer Mohawk, TJX, Berkshire and Mastercard to Carmax. 
Maybe they simply took some profits to get ready for the next correction. 
Good idea. But, if there's a correction, I bet Carmax will be hurt much more than Berkshire and TJX.  So, I repeat, I don't know where these guys are going.
I don't believe in Zimmerman,
I don't believe in Elvis,
I don't believe in Beatles,
I don't believe in Ackman,
I don't believe in Sequoia,
I just believe in me.
Yoko and me.

12 commentaires:

  1. Wow. I just lost respect for the Sequoia fund.

  2. Sequoia has lost it's touch since Bill retired. Hope it can at least match the index after fee. I have a feeling that it is turning into a monkey-run fund just like many others.

  3. If you bought 1000$ share of Sequoia 10 years ago you would have around 1850$ today.

    Value fund != performance

    It's simply that a lot of people got out of the fund. Probably because they didn't beat the market (investing in S&P500 ETF would got you 2100$).

  4. I'm fooling around with their past performance, about any range I choose they outperform the market.

    But as soon as you add 2015 to today, they underperform. It's impressive how much their mistake with VRX hurts them.

    My best bet would that in the next 10 years they will outperform.

  5. their 10 year performance is approx 87% gross so that's a relative outperformance to the s&p of 67% and this is despite the big losses in valeant. The numbers you've used might be due to redemptions and less on performance. Their investment philosophy hasn't changed so I do not see why they cannot continue to outperform in the future. Mistakes are bound to happen to anyone but over the long haul they seem to get it right most of the time. Carmax could be a play on economic expansion and increased consumer spending. They may not be as cyclical as it appears considering they're one of the few companies that made money during the crisis.

  6. If I may use a poker analogy, you could be the best player in the world, if you keep sitting down to play poker with one third of your're courting disaster.
    No amount of stock picking talent will save us if we have one third of our portfolio (or more) in a single stock. I have been stupid enough to have one third of my stock portfolio in one stock. I do not expect professional money managers to make that mistake. The strange thing is that MANY hedge funds and money managers have extremely concentrated stock portfolios.
    In poker, they speak of actual poker play and then bankroll management. These are two different things. You can play the cards really well and read your opponents like a wizard...and end up broke over and over again.
    I think the penetrator portfolio is an excellent example of great bankroll management.

  7. Warren concentrated on 5-6 best ideas since he was studying under Ben Graham until 90s when the focus of Berkshire shifted to acquisitions. Warren is beyond genius. He is an oracle!

    1. On July 19, 2013 I create a stock portfolio for Buffett's top six stock picks:
      American Express, Coca Cola, IBM, Procter & Gamble, Wells Fargo and Walmart. It's 3 and a half years later and this amazing portfolio is up 7%. The last 3 and a half years have not been bad years for the stock market.

    2. 3.5 years is not that significant. His 40+ years track record from BPL inception to 1990s has been amazing. Size became an anchor.

    3. Alot of buffets "picks" are not always straight equity. Look at his prefer stake in BofA, with warrants at $7, while getting 10% interest, and his kraft heinz deal that has netted berkshire double their capital. Then you look at his massive buys of whole companies like burlington which has more than doubled since his purchase but not valued on the books. Nobody should look at buffets pick like a hedge fund.

    4. Of course it also helps if you own the kind of businesses that allow you to use billions of dollars of other people's money for a long time and then pay them back later. Buffett's insurance businesses collect premiums and only have to pay off years or decades later.