Update No. 148 – 01/02/14

This week I thought I’d revisit a pair of posts made back on the original blog before the fund launched and before the website was created. The two part post was transcribed to the website here (part 1) and here (part 2).

Revisiting your mistakes is important and in part 1 I had described QBE as being meaningfully undervalued. Now to be sure, it’s price back then was nearly $18, and is currently closer to $12, and whilst investors have been paid $2.23 in dividends in the intervening period, a return of about -8% per annum in a period when the market made nearly 8% per annum is clearly terrible, but it should be noted that if you were a fan of the company, ‘Mr Market’ presented you with 3 or 4 opportunities to buy more at prices closer to $10 over the ensuing period, and had you taken those opportunities, you were presented with a few opportunities to make between 40% & 80% gains in fairly short order. Now I obviously don’t advocate ‘trading’ and ‘market-timing’, but to the investor who found QBE tempting at $18 in February 2011, I think it is unlikely that the -8% return described above would have been their result. Insurance is an unpredictable industry, I maintain that QBE are one of the better insurers and that over the longer term, they will do well.

I also maintain as I did 3 years ago that there are a great number of smaller opportunities that will return better results to investors (the returns EGP has generated have borne this out).

This is also why you should never listen to any tipster on the stock market. There is too much fluidity, you need to keep abreast of relevant information and adjust your view based on what you know. A point in time assessment of the value of a business is very different from how you would manage a portfolio to include that business. With regard to QBE, it appears there could be some question marks over the quality of the earnings at some of the many acquisitions they have made.

I also described in the ‘part 1’ post holding as much as 7.5% of my family assets in ‘speculative’ investments. It should be pointed out that my idea of speculative is infinitely more conservative than most investors. In any case, as our funds have been steadily migrated toward EGP (the average contribution from Sue & I has been $88,000 each intake over the last 7 investment intakes and $43,000 each over the last 4 as our external investments ‘peter out’), our speculative portfolio now represents about 0.05% of our total assets – Tony Hansen 01/02/2014

EGP Fund No. 1 Pty Ltd. Down by 2.24%, leading the benchmark by 0.79% since January 1^st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 60.62%, leading the benchmark by 39.15% all-time (April 1^st 2011).

^{*1 after 31May 2013 dividend of 2.333 cents per share plus 1 cent per share Franking Credit}

^{*2 calculated based on dividends reinvested}