Update No. 93 – 01/01/13

Happy New Year from Dublin.  The year was a pretty good one for EGP in absolute terms, our unit price was $0.96254 this day last year and today we find it (unaudited at this point) 26.47% higher at $1.21730.  The ASX200TR index advanced from 30879.12 to 37134.53, for a gain of 20.26%.

Regular readers will have noticed an obsession of mine is in benchmark comparison. I also compare the assets my Wife and I own with just as much rigour.  Although in absolute terms 2012 was a very good one, in relative terms, it is the second weakest performance in the last 5 years.  We are paying fees and living costs for 2 university aged students which is certainly somewhat of a financial drag (but with very clear future benefits in the reduced likelihood of financial support needed – I hope) on the speed of progression, though the satisfaction when they work hard and perform well is a pretty good psychic compensation.

Our last 5 years were as follows (I also use the ASX200 Total Return index as my personal benchmark, coupled with a long-term target of 15% p.a. over 5 year periods), when I sum ‘Personal Wealth’, I exclude all depreciating assets owned, such as cars, furniture, etcetera and it should be remembered these results are after the substantial taxes we have paid:

2008 – Personal Wealth Result (-17.89%) Benchmark (-38.44%), this was an impressive out-performance of 20.55%.  So when I say I find beating the benchmark by a wide margin on a sharply falling year a happier experience than a narrow victory in an advancing one, I am not talking theory, I have lived such a result and those who know me well will confirm how deliriously happy I was at the end of 2008 as I deployed ever increasing amounts of our capital into a market I couldn’t believe was just getting ever cheaper…

2009 – Personal Wealth Result +42.56%, Benchmark +37.03%, this represented only a 5.53% outperformance.  I made some capital allocation errors in 2009 that seemed a lot more obvious in hindsight (primarily not going hard enough into the clearest value situations), but I would take a 42.5% gain year every time it was offered.

2010 – Personal Wealth Result +14.03%, Benchmark +1.57%.  The 2010 12.46% outperformance was the best ‘quality’ outperformance of the 5 years set out here.  While the market bobbed and weaved and tried to find equilibrium, ultimately going nowhere, most of our stocks climbed higher in a relatively steady fashion.

2011 – Personal Wealth Result +1.46%, Benchmark (-10.54%) for an even 12% out-performance, which was in my view the second best ‘quality’ outperformance of the 5 examined years.  Many positions built or consolidated in early 2010 retained their value as the market began to recognise the GFC was not completely in the rear-view mirror, though the second half of 2011 was poorer than the first.

2012 – Personal Wealth Result +26.12%, Benchmark +20.26%.  This 5.86% outperformance is the second best absolute performance, but it has one special attribute in my view.  The accumulated value, relative to the ‘market’ price of the assets that primarily comprise both the ‘Personal Wealth’ and EGP Fund No. 1 P/L are at the highest level they have been since 2010 in my estimation.  It is no guarantee that 2013 will be a good one in relative terms, but I can definitely state I fully expect a meaningful outperformance in 2013 and will be surprised and pretty disappointed if it doesn’t arise.

As time goes on, an increasingly smaller proportion of the ‘Personal Wealth’ asset base is comprised of very stable, but very low-growth assets such as the family home.  This should mean our overall performance should gradually converge with the results the fund generates.

Comparing your personal net worth with the ASX200 is probably not for everybody, particularly if you are not heavily exposed to the Australian share-market (as we are).  But I do maintain the vital importance of setting some measurable goal, be it a percentage figure, a dollar figure or some other measurable to be set at suitable intervals so the saver has something meaningful to save toward.  For a young’un fresh out of school, they may target an increased $5k of savings by year end.  For someone with a very substantial property portfolio, there may be an appropriate property index to benchmark against (though property investors must be careful to ‘unemotionally’, or better yet ‘professionally’ value their properties…).

Whatever it’s going to be, declare it in advance and do everything in your power to best your target and you’ll probably accelerate your personal wealth goals much more rapidly.  Looking forward to an amazing 2013 – Tony Hansen 01/01/13

EGP Fund No. 1 Pty Ltd. Up by 18.19%, leading the benchmark by 1.8% since July 1^st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 21.73%, leading the benchmark by 17.51% all-time (April 1^st 2011).