Wednesday, February 16, 2011

Jim Chuong's 2010 Letter to Partners

A couple weeks ago, I came out with an article depicting the performance of the stock portfolio of Canadian value investor Jim Chuong for the past decade. With a lot of humility, he attributed his outstanding 2010 57% performance to just sitting there and watching his portfolio rise. Here are of his own words:

The return I achieved in 2010 is not repeatable, should not be considered a reflection of my investment skill and, if anything, foreshadows a very bad 2011 for me.
In fact, in 2010, aside from picking up a small handful of shares in The Buckle, my activity was non-existent. Readers should expect inactivity in the face of rising prices. For me, it makes no sense to buy at increasingly higher prices. In fact, it appears more profitable to start looking in areas where prices are declining or, even better, have collapsed.
This year my letter will be short because nothing happened – everything rose in price and I sat dumbfounded - gawking at all the businesses that I was suddenly priced out of.

He his very modest indeed and as many will have guessed, his task has not been so easy. In his 2010 letter, he explains his views about investing and the method he uses to find attractive stocks for his portfolio.

He talks about the effect of diversification and asset allocation. He shines the light on the reason why many companies decided ti distribute a special dividend in 2010. As a value investor he shuns companies that have debt on their balance sheets and he gives a lengthy argument to support his view.

He also candidly compares poker to investing in a very light way. And reminds us of the effect of taxes on different ways to earns money, ranging from earned income to dividends.

He also insists on the importance of retirement and what it implies for any person facing the dilemma of immediate gratification versus long term wealth. He thankfully ends with a description of the performance of his portfolio, and the companies in it.
Here are his holdings at the end of 2010:

% of Portfolio
The Buckle (NYSE: BKE)
Columbia Sportswear (NASDAQ: COLM)
American Eagle (NYSE: AEO)
Berkshire Hathaway (NYSE: BRK.B)
General Employment (AMEX: JOB)

You can access his full letter and his insights right on his website.

No comments:

Post a Comment