Friday, January 3, 2014

2013 Year in Review

2013 was quite a year - the S&P was up 30% and everything seemed to be going right!  And then there was my portfolio...

Thoughts: Looking back on 2013
I started the year knowing I need a strong business plan, but did not immediately create one and was investing based on a loose set of principles .  My portfolio was a mess in January - I held 8 strong dividend paying stocks, and 5 growth companies (4 being risky biotechs).  In early spring, I completed my business plan and created a model portfolio, one which I hoped to trade to by year end. 

I made a very big mistake in May after the completion of my business plan.  Instead of reducing my 5% position in Amarin, I believed there was easy money to be made so I increased it above my speculative stock allocation limit of 1% to 7% in this case.  This mistake cost me $3k or 4% in performance for the year, potentially more if you assume I put that $3k in another company that had positive returns.

My second issue was that I traded too much in 2013.  In total, I had made 30 trades at a cost of $300.  This was mainly due to the repositioning of the portfolio, but I expect to reduce this to 20 trades or less in 2014.

In a more positive light, I added 7 new dividend paying stocks and increased my yearly income by 24% versus last year.  I have revised my plan a bit and pull it out weekly to ensure I am working to get my allocations in line with the limits that the business plan specifies.

All in all, I've learned some valuable lessons this past year.  Number 1, sticking to one's business plan is essential.  The plan helps remove much of the irrational and performance chasing behaviors that we as investors may exhibit from time to time. It also provides goals to achieve and rules to play by to achieve those goals.  Second, wealth building takes time.  I've created my own calculator and it shows what inputs are necessary to achieve my goal of $2M in dividend paying assets by 60.  This will help me understand if and when I have to contribute more capital to meet the expected portfolio value instead of moving money to riskier assets to play catch up.  Last, I've learned that investing in higher quality company requires less of my time.  Almost every day in 2013 I watched my positions and the market.  In 2014, I am going to reduce the amount of time I spend reviewing my portfolio significantly. 

Thoughts: 2013 Year End Moves
Sold - ACTC: Management was not delivering according to their timelines and too much cash would be needed which means dilution.  I like the science this company is working on, but from an investment standpoint, I'm moving on to another company. 
Buy - SCRC: This replaced ACTC.  SCRP is a turnaround play on wholesale distribution and sales of OTC drugs to small pharma.  The company is a mini McKesson and has been increasing revenues quite a bit in the last few months.  Their wildcard play is for RapiMeds, a rapid melting form of Tylenol for children in China.
Sold - AMRN: sold half position for long-term loss of ($3050), which reduced capital gains of $4041.  This was done for tax purposes.
Buy - KO: initiated half of a full 4% position in KO at 39.35 for consumer staple exposure.
Buy - DE: initiated position of 2.5% for DE, will not buy to 4% given cyclicality of company earnings, but stock is up 10% in 4 weeks.
Sell - SO: sold to realize short term loss ($215) vs short term gains of $2288 (due to covered call profits in 2013).  Will look to add back to SO after wash sale period ends.
Buy - XEL: bought with SO proceeds, initiated half of a full 4% position.  XEL appears undervalued by ~15%.


Thoughts: Next Year (2014)
In 2014, I plan to further maneuver my portfolio in line with the model. This mainly involves increasing the core port of dividend growth names from 60% to 70% minimum. This occurs by way of reducing ATRS holdings throughout the year to 10% and AAPL growth holdings to 5% or less. 
Early in the year, I am looking to initiate positions in JNJ and GIS, as well as KMP or PAA depending on what is not on my company's restricted/watch lists. In addition, I will look to initiate positions in 1 or 2 young dividend growers (eg. SBUX, V, or DNKN).

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