Vladyslav Koptiev
Vladyslav Koptiev @AtlasCapital
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To my copiers and followers, I managed to achieve great performance for the past year. Overall, I outperformed S&P in 2019 by 38%. Let me remind you that beating average market return is not an easy task. Case study in $BRK.B (Berkshire Hathaway Inc) 2016 shareholders’ letter revealed that none out of five randomly selected professionally managed funds (“helpers”) did not match S&P500 returns during 2008-2016. And this “helpers” would have charged investors with outrageous management fees, sometimes close to 2%, does not matter what their performance was. With such results it does not make sense to invest in those “professional” funds. Let’s assume S&P will deliver 5% during next 10 years, which is quite optimistic based on current market valuations. Let’s assume also that investor have 25% chance of finding hedge fund able to beat the index by 5% every year (perhaps, he is a lucky guy or girl). Simple mathematic shows that on average investor will achieve 4.25% within next decade, after accounting for 2% management fee. Alternatively, if investor join S&P index fund which is tracking S&P500 and charge trivial management fee, his return must be something close to 5%, perhaps around 4.8%. At AtlasCapital our goal is different. We expect to achieve an average annual advantage over $SPX500 of at least 5%. Believe me (or better check), 5% extra return is a very big deal when compounded over many years. Now, why, would you ask, someone can claim he can beat the “best” industry professionals, with diplomas from famous business schools? This is valid question. However, I have answer. 1. I will stick to value investing. As a group, value investors are perhaps the only group who managed to outperform market over decades. Among them famous names like Benjamin Graham, Joel Greenblatt and a few more. Check out their stats. 2. Absence of group decisions. It is close to impossible for outstanding investment management to come from a group of any size with all parties really participating in decisions. 3. I don’t have any desire to conform to the policies and the portfolios of large well-regarded organizations, whereas most investment managers do have it. 4. I don’t have an institutional framework whereby average is "safe" and the personal rewards for independent action are in no way commensurate with the general risk attached to such action. 5. Limited diversification. At AtlasCapital we are following a policy regarding diversification which differs markedly from that of practically all public investment operations. I don’t mind to have concentrated portfolio with 8-10 positions, selected from different sectors, because I believe it’s the only way to achieve advantage over index returns. 6. And finally and importantly, most money managers are working by inertia. Stated simply, we are betting against efficient-market hypothesis, so widely taught at famous business schools. Must be noted that I can’t guarantee 5% advantage as sure thing. What I can guarantee is that we remain on the same boat, since majority of my wealth is invested in this portfolio. During our journey you need to be patient, let your hard-earned money work for you. When looking for investor, take into consideration long-term performance of at least 3-5 years, perhaps more. If someone shouts loudly about his 100% return this year, but remain silent why 50% was lost in previous – watch out. During 2 years this person has not delivered any return. If someone lost 50% in one year, he/she needs to achieve 100% next year just to be breakeven; if 40% was lost – need to achieve 66%; if 30% - 43%. Once you copy, I advise you to stick to my portfolio as long as practicable. Never forget good expression: “The stock market is a device for transferring money from the impatient to the patient” (c). Daily, weekly, monthly movements should be ignored completely. In value investing it pays off to be stubborn. Let me express one thought about risk score on my stats page. Think about keeping 100% of your account balance in cash. Probably your risk will be low (I never tried!), but you will lose money (purchasing power) over time because of inflation. With this negative expected value, using the analogy from probability theory, 100 USD in 5 years are worth only 90 today at current 2% inflation rate. In our portfolio we have positive expected value, but higher risk. It’s absolutely absurd situation. I will never exchange 1 dollar of your money to 90 cents, instead I much more prefer to give away 1 dollar bill for 2 dollars in shares value. Please refer to comments section for December and annual performance review. Link to my previous monthly reports: November - etoro.tw/2QnfDD0 October - etoro.tw/35m51sl September - etoro.tw/2ulNwf1 Link to market valuation review: etoro.tw/37GKhwT Sincerely yours, Vlad Koptiev. ... Show More