In value investing, it pays to be patient. In fact, patience is an absolute prerequisite for successful investing. While a 30-day time frame is not a measurement of success in investing, it's informative nonetheless. For the Gad Winning Value Portfolio, simply doing nothing delivered great progress.
At the beginning of each year, we invest in 10 securities and hold them for a year. It's that simple. Then we sit back and do nothing except keep up with our investments and learn about new ones.
April was a terrible month for many high-profile hedge funds as active trading was punished by a volatile market. However, it was a different story for the patient and boring value investor.
At the end of April, the results stacked up like this:
At the end of March, the Winning Value Portfolio was down 5.3% for the year. After positive numbers in April, year-to-date portfolio performance improved 2 percentage points, to a decline of 3.3%. That compares with a 1.4 percentage point advance for the S&P 500 in April and negative returns for many high-profile professional funds. Again, a track record is not defined by one month or even one year, but that is where the numbers stack up.
One of our positions, Travelzoo (TZOO) went from being down 23.6% year to date as of March 31 to being up 4.2% YTD as of April 30. Number crunchers will realize that meant TZOO increased significantly during the month of April. Astute investors will understand the value of patience when an asset is bought at a discount to intrinsic value. When you buy an undervalued asset, the biggest gains are likely to occur over a fraction of the holding period.
The portfolio's performance is still being held down by declines in our energy holdings, namely Chesapeake Energy (CHK), and our position in Bank of America (BAC). Both securities, in my view, remain undervalued and over time the reappraisal in their respective share prices should allow the portfolio to outperform the broad market indices.
Until then, we sit back and enjoy the wonders of compounding and minimal fund expenses.
