August was brutal for the Winning Value Portfolio. In fact, winning is not what our portfolio is doing at all so far in 2015. From the looks of it, I don't see a more favorable outlook over the next few months, either.
That's not to say that the long-term outlook for the individual securities is favorable, but merely that it will likely be beyond 2015 to see a reversal in many of our positions.
As of Aug. 31, 2015, nine of the 10 members of the portfolio were down significantly for the year. In baseball terms, our batting average is quite pathetic.
With four of our holdings -- Chesapeake (CHK), POSCO (PKX), Cheniere Energy (LNG) and Murphy Oil (MUR) -- in energy and commodity-related businesses, that concentration perhaps may have been the only thing I would change if I could go back in time. These four securities have experienced similar correlation despite important differences. Cheniere, for example, benefits from lower natural gas prices in the U.S. in order to produce liquefied gas to export.
Speaking of Cheniere, a couple of weeks ago, activist investor Carl Icahn disclosed a stake and received two board seats.
Low gasoline prices have led to a boom in auto sales, namely trucks and SUV's, yet General Motors' (GM) shares have been pummeled. I view this as a function of volatility as opposed to a fundamental deterioration in the quality of the company.
China's recent actions have all but guaranteed a volatile investing environment in the short-term. And it doesn't help that U.S. equities have been climbing at a furious pace since 2009 -- until last month. Investors are taking chips off the table and waiting to see what happens next.
For those who remain invested or are willing to bet on beaten-down industries such as energy, the payoff will come to those willing to wait. Six years ago, Wells Fargo (WFC), Bank of America (BAC) and American Express (AXP) were all trading for less than $10 a share. Today, Wells Fargo trades above $50, Amex in excess of $70 and BofA around $15.
The market behaves rather consistently over long stretches of time. This time is no different.