The Fat Pitch Financials Portfolio ended October 31, 2008 with a balance of $923,449.36. That balance is down 21.04% since last month. In contrast, the S&P 500 return declined just 16.43% over the same time period. Over the past quarter, the portfolio is down 27.33% versus down 22.68% for the S&P 500. Over the last twelve months, the Fat Pitch Financial Port is down 32.37% versus down 34.38% for the S&P 500. Since inception, the portfolio has returned -7.91% versus -7.17% for the S&P 500. On an annualized basis that comes out to -1.98% versus -1.79% versus the S&P 500. The bottom line is that the Fat Pitch Financials Portfolio has taken a beating, especially in the past few months. I believe this is the first time I’ve reported negative total returns for the portfolio since its inception on September 21, 2004. The only positive item to note is that over the past 12 months the portfolio has managed to outperform the major indexes as you can see in the chart below.
Fat Pitch Financials Portfolio versus the Major Indexes Over the Past 12 Months
There was only one transaction in the month of October. On October 3, 2008, I added shares of Wells Fargo (WFC). I added 1,400 shares at $34.85. At the time, I thought with the government’s bailout plan would stabilize the price of shares in the financial sector. I was also pleased to see Wells Fargo taking advantage of the situation to further build its economic moat by acquiring Wachovia (WB). As is typical for a value investor, it appears I was a bit early in this purchase. However, I still have high hopes for Wells Fargo.
The table below lists the current holdings of the Fat Pitch Financials Port. As you can see, shares of Premier Exhibitions (PRXI) have been crushed since late August. Revenues from their exhibits have been down due to a change in vendors, exhibit relocations, and the economic down trend in consumer spending. To top it all off, Mark Sellers is winding down his hedge fund, and he was a major holder of Premier Exhibitions. Its hard to believe know that Premier use to be one of my best performing positions. In retrospect, I should have sold some of the position after share price rebounded after the negative 60 Minutes piece on the company.
I’m also surprised at how far USG has declined. I guess it is really no surprise now that it appears to the bursting of the housing bubble has impacted the general financial sector, and now likely caused a global recession. It appears the worst case scenario is playing out for USG and even Buffett didn’t see this coming.
Finally, Sotheby’s (BID) has also declined dramatically. Talk of a collapse in the contemporary art market seems to be playing out. With the financial crisis impacting Western collectors wealth and declining commodity prices impacting the formerly growing Eastern art buyers, the art market is now definitely slowing down. I still believe that the market is being a bit short sighted in its pricing of Sotheby’s and I’m even tempted to add to this position at this point. The only thing keeping me from doing this is my difficulty in estimating the impact of recent auction guarantees and bad loans based on art works. Once I getter a better handle on that, I’ll feel more comfortable considering more shares.
Disclosure: I own shares in all the stocks listed in the above table. I do not currently own shares of Wachovia.