Fat Pitch Financials 2007 Performance

The Fat Pitch Financials Portfolio performed nicely in 2007, especially given how rough the market was. According to Marketocracy, my paper portfolio produced a 12.22% total return in 2007. This was more than double the S&P 500 2007 total return.

Portfolio Performance

Fat Pitch Financials Portfolio 2007 Performance

As you can see from the chart above, the Fat Pitch Financials Portfolio lagged the indexes for most of 2007, but then recovered after Thanksgiving. The portfolio took a big hit while I was on vacation in August and it took until the end of October before the portfolio started to recover. I had a really nice vacation, but I was totally unprepared for the credit market meltdown that occurred in August. Maybe that was for the best because the financial sector is still very volatile. If I hadn’t just returned from vacation, I might have been temped to buy a position or two in the falling financial sector.

2007 Trades

The first trade of 2007 was for Broadridge (BR), the ADP spinoff, on April 10th. I added 2,600 shares at 19.30. Then on June 13th I added 2,940 shares of U.S. Bancorp (USB) at 34.04 per share. I was definitely early in adding shares of USB. I didn’t really anticipate such a broad meltdown in the credit markets. However, relatively speaking, USB has held up pretty well.

I went on to buy shares in Mothers Work (MWRK) in the summer. On July 26th, I added 4,080 shares for $24.31. Mothers Work shares then proceeded to plunge. I was fairly confident of my analysis, so I added an additional 2,630 share at the discounted price of $18.82 per share on August 6th. I then went on to add an experimental position in a net-net Graham style investment in Concord Camera (LENS) on August 14th. I picked up 12,140 share for an average price of $3.81.

As the summer faded, I apparently got in a selling mood. On November 6th, I sold my position in Merck (MRK). Merck had a nice run up in price and the shares started trading above my intrinsic value estimate so I decided to take my profits. I also sold my position in Unilever (UL) because it too had become fully valued. I sold the 9,000 shares in the Fat Pitch Financials Portfolio on November 14th for $36.30.

I then turned around and invested in Western Sizzlin (WSZL). I first discovered this company when I added it to the Special Situations Real Money Port when the company was conducting a rights offering last year. After discovering that a savvy value investor was now at the helm of this little company, I became interested. When I discovered that Western Sizzlin was conducting another rights offering, I became interested in picking up some shares if the price of the stock dropped during the rights offering as I suspected it would. The price did drop, so I picked up some shares for $13.12 on November 13th and some additional shares on November 16th for $12.95.

My final trade of the year was made on the last day of the year. I added 1,610 shares of McGraw-Hill (MHP). I’ve owned shares of MHP in my personal portfolio for years and I decided to add some more shares and also track it in the Fat Pitch Financials Portfolio since the stock had drifted down into the forties.  I added 1,610 share at $43.55 on December 31st.

Returns by Position

From best to worst on December 31, 2007:

  • Microsoft (MSFT) : 47.05%
  • Western Sizzlin (WSZL) : 34.56%
  • Broadridge (BR) : 16.22%
  • Western Union (WU) : 11.12%
  • U.S. Bancorp (USB) : -6.76%
  • Pfizer (PFE) : -8.71%
  • Concord Camera (LENS) : -17.04%
  • Mothers Work (MWRK) : -21.49%
  • USG : -23.12%

So half my stocks are up and half are in the red. However, that does not include my closed out positions.

As I mentioned earlier, I sold two stock positions in 2007. My first sale was of Merck where I earned a total return of 76.89% on the 5,000 shares that the Fat Pitch Finacials Port held since October 4, 2004. My annualized rate of return on my Merck position was a solid 21%.

The second sale was of my Unilever position. I sold the 9,000 shares for a total return of 110.77%. That was a nice doubling of value in three years. My average annualized rate of return on Unilever was 28%.

Other Statistics

Turnover for the Fat Pitch Financials Port was 41% in 2007. The portfolio Alpha was 4.51% and the Beta was a low 0.54. Finally, the R-squared for the portfolio versus the S&P 500 was 0.29 meaning that 29% of the changes in the portfolio’s value could be explained by variations in the S&P 500.

In Summary…

I look forward to the oportunities that 2008 may deliver. The Fat Pitch Financials Port ended 2007 with a total balance of $1,402,369.99. I still have $491,537.19 in cash, so I have a lot of flexibility to take advantage of the current market chaos. At the end of 2007, the Fat Pitch Financials Portfolio had an average annualized rate of return of 10.77%. My goal for 2008 is to try and push that annualized rate of return up closer to 15%. My challenge will be to find great opportunities to put my large cash position to work.

2 thoughts on “Fat Pitch Financials 2007 Performance

  • January 12, 2008 at 1:49 pm

    Yes, it was a good year for my portfolios. Here’s to hoping that 2008 is as equally profitable.

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