I know we’re well over a week into the new year, so I may be a bit late for the traditional ‘year in review’ post, but as you might expect, the holidays are a hectic time in the casino bar biz. So after getting my butt kicked at work for a couple of weeks, I got a few extra days off. So here we are.
What was 2016 like for me, as an investor? It didn’t start off very well. February was my lowest point in this investing/blog project, down over $700. But overall the year was very good. Since that low, my profits more or less shot straight up for the rest of the year. I beat the market by a wide margin in 2016, which is even more impressive considering that I usually had more than 50% of my portfolio in cash. Toward the end of 2016 I got increasingly nervous about the market, selling many of my positions. I ended the year with about 75% cash, and even bought a few put options which I still own. Below I have a chart of all my current positions, and everything I sold in 2016. The charts are to the current date, so we can see if those sales were timed correctly or not. SPOILER: It’s a bit of a mixed bag, but I’m generally pretty happy. I’ve written a piece on most every company listed below, so I’m just hitting the highlights here.
Here we have Chesapeake Energy (NYSE: CHK), the first thing I bought, and I’m still holding. I may be down 18%, but that’s nothing. At one point I was down about 83% on this. I can do 18% standing on my head. When CHK hit $1.50, being down 18% would have seemed like a distant fantasy. But as you can see, Chesapeake is clawing its way back. The company is slowly taking care of its debt problems, and I think the future of natural gas is bright. I’m holding this one long term. It may well go back down some before heading higher, but I’m a believer.
8point3 Energy Partners (NASDAQ: CAFD) is a company I’m really excited about. I’m excited because it’s kinda boring. It owns solar projects and collects money from long term contracts on those projects. It plans to slowly grow its already nice dividend over time. I like the solar industry, and I plan on holding this a long time as well. In fact, I’ll own a lot more if the price goes significantly below my lowest buy point. If it hit single digits maybe?
First Solar (NASDAQ: FSLR) is another solar company I am really excited about. I made money on it in 2015 and got back in when the price plummeted after I sold out. Well, it kept plummeting. I hope it plummets some more! Everyone seems to think 2017 will be a tough year for the solar industry, and that may be true, but FSLR has a great balance sheet and a management team willing to make tough, long-term decisions. I’m down now, but not worried one bit. People say a Trump presidency will be bad for the solar industry. I say bring on the negativity.
Skechers (NYSE: SKX) shares were hit a few months ago on fears of slowing domestic growth. I love the shoes, and the company seems great as well. So far the timing of my first buy point seems really good, though as with most things I own, I’m willing to buy more if the price goes lower. I believe Skechers will continue to be a force in the shoe industry, and not a fad stock. Time will tell.
In late November I bought my first option for my investing/blog project. I bet against CSX (NASDAQ: CSX), a railroad company. The puts haven’t done much, but they are good until January, 2018.
POSITIONS CLOSED IN 2016
PayPal (NASDAQ: PYPL) was a decent holding for me. I could have sold it for a bit more had I waited, but overall it hasn’t really done much since I sold it. I got out because I believed the market was overheated, though of course the market has risen quite a bit since I sold. I like the company, but obviously not at these levels.
I’ve had several successes in 2016, more so than failures, but Energy Transfer Equity (NSYE: ETE) is what ensured that I beat the pants off the market even while usually maintaining over 50% of my portfolio in cash. When I sold at $18.25 and it went down to around $14 over the next couple of months, I was feeling pretty good. If I had stuck with it I’d have been even better off. I can’t complain.
Ambarella (NASDAQ: AMBA) is perhaps my ‘best’ trade from a technical standpoint. My entry points were great, my exit was very timely, and the stock has been weak ever since. I certainly believe in the long term viability of this company, and am considering buying in again soon on any further weakness. This is another well managed company with a great balance sheet, and I think it’s worth owning long term.
I’m going to give the ‘missed opportunity of the year’ award to Baker Hughes (NYSE: BHI). I never felt I understood this company in quite the way I understood my other investments. I think it’s because they didn’t have webcasted conference calls for awhile because of the proposed buyout from Halliburton (NYSE: HAL). Conference calls are so important to my understanding of a company. I liked the business they were in, I liked the money they were going to get from HAL if they didn’t get bought out, and I liked all of the negativity. I made a profit, but at the end of the day I simply didn’t understand things well enough to stay in, and got out too soon. Oh well, as far as mistakes go, I’ll take it.
Speaking of mistakes, here’s one I’d rather have not made, although it wasn’t really that bad. Daktronics (NASDAQ: DAKT) makes large digital signs, stadium scoreboards, that sort of thing. This was an early pick of mine, but it slowly bled away after I bought it. The problem here was that this was such a small company that there really wasn’t much to keep track of. I go to several financial websites to keep track of articles about each of my positions, and all of the companies that I’m following. DAKT was such a small company that aside from a few dry newswire type reports, there was hardly ever anything being discussed or written about the company. I kept watching the price go down, and didn’t have a good understanding of why. So I sold for a loss, while I should have had faith in my original plan and bought more. It would have turned out very well. I want to invest more in small companies, so I have to work on a system to do that. Live and learn.
Mattel (NASDAQ: MAT) is another position that looks pretty awesome from a technical standpoint. Mattel was struggling from revenue problems, especially in its Barbie line, and negativity had gotten overblown. I believed in the turnaround story and bought in. Pretty soon everyone and their brother seemed to believe in it as well, so I got out. It didn’t really do a lot for awhile after I sold, but it’s been in a slight downtrend for months. If it returns to the lows, I’d buy more. But I believe that at the current price, it’s overvalued. If it got much higher than where I sold it, I’d consider buying puts.
So that covers it for my 2016. The year gives me some confidence that how I do things works, but what about 2017? I’ll be honest, I’m nervous about this year. I don’t think things are as good as the market makes them out to be. People have asked me if the election changes my views on the market, and I’d have to say no, not really. I felt this way before the election, and I don’t think either possible outcome would have made me feel any different. The market seems to like the Trump win, and that’s fine. And while I know that there is a definite possibility that the market goes up from here, perhaps significantly over Dow 20,000 (as of this writing it’s ALMOST made it), I believe there is a significant correction coming sometime soon. When? Well, if I knew that I’d be dating a supermodel, probably several.
So how do I handle 2017? Simply sit on my cash like I seem to be doing now? Buy put options on everything and hope for a crash? That might turn out to be exactly right, who knows? My general plan is to be extremely cautious and only go long on stocks that are DEEP values, and buy a few long-term put options here and there on things I feel would be worst hit in a market downturn. Sounds simple right? I found myself in some pretty sweet deals in 2016, and it would be easy to look back and oversimplify them, or feel that I have the ‘golden touch’. Buy ETE at $6.75 and $4.85, then sell a few months later at $18.25, all while collecting a few dividend payments? Cake.
But I have to remember the hard work I put into understanding what I was getting into, and the sweat dripping off my brow as I bought things that were falling like rocks. I have to keep my perspective. If it were really that simple, then I have a fool’s luck to thank for my success in 2016. Rely on that, and it’s sure to run out.
As always, feel free to look at my portfolio and see how I’m doing. Usually I own or plan to own stock in many of the companies I write about. Specific numbers I reference may not be completely accurate; different online financial sources often have somewhat conflicting information. Verify information via multiple sources you trust. Please READ MY DISCLAIMER. Do not take action in the market simply because of what you read here. I write about what I am doing and what I think, I am not advising anyone to do anything. Make your own decisions, do your own research, and never rely on any single source for information. Some of my ‘picks’ and strategies WILL lose money, that’s the way the market works. I am not a financial professional; do not rely on me as such.
Michael, the Stock Picking Bartender,