Mid-Year Review: 2014
So I’m a little late in writing down my “mid”-year review for 2014. You can see my review from last year, here. I honestly do not have much to add, but I’ll say a couple of things in particular, in response to it:
- I think I veered a little too far into the “macro” last year. To some extent we always must, but that is not really what I’m about as an investor. I’m not Hugh Hendry.
- What I was really responding to, though I did not articulate it well, is that it is hard to find values in the market in companies that I want to own forever. This has gotten harder still in the past year. My really “big idea” value stock pick, which I have been pounding the table on for awhile, was Microsoft. That is up 40% in the last year. I didn’t add money last year because of uncertainty and because it was already one of the three largest positions in my portfolio, but it’s hard to scream anymore even about that company being undervalued.
For this year, uncertainty is up, and it is even harder to make a discrete value case, for particular companies that I analyze. (And of course the market is up by about another 16%.) I continue to pay down student loan debt. I am learning electric guitar, as I have posted about on Twitter. I am sure there are opportunities in the market. I am sure I am missing them — though keep in mind I haven’t sold anything, I’m just not adding new money (outside of my kid’s 529 plans and some to my 401k).
But I just don’t care. 2009-2010 is seared into my memory as a time when it was very, very hard to make mistakes. I think I am still finding my way in this new kind of market. Berkshire’s cash balance just hit an all-time-high, so clearly I’m not the only guy having a hard time figuring out how to meaningfully deploy cash in this environment. (And Buffett doesn’t have student loans to pay off.) I’m in wait-and-see mode.
As an aside: somebody asked me on Twitter why I don’t think this is a bubble market, just like 1999 was. The answer is because Coke doesn’t trade at a P/E ratio of nearly 50. I remember that era quite well, too, you see. There is froth today, and the CAPE is high. And the Fed is easing out of QE, which it will probably do, and seems to be doing, too early, given inflation rates, and this will likely hurt the market. But we are hardly partying like it’s 1999. I do not regret scaling back on new purchases after 2012, yet. I continue to monitor the market to see if there is evidence that profits are growing sufficiently to alleviate the overvaluation (or at least the lack of undervaluation) that I see in my stock screens.