Portfolio Update I: Dec 2016

Over the past few months, I’ve tried to value stocks that had somehow found their way into my portfolio over the years. Based on these numbers, I did a few moves here and there. Here is the first part of my status report, starting from the biggest to smallest holdings.

Berkshire Hathaway

In July, I valued BRK at $185-$190, when it was trading around $143, representing a growing 75c dollar. Since then, the IV has gone up marginally (~$190-$195), while the stock has rallied 12% to nearly $160. BRK remains a core holding – a “general” – that I don’t fool around with too much. I am willing to buy more around $135, even though it represents nearly 13% of my portfolio. BRK remains a mature, profitable, and superbly run company.

Apple

In September, I valued Apple at around $115-$120. Based on this valuation, I wrote $120 covered calls for Nov 2016 on 2/3 of my position. Those options died worthless, as Apple languished around $110 for much of the period, despite rising to $118 briefly in October. I subsequently wrote Feb $120 calls on 1/3 of the position. Apple is a 10% holding currently, and I am willing to lighten up at the right price.

Leucadia National

In September, I figured Leucadia was worth somewhere near $30. At the time, it was trading around $19, having risen from lows in the $14s. Everything that could go wrong, was going terribly wrong. I was betting on Murphy’s law eventually abating, and the past couple of months have seen the thesis partially play out. Oil prices stabilized higher, and Trump’s election lifted all financials. LUK has jumped nearly 20% to $22.50 as of this writing. There is a lot of room for the business and the stock to run.

IBM

In August, I suspected that IBM was worth around $160, which was right around where it was trading at the time. Today it is trading at virtually the same price. IBM is undergoing a major transformation, and the variance around this estimate is quite large. Currently, I am holding on to my shares and monitoring how the turnaround shapes up. I remain ready to dispose my holdings at the right price.

Wells Fargo

Wells Fargo was one of those companies that I followed for a long time, but never pressed the trigger on. On Jan 1, 2016, WFC traded around $55, which is right above where it is trading right now. At one point in the year, however, it dipped to nearly $43. In August, I argued WFC was probably worth $60/share, and it would be a good idea to accumulate it under $48. I steadily built a 5.5% position in the stock at an average price around $44.80, capitalizing on the dip after the fake accounts scandal surfaced. I was willing to buy more at $43, but the stock ran away from me soon after.

Oaktree Capital

OAK has been the most lackluster large stock holding (>5%) in my portfolio. It traded at $40 at the start of the year, and that is right about where it is trading now. In between, it rose above $48 on multiple occasions. I added to my position (at prices higher than its current price), and still have Dec 2016 puts outstanding to buy it below $40. I believe it is probably worth north of $54/share, and the fluctuations in the stock price don’t bother me much. The sentiment against active asset managers is at an all-time low, OAK is a solid manager, has excellent stewards, it is counter-cyclical to the rest of my portfolio, and pays a big dividend, all of which make it easy to remain patient.

These stocks constitute more than 50% of my equity portfolio as of December 4, 2016. I will write about the others in a subsequent post. I still have about 17% of my portfolio in cash, waiting for new opportunities to seize.

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