As we close 2014 and open the door to 2015 we would like to take a moment to thank all of those who have supported the principals and Fat Pitch as a whole: Chapman University, the Leatherby Library and Janes Financial Center, Wally Friedman and Dr. Gary Baierl for their incredible mentoring, Sarah Wittenauer my muse, and the entire Corner of Berkshire and Fairfax Forum for candid and thought provoking critiques of analysis and portfolio strategy.
2014 was another incredible year for Fat Pitch Investments. Point blank the portfolio returned 22.78% this year. Our comparative index (50% S&P 500; 50% Russell 2000) returned 9.29%. Positioning FPI with a 2014 alpha of 12.5%. Currently FPI is in month 21 since inception and has posted the following return schedule. *Note that the yellow line is the portfolio value and the dashed line is the total assets that have been deposited in the account*
Through the course of this year, holdings were more diversified compared to month 0 to 12. On average the portfolio had about 12 positions. The largest position (1 or 2) was usually 15-20% of the total portfolio. A majority (6-8) was comprised of 5 to 8% of portfolio weight, and we held a couple of minor positions of 1 to 3 % of portfolio weight. Our cash on hand was normally 10% of the portfolio.
By equity composition; the portfolio is comprised of 20% (companies with a market cap over $1B) – 30% (companies with a market cap between $500m to $1B) – 30% (companies between $100m to $500m) – 20% (companies with a market cap under $100m). In the past year we have increased our weightings significantly towards companies with a larger market cap (over $500m) compared to months 0-12; when the portfolio had no holdings in companies over the $500m market cap. In summary this change is due to: greatly diminishing small cap opportunities since the 2012/2013 market, as well as incredible opportunities in larger companies now showing higher return on capital margins/impenetrable moats/and incredible management teams.
Top Realized Gains/Losses for 2014 are as follows:
Gains: Birks and Mayors, China Mobile, Liberty Media
Losses: Trans World Entertainment Corp., Cliffs Natural Resources, Credit Acceptance Corp (short)
Top Unrealized Gains/Losses for 2014 are as follows:
Gains: Impac Mortgage PRF C, Murphy USA, Hallador Energy
Losses: Macro Enterprises, CTCM
Going forward into 2015 we plan on making a couple of slight changes to the portfolio. We plan on increasing our international holdings. We significant upside on a particular Russian equity as well as small caps in Japan that have incredible terms when looking at value investing metrics. We plan on increasing the weighting of larger cap companies. Cash will probably be in the range of 15-25% of the portfolio. We plan on having 10 to 15% of the portfolio weighted to short positions. Our shorting strategy will utilize put options that are in the money and have expirations 8 to 12 months in duration. Lastly we plan on continuing to strengthen our investment criteria and refine the process of analysis and rankings of equities that make it in the portfolio and equities that will need to have the position closed.
On this note, followers may have noticed that analysis on equities is no longer posted to the website. We again apologize to our followers who have come forth to express their concern. Unfortunately the principals of FPI have realized that posting this analysis cannot continue due to the amount of time it takes to compose the summary of research and the change in business plan going forward. FPI’s long term goal of asset management for individuals can only be attained if our analysis and due diligence is kept under our “roof”.
Thank you again to all of our followers for helping FPI continue to flourish. We look forward to another incredible year ahead of us, keeping our readers informed about the portfolio and soon providing the opportunity for individuals to invest their assets into the future FPI general partnership.