In today’s post I’m sharing my 2021 performance review and how I’ve produced 22.9% average annual investment returns in the portfolios I’ve managed over the last decade.
Finding a few great stocks and then sitting on my ass continued as a trend from from 2016 through 2021 which Charlie Munger fondly describes as “sitting on your ass and doing nothing.”
Charlie Munger said this, or something similar, and it’s what I’ve done for more than 5 full years now.
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I’ve bought ZERO new stock investments since April of 2015 – almost 7 years ago as of this writing – when I bought a few great businesses, and haven’t done much since.
At least in terms of buying investments.
Why?
Because the market still continues to go straight up and valuations on ALL assets worldwide are still at or near all-time highs.
I’ve now said this for 6 straight years.
This is why I’ve spent my time building businesses and training others in the last almost 7 years.
But patience gives us an enormous advantage as deep and disciplined value investors over the long term.
I WILL NOT alter my criteria just to buy an investment.
Even when its been almost 7 years since I’ve bought one.
I’ll remain patient and diligent, and continue to learn and wait for valuations to come down.
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The above quote from Benjamin Graham is one of my favorites.
It means in the short-term – emotions and psychology drive the market, but in the long-term – the market and individual stocks, get judged on how well they’ve operated and grown over time.
This is great news for us as long-term – oriented value investors.
If we can find a few great companies at cheap to fair prices, and hold them for the long-term, we’ll have great returns over time. Why? Because…
“Time is the friend of the wonderful company, the enemy of the mediocre.” – Warren Buffett.
With this as a backdrop, below is the 2021 performance review.
For links to the prior years’ performance reviews, you can use the links below.
Also, as noted above in some of the individual posts, I made multiple mistakes in 2013 and 2018 when calculating my returns. The numbers below – which show the 10 full years between 2012 and 2021 – are correct.
2021 Performance Review
Again, how have I continued beating the market without buying anything new in the portfolios I manage?
I still own all the companies from 2014 and 2015 except for 8 of them. I bought 3 new companies in 2015, ZERO new investments in 2016, ZERO investments in 2017, ZERO in 2018, ZERO in 2019, ZERO in 2020. and ZERO in 2021.
Investments that are no longer owned were among the following – merged, gone private, liquidated, sold.
The remaining investments in the portfolios I manage produced an average GAIN of 17.13% in 2021.
Below is the full spreadsheet going back over the last 10 years of my returns…
Results were up this year due to the continued rise in the markets and the individual stocks I bought years ago in the portfolios I manage.
Another two factors affecting this year’s results were:
1.) Since I last bought a stock in 2015, there are now 8 companies I owned that have been sold / bought-out / merged / gone private. Other than 1 of these companies which I made a mistake buying, the others were some of the best companies I owned.
2.) The average cash position in the portfolios I manage is now up to 64.6% with new cash additions, sales of stocks, and proceeds from merging / going private transactions.
This large cash position is a massive lag on performance… If I was fully invested – which I rarely am so I can keep open for opportunities – this would increase results further. As an example of this, if I were able to buy the 7 stocks I wanted to buy during the Covid Crash in March 2020 – the portfolios I manage would have been up 98.3% this year instead of the 48.3% they were up.
But stocks went back up so fast my buy orders never got filled.
So what does this mean for cumulative full nine-year returns now?
10 Full Years Of My Investment Returns
Here are Buffett’s returns that I reference below…
The Buffett Partnership Returns
I don’t compare myself to Buffett because I want to be the next Buffett, but because everyone knows who he is, as he’s regarded by most as the best investor ever.
Rather, I want to be known as the first Jason Rivera when my career is over.
In the end, I want to be known as a better investor and capital allocator than Buffett and to produce better returns over time than he has so I can help millions or billions of people all over the world.
For the first six full years in my career I was achieving this lofty goal…
In the 7th year with my first ever down year I fell behind… And in the 8th – 10th years I remained behind and will likely remain so for the foreseeable future since its now been almost 7 years since I’ve bought something new.
In the first 10 years of my career, I’ve produced average – non-compounded – returns of 22.9% each year. Or a total cumulative return of 229.1% over that period.
In the first 10 years of his career, Buffett produced average – non-compounded – returns of 23.5% each year. Or a total cumulative return of 235.3% over that period.
This means in the first 10 years of our careers, I’ve produced returns, now 0.6 percentage points LOWER each year, than Buffett did in the first 10 years of his career. This is why Buffett’s number 1 rule is to never lose money.
For the first 6 years of my career compared to his, I was winning… But after one down year I’m likely to stay permanently behind Buffett now due to that one bad year… And because I still can’t find anything to buy.
To my pleasant surprise, we actually caught up to Buffett this year… Last year my yearly average returns lagged his by 0.75 percentage points.
What does this 0.6 percentage point excess return per year mean in dollar terms over this period?
Assuming we both started with an asset base of $10 million at the beginning of the nine-year period, I would have grown that $10 million into $78.62 million after 10 years.
Buffett would have turned his investors $10 million into $82.54 million in that time.
This is why every point of excess returns is so important, and why you need to be aware of any fees charged to your account by your money managers.
Over a long period – or in this case nine years – ‘only’ an excess 0.6 percentage points each year would have made Buffett’s investors $3.92 million extra when compared to my numbers.
And this further illustrates the power of compounding over time.
I explained why I’m now losing to Buffett, and why I’m not worried about this in more detail further below.
But I’m still beating the market. Although now barely due to its continued skyrocketing.
And Still Beating The Market
From 2012 through 2021, the Dow Jones Index produced a total cumulative return of 160% for the 10 years or 16% per year on average.
The S&P 500 produced a 202% total return for the 10 years or 20.2% per year on average.
And the Russell 3000 index – the closest thing to a small cap index – produced a 251% total return or 25.1% per year on average.
Due to the markets continued skyrocketing and the portfolios I manage continuing to be in 60%+ cash the last several years, the market has started to catch up to me.
Results have been great thus far, better than I expected.
But there’s still a lot of work and improvement necessary to continue this, especially with valuations still at or near all-time highs.
And also because of mergers / sales / acquisitions, the portfolios I manage are down to 5 companies owned, and the portfolios are now on average in 64.6% cash.
Conclusion Thoughts
We’re now losing to Buffett, and the market is catching up… But the markets rise is unstainable…
Over the last 120 years or so the market does about 10% year on average… In the last few years its crushed that as asset prices – and valuations – have continued to skyrocket.
I don’t expect us to beat Buffett any time soon due the factors above. Here’s what I said about this in the 2017 and 2018 performance reviews…
***
Value investing works best with a falling or stagnant market, so with valuations at or near all-time highs, and reaching new highs on an almost every day basis still, this is expected.
Unless the market corrects sometime soon, I would expect Mr. Buffett and the market to continue catching up to or possibly passing us in the near future.
As I said last year at this time, barring a major sell-off, I expect to add few to no companies again in 2018.
This is because I will only buy something that meets my ultra-strict criteria. Under no circumstances will I buy something because I haven’t bought in a while.
This helps keep us only in great companies and real estate investments and should help us continue producing exceptional returns over time.
No matter what the market continues to do though over time, I’m confident we’ll continue to beat the market by a wide margin, and continue to compound our wealth over time.
And with the market’s march ever higher, it’s allowed me to take the time to learn other valuable business skills.
This will help us even more over the long term as we get back into buying public companies stock, and into buying private businesses and multi-family real estate investments once we reach enough revenue and cash flow.
Here’s looking forward to an even bigger and better 2018.
***
This is still true today…
With valuations either at their highest level ever or their second highest level ever still, depending on which metric you look at, I’ll likely continue underperforming Buffett.
Thanks so much to everyone who’s been a part of this journey so far, and please let me know how I can continue to improve things going forward in the comments below. I hope you learn something from my experience this now decade long journey.
Here’s looking forward to an even better 2022 to keep this momentum going.
Always in your service,
Jason Rivera