Skin in the game

A person close to me, (you know who you are), recently suggested that, whilst they found this blog to be both an interesting read and for the most part factually correct, it lacked an element of substance to sustain its theories.

Now, this feedback could be interpreted in a number of ways, but in my case, being the responsive fellow that I am, I took it in its most literal sense. After all, as the saying goes, “the proof of the cake is in the eating”. With this in mind, I intend to apply a more practical approach to my rants. Translated, this simply means that I will put some “skin in the game” and invest in a basket of value stocks and periodically review and publish here the performance of said portfolio for all who care to see it. This basket will be referred to as the “Uncertain Future Portfolio”.

For those that have read the previous articles dating back to October ’09, this more pragmatic approach is likely no surprise. After all, I have spent some considerable time (and effort, it must be said) dissecting and publicising the obvious limitations of the asset management industry as well as the inherent advantage available to the individual investor once one chooses to apply a set of simple to understand, yet difficult to apply, principles.

In the interest of full disclosure (I am beginning to sound like a true professional here…) I must begin with two caveats however:

1. I intend to, at least initially, invest only between 5 and 10% of my liquid assets on the “Uncertain Future Portfolio”. The reason for this is two fold:

a. Markets cannot be timed and hence a gradual entry is advised

b. I have been lucky enough to have found 2 deep-value investors with considerable track

records and hence the remaining 90% of my “investible” funds sits with these rare but very capable hands.

2. I will start the process from zero as soon as attractive investment opportunities have been identified and analysed in sufficient depth. As such my current direct stock holdings will not be a part of this “Uncertain Future Portfolio”

Initiating this stock portfolio ought to complement the reflections shared on the blog and also serve to confirm or invalidate its assumptions. One thing it will not do, however, is to replace or diminish the inquisitive nature of the author on investing related topics. Nor will it become a short-term measure of investing prowess. In short, I will continue to publicly reflect on what it means to be a “good” investor in the broadest possible sense of the word.

Clearly, if the initial results are not positive, (in an absolute sense), it would be easy for me to claim that not enough time has elapsed to pass judgement on the validity of the ideas hereby expressed. Whilst that is a real and present danger, on the flip side, no credit will be taken for initial short-term positive results as validation of the same ideas and theories. To put it clearly, it will surely take time (measured in years, not months) to gather sound conclusions from the performance of the Uncertain Future Portfolio.

Readers can, as I certainly do, expect the Uncertain Future Portfolio to serve as a solid empirical test of all the suggestions, observations and maxims shared to date on this blog.

To, once again, use the words of the father of value investing, Benjamin Graham, I will seek to make my own business-owner type judgements and take the market gyrations as what they truly are :

“ an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal”

More information on the construction and performance of the UF Portfolio will be shared as available…