This morning I had a nice slice of humble pie for breakfast. I know, pie for breakfast??? But really, why not? Put that on the list.
Anyway.
I think I’m a pretty good investor. I do my homework before I buy and I’m patient.
Lot’s of Red
So this morning, I was tiptoeing through my recent stock purchases and saw a lot more red than I would have liked. This was unscientific, but disturbing none the less.
I dug a little deeper and saw that on all the stock purchases I’ve made this year, I’m actually down about 10%, while the S&P 500 is up over 10%.
Rationalizing
I think this is step one in coming to terms with grief.
My recent purchases tend to be dividend paying value stocks which I don’t expect to outperform. I wrote about this last week in the post on energy stocks. I typically buy a basket that I expect to (as a group) have a small capital gain over many years, but what I’m really interested in is the regular quarterly dividend payment.
I’m retired. I need the cash.
Time is another factor. I am painfully aware that many of my best performing companies have put me through periods of under-performance. Netflix, Amazon, Shopify, even Berkshire Hathaway and Costco, have all had periods where the price was stagnant and I started to question myself.
But in most cases (excluding Intel, Under Armor and Lemonade) my patience was rewarded.
But Still
I thought I was better than that.
I created a current version of a performance spreadsheet I have. It has every security purchase I’ve made. It records the symbol, the shares purchased, the date purchased, the current price and the gain/loss.
It also includes a column with the price of the S&P 500 on the purchase date, and another column with the price of the S&P 500 today.
The final column is the difference between the S&P 500 performance and my security’s performance for the same time period (purchase through today).
Interesting
No surprise, the equity purchases (both funds and stocks – bond funds excluded) that I made in 2008 – 2013 are out-performing the S&P 500. By a lot. I’m feeling better.
In 2014, I didn’t buy much – must have been a busy year – but my purchases are behind. Starbucks and McCormick are to blame. But back to my rationalization, both companies pay a dividend – which isn’t accounted for here. This is strictly price appreciation. Starbucks and McCormick are up, just not as much as the S&P 500, and they paid 11 years of quarterly dividend payments. So I’m OK with 2014.
2015 – 2020 are ahead, but 2021, 2023, 2024, and 2025 are way behind. Again, not totally surprising given my (somewhat whiney) rationalizations, but still, not what I had expected to see.
Shocking
Here’s the real shocker. Get ready.
I created a pivot table that summed up the total cost of all purchases that are beating the S&P 500. I also summed up the total cost of all purchases that are trailing the S&P 500.
19.3%
19.3% of the dollars that I’ve used to buy equities since 2008 are beating the market. Over 80% are trailing.
I’ve written in an earlier post that 20% of our investments are responsible for 80% of our gains. While this isn’t proof of that exactly, 20% of my investments are beating the S&P 500. 80% are behind.
The 20%, especially those purchases of Amazon Apple and Netflix from 10 or 15 years ago are killing it, but still, I find this surprising.
Wrap Up
It’s important to keep score. This shouldn’t involve reacting, but we need to test our performance against our goals.
I feel good that my older investments are beating the S&P 500. It aligns with my strategy. At that point in my life, I was buying growth companies and I held on through some wild volatility and I’ve been rewarded with market beating gains.
The companies that are behind the S&P 500 but still positive and also pay a nice quarterly dividend like Starbucks and McCormick are OK with me. For these particular 2, I had hoped for better. Starbucks in particular is going through a rough patch. But it pays me 2.8% per year in dividends to hang tight so I will for now.
The rest need some attention. It’s not time to sell, but it is time to revisit my thesis on each. If something has changed dramatically, I may sell, but for most I’ll hang tight because I have evidence from my past success stories that it sometimes takes years for my thesis to play out.
If I had sold Amazon when it hit $87 per share just a few years ago, I would have missed out on huge gains. Amazon trades at $235 today.
Still, I’m a bit surprised at how many companies are lagging the S&P 500. As a whole, my equity choices have outperformed the S&P 500, but this makes a strong case for buying an S&P 500 fund and letting it run.
I’ve gotta go – I have some work to do.