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Month: January 2012

My best and worst stocks in 2011

My best and worst stocks in 2011

Below are the top 8 best performing stocks I owned for the entire year in 2011 and their performance.

MAKO Surgical Corp (MAKO) +65.64%
Chipotle Mexican Grill (CMG) +58.82%
Buffalo Wild Wings (BWLD) +53.96%
Starbucks (SBUX) +43.20%
United Health Group (UNH) +40.35%
Panera Bread Company (PNRA) +38.80%
Whole Foods Market (WFM) +37.54%
Green Mountain Coffee Roasters (GMCR) +36.49%

It definitely looks like restaurants, food, and medical care was in for 2011 looking at my best performing stocks. Also noticed that this performance is quite a bit different than last year where I had 3 stocks that were up at least 100%. Overall though I feel very good about having these good performers last year and it shows you that despite the market being relatively flat if you find the right companies you can make significant performance gains no matter what the market is doing. Looking at these stocks I really feel good about the whole group long term and while some like MAKO, GMCR, and CMG may have some pretty lofty valuations currently I think they are all good long term companies that are pretty well run. MAKO and GMCR are probably the riskiest of the bunch.

Netflix (NFLX) -60.56%
Dolby Digital (DLB) -54.26%
Exelixis Corporation (EXEL) -42.33%
Infinera Corp (INFN) -39.21%
Southern Copper Corporation (SCCO) -38.08%
PACCAR Inc (PCAR) -34.65%

And here is the flip side – top performer of 2010 Netflix was absolutely crushed in 2011 and did some serious damage to my investment performance in 2011. Another big dagger for me was the implosion of Dolby Digital that I had always felt was one of the titans in my portfolio and not a really risky stock, Netflix I knew had some room to fall, but Dolby caught me by surprise. The main reason for Dolby’s fall this last year was that it looks like Microsoft is going away from using Dolby technology in Windows 8 which is currently a good chunk of their licensing revenue.

Netflix on the other hand was forced to make some pretty strategic decisions this last year to compete in the streaming arena long term and in the process did about as poor of job as possible making this transition palatable for their customers. It’s almost like Reed Hastings was abducted or lost his mind or was shorting his own company and spent about 2 months doing everything possible to completely tick off an alienate his customer base which as we have found out is not good for business.

Long term though assuming Reed has not gone completely insane I still like Netflix’s chances though their recent actions have given me a much large pause for concern – Netflix’s magic was all about making their customers experience a seamless and enjoyable one and they have taken a number of actions recently that has gone completely against that – hopefully they learned their lesson. Netflix and Dolby were my two largest stock holding at the end of 2010 and still represent a large component of my portfolio.

My Investment Holdings – January 2012

My Investment Holdings – January 2012

It’s been a year since I last updated my investment holdings so I figured January every year would be a good time to do this. In general my investments will not change much from year to year as I pretty much only buy stocks and do not sell very often, but I do make changes occasionally or tidy up my holdings so this will be a good place to see what changes have happened in my portfolio in the last year and what my current portfolio allocation looks like based on new investments and individual positions market changes.

In the last year I have actually entirely sold off about 10 stocks. I did have many small positions buying small increments when I had free trades with Zecco and the market was falling so nicely in 2008-2009. When Zecco announced they were getting rid of free trades I decided to use all 10 of mine up and clear out some smaller speculative positions before I transferred my accounts away to TradeKing. I also had a few companies get bought out and have made a few decisions to cull positions I maybe no longer felt as strongly about, but in general it is extremely rare for me to sell a stock.

Looking at my current allocation I feel pretty good about it – in fact I feel like in the last year I have done a good job refining my portfolio to reflect my ever evolving investment philosophy and knowledge base and for the first time I really feel somewhat comfortable that I might know what I am doing (scary scary thought).

My four largest positions are the mutual funds I hold in my 401k, after that I feel very good about my 15 biggest stock investments that account for over a third of my retirement nestegg. If there was one stock that I felt the absolute best about going forward it would definitely be Amazon which is currently my 7th largest position. I just feel that they do so many things right, have so many long term trends going their way, have a visionary leader, and innovative company spirit, and an absolute focus on making their customers happy. I think they will one day dwarf competitors such as Walmart and Apple.

Anyway here is the list 47 total investments, 5 mutual funds, 42 stocks, and a cash position.

Retirement Nestegg Report – December 2011

Retirement Nestegg Report – December 2011

Well another year in the books and a bit of a bummer the second half of the year with regards to my nestegg growth and my investment performance vs the SP500. As you will see in some follow up posts – I had two of my largest stock positions from 2010 really tank in 2011 (Netflix and Dolby). I guess the good news is despite this somewhat worst case scenario I have found out that I am diversified enough where it did not do any irreparable damage to my portfolio.

Another observation is that I only contributed $16,782 to my retirement nestegg this year and even a bulk of that came from vested employer matching contributions. This is the lowest amount I have contributed to my retirement nestegg since 2005. The reason for this is I am currently saving a boatload of money for our next house and have been putting all of our excess cash flow towards this endevour. Heading into 2012 this is something I will have to reconsider as my house savings account is now at what I think is a pretty sufficient amount.

Overall my retirement nestegg shrunk by over 1% in 2011, but as I pointed out above I don’t have any worries that I am on the wrong path or employing the wrong methodology. The stock market gyrates back and forth in the short term, but long term I like the trend that I am seeing.

Anyway here is my monthly and annual report

Traditional Rollover IRA – $14,731.10 (-0.97%)
My Roth IRA – $45,012.64 (-3.40%)
Wife Roth IRA – $22,080.12 (-0.23%)
Current Traditional 401k – $88,653.17 (-0.18%)

Roth/Traditional % = 39.36 % (tax free)

Total Retirement Nest Egg $170,477.03 (-1.13% 1 month) (+4.78% 1 year)

Monthly Contributions $693.10 (401k)
SPY Performance +0.31%
My Monthly Investment Performance -1.53% (-1.84%)
My Monthly Individual Stocks Performance -2.14% (-2.45%)

My Contributions for 2011 $16,782.97
SPY Performance for 2011 -0.18%
Investment Performance for 2011 -5.53 (-5.35%)
Individual Stock Performance for 2011 -2.29% (-2.47%)
Total Investment Return -$9,000.84

2011 Nestegg Growth

My savings account is now bigger than my home mortgage.

My savings account is now bigger than my home mortgage.

Kind of a weird scenario happened last month. The amount of money that my wife and I have saved up for building our next house has actually surpassed the amount of the mortgage on our existing house. We have been living in our first house now for a little under 6.5 years which also ironically is pretty close to how long I have been writing this blog and now I am to the point if I wanted to could have my house paid off free and clear with a couple clicks of a mouse button.

My wife and I have never paid extra on our mortgage and currently have it locked into an 5 year ARM at 4.0% that I think has three years before it adjusts. Our savings is currently sitting in an ING checking account earning us a paltry 1%. So even while our mortgage is tax deductible even a 1st grader can probably figure out that I am losing money every single day I do not pay off my mortgage free and clear.

So why haven’t I done it? Well the main reason I have not made the smart financial move is that if I were to pay off my home mortgage I lose the flexibility I may need if a piece of land comes available that I need to purchase. Most lenders require a significant amount of money down to by vacant land and the rates for vacant land are likely to be quite a bit higher than the interest rate I currently have my mortgage locked in at. So as soon as I make the purchase I am then losing money on the higher interest rate between my existing mortgage and the land loan.

If I were to pay off my house I would also possibly need to wait to sell my house before I could purchase the land which would put a big kink in things and potentially cost me losing out on a piece of property and while it didn’t seem quite so obvious when I originally wrote this post during the housing boom – its pretty obvious now that you might have trouble just turning around and selling your house right away. So I am willing to take a 3% hit on a pretty significant chunk of money every day for the flexibility it is affording me in my pursuit for a large chunk of land to build a house on.

Another ironic note is that even if paid off my mortgage it would save me my $589 mortgage payment each month but I as I pointed out in the post referenced above I still have to drop about $400-$500 a month on taxes, insurance, heating/cooling each month so its not like you write the check and live for free the rest of your life. The cost of a home goes far beyond your mortgage payment and for some of these dufusses who build extravagant houses their tax bill is the biggest liability they have on their balance sheet going forward.

When we purchase our property and build our next house I will have two big financial considerations on the forefront of our decision making process – property taxes and heating/cooling costs. These are two costs that can be significant and are guaranteed to go up exponentially every year for the rest of your life. The mortgage itself does not scare me because that is a fixed cost at a fixed rate that eventually over time inflation will eat away at and it costs you less and less each year and is also potentially offset by a gradual increase in real estate value. Taxes and energy costs on the other hand go up hand in hand or exceed the cost of inflation in many cases so every year you own that house it costs you more and more.

So you might be asking MFJ what is the deal man – you talk like some frugal dude that thinks owning a house is a waste of money and you’d be a dufus to build an extravagant house – yet here you are with a 6 figure savings account “downpayment” for your next house are you a crazy hyporcit? The answer is maybe.

First things first we are going to spend a crapload on our next house compared to what we would really need. We could live in our current house forever and it would be more than adequate. For the record we currently live in a less than 10 year old 1800 sq ft ranch house in a nice subdivision with an unfinished basement that could easily house our family of 5 even with some incremental family growth.

However life is all about balance and we need to balance between saving for tomorrow as we are with our retirement nestegg and enjoying some of our financial blessings now. It’s always important to give myself a reality check and making sure I’m being frugal and not being cheap – there is a big difference. So is a big fancy house going to make me and my wife anymore happy or our lives any better – the answer is no. We don’t need shiny new things to make us feel more important or make our lives more exciting. We enjoy living relatively simple lives and don’t spend much of any money at shopping malls, on new cars, or on other things that seem to excite other people.

The main reason we are saving so much money for our next house is that we want to purchase a large chunk of property (20+ acres) out in the country to build a house and start a fruit orchard. All in all I expect the cost of the land to be pretty close to the cost of the actual house which explains the large price tag for the combined purchase.

Overall I don’t expect our house to be that extravagant and one could actually view the additional land and fruit orchard as an investment, but to be honest I’m not even sure if I can grow anything so I’m not going to mix the two. This will be strictly for personal enjoyment and some place where my family will grow and where my wife and I will live for the rest of our lives. Because the land will be put to agricultural use the taxes will be very affordable and like I said if I’m able to grow a few things there could be the opportunity where the land could actually pay some dividends back to me.

Now off to find some land…