2020 In The Rearview Mirror, Looking Forward To 2021

2020 has been a year we’d like to forget but clearly never will. I’ll skip the typical “year in review” type stuff and maybe make my version of it a little more personal …

2020 for me was quite possibly my best year ever from a professional view and my worst from a personal one.  I am sure given what the year brought us all this is not an atypical statement but I thought it bears making as I believe everything in one’s life intersects.  For me, those polar outcomes to the two main sections of a person’s life have the effect of making one feel a bit numb.  It’s hard to get too happy about a business success while the other part of your life is “distressed” to use a biz term here. On the flip side, when your business aspect is going so well, it does buffer the downside of the other areas to a point.

A couple of things I learned this year:

  • Most people you think are “friends” are “acquaintances” and not friends. When the shit hits the fan, a friend calls you to say “how can I help” and an acquaintance sees you weeks or months later and says “I heard about that, are you ok?” and offer nothing.
  • The Eric Clapton song “Nobody Knows You” is the most accurate song ever written and this last year and a half have proven this to me.  I write this listening to his 2-hour concert in Budokan. Do yourself a favor and put it on…
  • The flip side of this there are people you’d never expect to be the “friends” portion of the above statement come out of the woodwork. I am forever grateful to the many ValuePlays subscribers who I have mainly only know virtually have unknowingly filled major gaps. You know who you are and I hope 2021 is the best year of your life…
  • There are still others who just decide to stick by you like glue no matter what and are present day-after-day. Never let those people go ……ever. They just unapologetically love you…give them the same
  • Never hold anyone to a standard higher than you hold yourself, contrarily, when someone holds you to a standard higher than theirs, they are only doing so to make themselves feel superior, get them out of your life…
  • If you are able to segment your life, a dumpster fire here does not affect what you are doing over there (I’m continually amazed Clapton can Sing “Tears in Heaven” in concert).
  • Inflationistas and gold bugs have officially been proven 100% wrong. It's been a decade give up
  • The polling industry for politics is officially finished
  • Predicting next year is a waste of time and 2020 put the nail in that coffin
  • Let businesses loose and they can come up with a cure/vaccine in months, not years…
  • At the end of the day, people just want to feel safe and free

So, I guess you are wondering what the hell any of this has to do with investing?

I think, everything…

We have had some amazing success this year and at the same time, admittedly, some abject failures. Over the years we’ve had our collapses and our 40-baggers.

In March when the market tanked we were very opportunistic and bought shares that have had had fantastic results. Our buying was primarily in three stocks, Williams Companies (WMB), Kinder Morgan (KMI), and Innovative Industrial Properties Inc (IIPR). While the combined WMB/KMI have been very good buys both in terms of stock appreciation and dividend yields  (10% plus locked in), IIPR was a stunning success with both 300% plus appreciation and the same double-digit yields).

On the flip side, Chesapeake Energy Corp. (CHK) was a complete failure (the bonds we bought might make up for this but time will tell). We also had the perfect thesis on Lumber Liquidators Holdings Inc (LL) but bailed too early and missed the surge we always thought was coming. Both of these are what Buffet calls “unforced errors” meaning everything we needed to do the right thing was there, we just didn’t see it or ignored it because “we know better”. In either case, it’s a failure.

Overall for the portfolio, it was a good, not great year and I am sitting on plenty of cash going into 2020. I really like what we hold and love the cash our investments are throwing off now. It’s free money to invest again.

Back to the main point. What does the first half of this point have to do with the second?

Simple, we have to be unemotional when investing. We cant “hate ” or “love” a company for some arbitrary reason as both emotions lead to bad results. We have to try and remain “numb” and see each for what it is, not what we think it is or what we hope it can be.

FYI: 1 hour 33 into the concert is Layla… he plays it both acoustical in the very beginning and electric at this point. Amazing…

Investments deserve our affection or disdain based on their results. Now, as value investors that does not automatically mean share price performance, it means “how has the business performed” as at the end of the day, long term that will drive results.  The danger in both business and people is that some always just keep almost getting there but continue to disappoint you, we have got to learn to let both go as holding on never does any good.  CHK and Breitburn Energy (BBEP) are perfect examples of this.

On the flip side, the stock of a company can collapse but if the business is performing, we hold on. This is like the person in your life who had been wonderful to you but makes a mistake, do we throw them away or look at the sum total of the relationship and see it for what it was, as a temporary set back. IIPR is a perfect example of this. The company has continued to crush it results wise but the stock collapsed from $140 to $45-$50 in March. Did we dump it? Hell no!! They have been performing amazingly and the business results never faltered. So, of course, we tripled our position and are up >300% since March in those buys AND getting over 10% annually in a dividend.

So the main lesson of 2020? For my investing life, it is to more quickly dump those who continue to disappoint and double or triple down on those who don’t. Come to think of it…….that is for my personal life also….

I hope 2021 is the best year ever for everyone.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests ...

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