As those of you who frequently read my blog posts and articles know well, I am not one to pound my chest when it comes to investment performance. In fact, I advise my clients not to pick a portfolio manager, including myself, based on performance alone. However, performance is obviously important, especially long-term performance. Client need to know that the underlying investment strategy their portfolio manager employs works over the long-run, and in varying market and economic environments.
I have been maintaining the MPAM Model Growth Portfolio since I established Montecito Private Asset Management in early 2004. In that time I have documented every trade and the ending values for this model portfolio for every quarter, from the second quarter of 2004 through the fourth quarter of 2012. Clients and potential clients can view my decision making as it occurred, in real time, to verify my results and the effectiveness of my investment strategy by simply reviewing the historical record for the MPAM Model Growth Portfolio.
This past year was certainly a challenging time. Although stocks ended the year with solid gains, what many may not realize is that the market was up significantly in the first quarter, and after that, although it bounced around, it really didn’t generate any meaningful returns. More to this point, the S&P 500 gained 12% in the first quarter of 2012, and ended the year up 13.4%, gaining just 1.4% over the last 9 months of the year. In the fourth quarter, the S&P 500 actually lost 1%. This quarter-by-quarter analysis underscores a couple of key points: First, those who owned stocks entering the year, who used a buy and hold strategy and were well-diversified, should have performed pretty well at within a reasonable margin of the S&P 500 return. Those who tried to trade the market, if they did not have a significant weighting in stocks during the first quarter, likely struggled to generate returns this past year; second, even though the market didn’t do much over the last 9 months, there were great opportunities to both make money and lose money during that time-period. In fact, the stock market experienced huge volatility throughout that time. Those who were not buy and hold investors, and who traded those swings effectively, should have generated strong performance for the year, and could have outperformed the market significantly (as I did with my MPAM Model Growth Portfolio).
Here are my performance results as compared with the S&P 500 for various periods, including since inception (May 2004 through December 2012):
|Time-Period**||MPAM Model Growth Portfolio Returns (annualized)||S&P 500 Returns (annualized)||Difference||MPAM Model Growth Portfolio Cummulative Returns||S&P 500 Cummulative Returns||Difference|
|* Returns do not include dividends, management fees, or transactions costs.|
|** Inception was May 10, 2004. Returns are through the end of 4Q2012.|