Happy New Year (С Новым годом!)
2011 was a great year for me. My strategy of doing absolutely nothing while running mouth from the sidelines paid off in spades. I have logged in a year end return of 19.2%, plus dividends, over the TTM relative to the -1.28% (plus dividends) return of the S&P 500.
While I'm obviously not above bragging about past success, now that the year is over its time to focus on the years ahead.
My current portfolio
Enterprise Products (NYSE:EPD) - By far my largest holding due to a multi-year run-up in price, EPD currently makes up 47% of my portfolio. Enterprise is my kind of company. They own essential infrastructure that supports critical public services. A true "toll bridge" operator. Due to tax implications I am married to this position unless something truly drastic occurs to motivate me to sell.
Philip Morris (NYSE:PM) - Accounting for 30% of my portfolio PM is the second largest holding in my portfolio. PM has recently had its pricing power threatened by the slow down in Europe and faces a never ending threat of lawsuits and further government regulations. That said the company continues to grow sales and has a world class brand name. Cigarette volume shipments is the key metric I will be using to monitor my investment. If sales start to fall, price increases can only buy you so much time.
Kraft Foods (KFT) - At 12% of my portfolio KFT comes in as the third largest position. While I don't see the coming split creating any value, I will continue to hold and monitor both positions. The trend towards private label brands will be a key factor to watch for the domestic groceries business, while competition with Nestle (NSRGY) and local brands will be the determining factor for success of the global confection business.
Altria Group (NYSE:MO) - Finishing off my portfolio, MO accounts for the remaining 11% of my investments. This dividend stalwart is the first stock I ever purchased and has proven to be a great investment over the years. That said, with cigarette volume shipments slipping and no real growth opportunities in the American market, Big MO's best days are likely behind them.
Performance over the last year was pure coincidence, or luck, on my part, being the result of stock purchases made years earlier. All the same year ends are a great time to review ones portfolio and revisit ones investment theses.
The first thing on my list for 2012 is to evaluate the opportunity cost of holding MO and KFT versus using those funds to pursue more attractive investments. Trading at an all time high while sales continue to fall and regulatory threats escalate, the market is practically screaming at me to sell my position in MO, and I'm listening. I remain undecided about KFT and will hold until I find an opportunity that inspires me to make the trade. So lets have a look at some of those opportunities.
Stock Picks for 2012
Western Union (NYSE:WU) - I have already written about WU right here on GuruFocus and don't really having anything new to add.
Charles Schwab (NYSE:SCHW) - Chuck is another stock I've already shared my thoughts on and its become one of my highest conviction picks. The trend toward self-managed investments and any future improvement in interest rates make SCHW a compelling investment idea.
Weyerhauser (NYSE:WY) - Inspired by a series of posts by Frogs Kiss discussing the opportunities implicit in a rebound in housing, WY is one of my top investment ideas for 2012 and beyond. Lumber is a traditional hedge against inflation and with 3 of their 4 business segments intimately tied to housing starts, WY is a great contrarian pick and a solid dividend payer.
I hope that this year end review is useful to someone else besides me. The end of the year is a great time to stop and think about how you got here and where it is you think you're going and how to get there. If you can't defend your investment thesis for owning a particular stock then its time to sell and move on. 2012 will likely see me sitting on the sidelines again, but I will be watching my 3 picks for a chance to buy, and reading as much as I can to find new ideas.
Best of luck to everyone in the new year.
Happy New Year (С Новым годом!)