Portfolio Update

I’ve updated the portfolio page to show the full transaction history and entry / exit prices.  Note, my explicit goals are not to beat a benchmark index or generate positive returns on a quarterly or even annual basis.  My goals are (i) to buy high quality businesses at a good or reasonable price, (ii) limit risk (I define risk as the probability of a permanent loss of purchasing power), and (iii) patiently wait if I can’t find anything interesting which fits within my circle of understanding.  I believe this strategy, over time, will produce superior results.

After doing more work, I sold out of a small position in SolarCity.  I remembered one of Buffett’s quotes (full quote is in the quote repository) which states in so many words – if you are struggling to make things clear in your head, you probably don’t understand the business.  I went through my checklist and couldn’t provide logical answers for many items.

A few key areas I can’t grasp include (i) competitive threat from utilities and banks, (ii) long term cost advantage versus Asian suppliers, (iii) future policy implications including net metering policy, (iv) accounting, (v) the impact of rising interest rates / tough financing markets, and (vi) long term capital needs to build out manufacturing capacity and investments in marketing.  I also think back to all the lessons I’ve learned from reading business history.  In most instances, a new technology provides a wonderful outcome for humanity, but lays waste to many industry participants. The automobile was an incredible invention, yet hundreds of car companies have failed over the years.  The commercial aircraft was also revolutionary, but most airlines have gone out of business.  Solar is a game changing technology which is driving us toward a carbon neutral future, but the markets are simply too large.  You’d rather own a small company dominating a slow growing niche than a large one playing in a trillion dollar market.

The only time to invest is when something feels like an absolute no-brainer.  If you are handicapping too many items, you should stop and look at something else.


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