Author: David Wang
Covestor model: Event Driven Value
The year 2011 was marked by volatility, as the S&P 500 jumped up and down and ended the year flat. Fortunately for value investors, volatility is our friend as it allows us to buy more shares at a cheaper price when Mr. Market panics. The main goal for 2012 is to preserve our capital so that we can continue to take advantage of market gyrations in the new year.
When selecting investments, we look at three things: How much is it worth, where is it trading right now, and how much could we lose if we are wrong? Answering these questions led us to a portfolio of high quality companies that we’re hopeful will grow their intrinsic value over time, and undervalued companies with a catalyst that should unlock value. We believe that the high quality companies are a better alternative to low yielding treasuries and are excited about the opportunities for investment gain in our undervalued companies.
We are most excited about Gramercy Capital Corp (GKK) for the year 2012 due to its asymmetric risk/return profile. Our best performer for 2011 was American Eagle (AEO) +30% (bought 10/3 at $11.72, closed the year at $15.29) and our worst performer for 2011 was American Greetings (AM) -23% (bought 11/14 at $16.10, closed the year at $12.51).
We hope for the best in 2012, but as always will prepare for the worst.
