Reading the early Buffett Partnership letters has inspired me to do some introspection and writing on my portfolio performance. Year to date, my fund has returned 18.5% while the S&P500 has returned 10.6% including dividends. Working at the Fund-of-Funds has increased my sensitivity to benchmarking and performance attribution. With that said, the S&P 500 is not necessarily the most accurate candidate, but does enjoy the benefits of representativeness and notoriety.
Despite these structural disadvantages, I feel confident that they are more detrimental to others than they are to myself, due to the small amount of capital under management. This also explains the reason why I look for 100% minimum gain (i.e. 50% margin of safety) when looking at prospective investments. 20% prospective gains remain within the range of noise and can easily be lost coming and going. Approximately one third of my positions have done extremely well, while the rest have languished. I am comfortable with the portfolio makeup, however I have been having trouble with idea flow to replace the one third as they approach fair value.
Idea flow has mostly been distracted by numerous career-related activities and ventures. Once I finish with the Buffett trip and post-graduation plans, I expect mental focus to return to normal levels. On the other hand, continual exposure to the portfolio this summer has increased my temptation for activity and the possibility of doing something stupid. This temptation has been quieted mostly through online poker, simultaneously forcing patience and satisfying the animal instincts to gamble. I am proud to say that I have won a handful of 300+ person tournaments.
If returns continue at a similar absolute and relative pace, I will be quite pleased with 2007 results. I am mindful of the incredibly small number of samples on which to base this judgment (position-wise and temporally) and hope to continue to submit similar results. I would like to close with classic quotes by Jerry Yang, this year's winner of the World Series of Poker and "Puggy" Pearson, one of poker's greats.
"I've seen the miracles of God with my own eyes. I also did a lot of bluffing."-- Jerry Yang
"Ain't only three things to gambling: knowing the 60-40 end of the proposition, money management, and knowing yourself. Even a donkey knows that."-- "Puggy" Pearson