Yesterday my 2009 portfolio closed up 201% for the year. It has been an interesting journey, and while it is rather self congratulatory to discuss it, there are lessons to be learned.
Before I review some of the reasons I was able to do this I want to make it clear that I do not think this can be easily repeated; I look at the portfolio every day thinking this is too good to be true, and we all know what that usually means.
For starters, my 2009 recommended stock picks happened to work out better than I could have imagined. Anadarko Petroleum (NYSE: APC) has almost doubled and Intuitive Surgical Inc (NASDAQ: ISRG) has more than doubled.
Second, I had the courage to follow "my pal Warren's" advice, along with that of other value investors, and bought stocks and options when fear was running rampant. I was in good company calling the bottom when March 9, I posted Nostradamus was a punk! Have we reached bottom? and while I am not immune to periodic blunders, this call was spot on.
Among the stocks I jumped all over was Wells Fargo & Company (NYSE: WFC), buying in at $12.50, and selling puts to open (naked puts) at strike prices from $5.00 to $10.00 when some thought WFC might become one more financial domino. The stock has since doubled but the options doubled those returns again as the stock outpaced the overall market.
I have repeated this process of buying stocks at what I considered a value position while doing naked puts at multiple strike prices and months. This has contributed greatly to the portfolio appreciation. I shared most of this during the year when calling investors attention to the Olin Corpration (NYSE: OLN) Chasing Value: 5% yield from Olin, a 'boring' old company and Williams Companies (NYSE: WMB) Serious Money: Better than Apple, Google, Microsoft & Berkshire Hathaway, Part 1. If you are looking for high yielding stocks that still have some juice in them, I think they have some upside left.
Throughout the year I have been encouraging our readers to search out bargains. While doing so it is also wise to search out the advice of the masters beyond Buffett like Sir John Templeton for one . It was his inspiration that persuaded me to invest in a few penny stocks. That led me back to a company I have been following for some time, and candidly must confess, lost money in: Newcastle Investment (NYSE: NCT). I bought shares at 60 cents and today it is up 63 cents, closing at $3.05 -- a 408% gain.
You cannot go back in time and you should not kick yourself for your misgivings or mistakes, however, you can learn from them. This time around I am taking something off the table Serious Money: ETF that's better than cash, I am not doing naked puts unless I would be happy to own the stock. I have also set aside my gains as a backstop in case a Black Swan appears so that I can close out any threatening options if I have to.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own all of the stocks mentioned as of today.