(Sorry for the delay on this one. Just been swamped with the tax season and now finally got around to updating the site.)
Historically S&P 500 has given 9.73% annualized returns since 1871. The returns for S&P 500 from 2009-2021 has been 16.03% annualized. We have been in a major bull market for the last 12 years. The bull market can’t last forever. Over the long run the performance will revert to the mean, which means we will see some down years. 2022 is looking to be a year where we are starting the end of the bull market, whether it happens to be is something only history can tell.
These bull markets lead to inflated stock prices and multiples. The multiples need to come back down to historical numbers. Bill Gurley recently mentioned the pain the tech sector will have to go through to get the “unlearn” the valuations from the bull market. This is not just a tech sector issue, the recent bull market has lifted many industries (tech has been biggest beneficiary). I think we will see some painful reality for many sectors. Although you don’t want to buy stocks just because they are down 50% from the bull market.
2021 was a really good year. I was up 71.64% for the year, compared to 28.7% for the S&P 500. Since inception, 2009, I have performed 44.55% annualized, compared to 15.47% annualized for S&P 500. Both my returns and S&P 500 returns are beneficiaries of a bull market that has been the tailwind since 2009. At a certain point the bull market will end and the returns will have to adjust accordingly. The reversion of the S&P 500 averages to the 9% returns means we will see some painful years. I’m sure my return will come down but I’m betting that picking individual companies will outperform the market.
The 2021 performance was largely impacted by Oroco Resources and Emerita Resources. I discuss more about the below. They both have had a rough 2022 so far, although I think they will have a monster 2022 year.
Most of 2021 was spent without much change in the portfolio. We found some good ideas and we able to reallocate capital to the new ideas. Although we didn’t really sell anything. The only selling we did was to raise cash for new ideas.
It has been extremely hard to find new ideas. We found a new idea in 2022 but we haven’t found much compelling given the valuations. Instead we are more interested in buying more of our existing ideas.
As I mentioned in 2020 letter, the portfolio that I’ve been tracking for performance is my Roth IRA account. I have a few other brokerage accounts which I use for investing. So the position mentioned below are comprehensive of all my investment accounts.
Voxtur Analytics Corp
Glass House Group Warrants
Salona Global Medical Device
Noble Resource Corp
Mindset Value Cannabis Fund
Oroco Resources: 2021 was a transformative year for the company. The company started drilling on its Santo Tomas property. After 2 decades we finally have drilling activity on the property. There were many delays and challenges to get to this point. Even after all the challenges (permit, getting rigs at site, COVID delays, delays at testing labs), the management team did a superb job of managing the company through the hurdles. The delays were frustrating but the company executed. Once the company started drilling, they have not stopped. So what management can control they have done a great job of executing. What they can’t control (COVD restrictions, permits, rig approval, delay at testing sites), the management team did the best they could to get through it.
The results of the drilling have been good. In 2021 they announced first set of results from the North Zone. So far in 2022, we have seen assay results for 12 holes. There are many more holes that have been drilled and assay results should be coming in weeks.
So 2021 was a transformative year for the company as the drilling program started. 2022 will be another transformative year. The drilling program will go beyond the historical gradeshell. We will see the resource expand and maybe even the grade improve. We will see Santo Tomas become a major acquisition target for the majors. (I expect 2023 to be another transformative year as it gets acquired).
Voxtur Analytics: Things have been delayed with this company on many phases in 2021. The main thing for the company was completing the major acquisitions they were working on in 2021. The acquisitions took time but the company was able to get them all done.
The aNow service had a monster win with United Wholesale Mortgage. This really put the aNow service on everyone’s radar. The growth in aNow has been amazing and in 2022 we will see lot more implementations.
In 2022, the company had a major win with the change made by Fannie Mae. Fannie made a change to allow attorney opinion letters (AOL) in lieu of title insurance. Voxtur is the only provided whose AOL currently meets the Fannie Mae requirements. The company is already working on major players to get the AOL system integrated in the buying process. In late 2022 the Fannie changes go into play, so we will see revenue spiking substantially for Voxtur.
I think 2022 is going to be a major year for Voxtur and 2023 will likely be even more important.
Eastside Distilling: This is the most recent buy. I wrote up my thoughts on the blog recently. The digital can printing business is going to fundamentally change this company. The company is days to weeks away from giving shareholders update on how the printer is going.
The company has struggled with bad management decisions in the past. Geoffrey is a great leader who understands what the company needs to focus on and is betting big on it.
MIND Technology: I have actually sold out of MIND in early 2022. In the most recent conference call you can hear management’s excitement and belief that the orders are about to roll in. I just feel like the management team has failed to deliver and communicate with investors. Also the capital structure has changed drastically from when I first invested in the company.
Glass House Group Brand: The CA cannabis market is going to major changes. I think by the end of 2022 the CA market will be on track to show what the biggest cannabis market in the world looks like. GHG will be a major beneficiary from all the changes that are proposed and will get implemented in 2022.
Salona Global Medical Device: I started a position in 2021 with the goal of building a large position. Unfortunately, I didn’t have enough capital to make it a large position. The company is a roll-up play with a management team that has a superb track record. The company ran into delays in 2021; although so far 2022 looks like the company is back on track. My position is so small that it doesn’t really have an impact on my portfolio.
Noble Resource Corp: An exploration copper play. The company has 2 major properties in Chile that the company is running an exploration drilling project. In 2022 we saw the drilling results from these 2 properties.
The one property that had high expectations, the drilling results were bit more challenging. The company has put the drilling on hold at this property as they likely will need lot more capital to do a drilling program and find where the deposit is.
The other property had really good results. The company is moving forward with its drilling program here. I’m optimistic about this property.
Emerita Resources: I bought a position in EMO in 2021. The company had a transformative year in 2021 as it got the legal rights to the IBW project. The company started drilling on one of the historical deposit in the IBW and the company was able to expand the historical resource size by multiples.
In 2022, the company has received the permit to begin drilling on 2 other deposits in the IBW. The results from the drilling program will make IBW a project that many majors will want to acquire. Also in 2022 we will see the company get the AZN property awarded to them. I’m super bullish on EMO and it is one of the ideas where capital is likely to get reallocated to.
When I started my blog, I was using it as a way to track my performance and it force myself to do a write-up on companies that I buy. The blog has gotten a following even with me not doing regular posts. One of the things is the name of the blog was something I signed up with without any expectations of having regular readers. As things have changed, I plan to move the blog to a different domain. I plan to get it up and running sometime in summer of ’22.
The other thing that I’ve been going back and forth with is providing real-time access to my trading. I have many readers and friends asking me about my investing. Typically I will write up my ideas and also provide updates on them. Although the posts are not timely. So I’m thinking of starting a service where you can access my trading on a daily basis. Also I would provide access to the write-up I do for myself before I buy any new position. My plan is to launch this in the summer of fall of 2022.