Luck? Skill? Who Cares?

The quarter is about to end and maybe we are seeing stocks get marked up into the 30th. If so that might mean we sell off next week, we'll see.

I was in the office today and toward the end of the day I looked at how a few accounts had done so far, with two days to go in the quarter. It looks like I will have had a great quarter. The SPX is up 21 points since the close on March 31. I calculate that to be about 1.7%. I looked at about 10 accounts and was pleasantly surprised.

I should probably note that I do not fixate on account balances. I have partners that can do that if they want, I tend to focus on other things.

Of the accounts I looked at, the worst one was up 1.8% for the quarter and the best one was up 4.1%. I would say the mean was around 3.2% or 3.3%. No two accounts are exactly the same due to tolerance for volatility and other circumstances. While I am pleased with the results, the thing that stands out to me is that because of the ongoing caution toward the market, most accounts have 10%-15% in cash. One thing that just about every investment manager talks about is beating the market with less risk than the overall market. I will add while the market may get crushed in the next two days, for all I know, it seems unlikely that I would lose a lot of the spread gained thus far.

The point is not to pat myself on the back but to analyze what went right to try to repeat next quarter. Most of the themes in client accounts are things I have written about so will not be unfamiliar to long time readers.

I have been underweight tech for a long time. That was not a good call for the quarter. As of the close on the 28th, tech had outperformed slightly. I have been overweight energy which has been correct for a long time and a couple of names here added a lot or return. I have been underweight financials which was a bad call but I got lucky with some good stock picking in this group with an Australian and an Irish bank.

I have been overweight utilities which was a jackpot. The worst utility clients own was up 5% and the best one was up 12%. Telecom was inline with the SPX but my picks stunk this quarter, but the dividends for them made up for some of the poor performance. I had the most luck in the consumer area. One was a moon shot and another was up better than 5%.

Industrials had a couple that worked and a couple that didn't, ditto materials. The other thing that generally worked well was emerging markets. By and large most of my foreign exposure had a good quarter, I have almost no EMU and zero Japan.

Another thing that probably helped a lot was dividends. With the current portfolio composition dividends help every quarter.

Most of the weightings, sector and country decisions are things I have been writing about all along. Most of the themes I look at tend to be longer term than trying to play Apple for its earnings number.

One thing I have written before is that I try to get more themes right than wrong. I got plenty wrong this quarter but I don't think the wrongs outweighed the corrects. That is important.

Not much will change just because the calendar will turn to July in a couple of days. I may add one more energy name and maybe a tech name soon too but beyond that there is not much visibility for change.

I would conclude by saying that patience is something that usually pays off for me. I don't act rashly. I have a plan that I constantly review in case change is needed, but I don't let three or four bad days cause me to turn things inside out.