Dass Capital Extraordinary Companies portfolio up 20%

Returns

Over the past year, the Dass Capital Extraordinary Companies portfolio is up 20.4%, while the S&P500 was up 11.65%. We outperformed by 8.75%.

That’s a great start, but one year is a short time in the life of a portfolio, especially since we added new positions recently.

Risk

Standard deviation is a risk measure which shows how far above or below the average, the return could be. Our standard deviation was 20.8%, while the S&P500 had a standard deviation of 18.4%. We were slightly more risky than the index.

We had positive returns in 57% of months versus 53.5% of months for the index.

Let’s put the performance in context. The long-term return on the S&P500 is about 10% per annum. So the S&P500 performed above its long term trend. Comparatively, our portfolio return of 20% is high. So we must keep our feet on the ground. The fact is that one-year is not a long time to measure portfolio performance. We are going to have ups and downs, expect them.

Company performance

Of course a portfolio is made up of real companies. Here’s a few of their operating metrics. I must mention that Berkshire is a holding company, so it’s not quite comparable in every respect. For instance the free cash flow (FCF) from its investments does not appear in its financial results. Take the Berkshire numbers with a pinch of salt.

A few things stand out or me.

Firstly, based on the P/E ratio and the FCF yield, these are expensive companies. But that is to be expected, you don’t often get extraordinary companies at low prices.

Secondly, in terms of share price, Berkshire is the laggard in this group over the past 10 years. But it is actually the main driver of our performance over the past year because we owned it the longest. Berkshire returned 23% over the past year. Good lesson to remember – stock market performance comes in chunks when you least expect it.

Thirdly, the return on capital employed (ROCE) of our operating companies is quite high. This shows us that they have strong competitive positions and are able to defend those positions, thus maintaining returns. ROCE is not relevant for Berkshire, so ignore it.

What’s next?

We are looking for our next holding in the healthcare and financial sectors. But valuations are high, so we may have to widen our search or be patient.

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