As has been the tradition for me on this blog, after penning an article on AVI family net worth report for the year, I compile a report on how AVI family portfolio of investments performed for the year.

Unlike most years, when on average, I expect the portfolio to produce positive returns (>0) for the year, this year the numbers were mixed, unsurprisingly so!

While, at this time last year, the focus was on the waning pandemic, this year has been all about inflation and interest rates, and yield-curve inversion.

In the charts below we see how interest rate has evolved through the year and what has happened to yield inversion, the difference between 10-year and 3-month treasury rate, a metric that has so far been dead right as a predictor of an impending recession.

When interest rates rise >50X, valuations on assets that are expected to produce cash flow into the distant future no longer look attractive and the result is tech-wreck! And when that happens, proverbially, the baby gets thrown out with the bath water, which is what we witnessed for the tech behemoths such as Google, Amazon, and Meta. Valuations dropped anywhere from 30 % to upwards of 60 % for the year! With the exception of a few great investors, almost everyone saw negative returns on their portfolio for the year!

In this market environment, how did I perform, well let’s find out!

Below, I summarize the performance of my various investment portfolios.

A few things stand out immediately

• All my investment portfolio accounts are in green. Why is that? Its because, all of these portfolios beat the S&P 500 index, which produced annualized returns of -18.11 %
• Performance for my active accounts (both retirement and non-retirement) fared far better than the passive accounts.
• In down markets, I tend to fair quite a bit better relative to S&P 500 index.
• The total investment portfolio produced an annualized return of -5.75 %. So this has been the year, in a while that we have witnessed a net loss for the year!

One account, in particular, Mr. AVI Active IRA, which tracks my active investment strategy of contrarian-value investing in quality businesses, faired significantly better than any of my other investments. This account has over the last 5 years produced annualized returns of ~17.08 %, while for the same duration, S&P500 has produced annualized returns of ~9.42 %

How does my overall portfolio performance compare to big-money portfolios?

Howard Marks hit it out of the park! Rest not so much. Given all super investor funds are actively managed, my performance on an actively managed portfolio was -3.08 %. In terms of pure performance metrics, and discounting for the assets under management, I placed a respectable 4th in the list of 20 super investors above.

Let us now have a look at the distribution across asset types in AVI portfolio as of this writing.

Equity holdings in US stocks have gone down from 61.7 % at the beginning of the year 2022, to ~50 % today. International equity exposure also has gone down and so has the exposure to alternative assets. On the other hand, I now have increased exposure to US Bonds and a rather large liquid cash position. Spac/Crypto exposure last year was primarily through the SPAC vehicle by Bill Ackman, PSTH, which was closed out last year as Bill Ackman was not able to find any deal to close.

As interest rates have crept up, I have gradually begun to increase my exposure to Bond holdings, in particular, US Treasury Bonds. In part, the large cash position is a reflection of funds that I have put aside for investing in a private investment partnership that I am starting. I fully anticipate for this to go down in the coming year as I find more opportunities either through the partnership vehicle or otherwise to deploy cash into the marketplace.

Onto the list of my largest holdings, which are listed below:

The biggest change relative to last year has been Meta (FB). It went down from the top spot in 2022 to 4th place in 2023. In part, a significant drop in Meta share price and my timely exit to trim my position sizing contributed to this change. New Entrants in the top 10 position this year are, Markel (MKL), Netflix (NFLX), Prosus (PROSY), Angico Eagle Mines (AEM), and Amazon (AMZN). I sold out of my Wells Fargo position and the drop in share price for Intel and Verizon, resulted in them getting booted out of the top 10 holdings.

Finally, here is a snapshot of equity holdings in AVI portfolio and the corresponding returns.

A few comments relative to where I stood last year

• Last year, I was sitting on 4 multi-baggers (gains >100 %). Of those, I completely exited out of 3 positions and am currently only holding onto AAPL, as the one and only multi-bagger in my portfolio.
• Last year I was sitting on 6 equities with paper losses. That number has grown to 15. Of these three belong to my top 10 holdings in terms of percent portfolio allocation– Amazon, Disney and Meta.
• As noted earlier, I completely sold out of my position in Bill Ackman’s SPAC, PSTH.
• Other notable exits include Magnella Midstream Partners (MMP), JP Morgan (JPM), and Pacific Gas and Electric Co. (PCG).

Synopsis:

• I have largely avoided the massive drawdown witnessed by markets in the US this year. Thanks in part to my focus on contrarian value-focused investing, trying to purchase quality companies with the mindset of holding for the long term.
• A passive indexing strategy can be painful, especially in situations such as we witnessed in 2022.
• Although the number of stocks with paper losses in my portfolio increased from 6 to 15 this year, several of these loss positions represent a smaller fraction of portfolio allocation at cost, except for a couple.
• My total portfolio return of -5.75 %, handily beat S&P500 in 2022 and is a validation of my overall conservative investment strategy.

In summary, I am more than ever convinced in my ability to execute intelligent portfolio construction and management strategy and I foresee myself doing so for many more years to come!