HII

HII, my current biggest holding, is up 10% over the last three days, apparently on the Pentagon's budget briefing. Transcript here. While it looked mildly good, it didn't look +10% over the market good or +12% over General Dynamics good. I see three probable drivers:

• Details of the budget released to connected players who are bidding it up (Congressmen not subject to insider trading laws)



• The announcement brought attention to HII, and more bidders saw it's attractiveness relative to the general market and specifically military contractors



• Potential sellers note the above two, particularly the first one, and hold off selling...

So what do I do? I'm in the third camp I suppose. I think it's worth more but it doesn't have the margin of safety I'd like any more - but selling when insiders are bidding it up would be a sure way to miss out on an upcoming jump.

(note - though it's my biggest position, it's not big - no big positions atm)

First Year Performance

From a quantitative perspective, I did superbly - up 17.27% vs essentially flat for the US market. Worst month was December at -1.28%.

Qualitatively, it's harder to tell. My performance was dominated by two trades - short NOG and long HII. Both look like one off opportunities. The NOG idea came from Bronte Capital. However, I'm unlikely to get valuable ideas from there in the future - due to a number of successes, he has more market credibility now. Also, I believe he had strong incentive to put out quality ideas to get his name out and attract investors. Going forward, publishing short ideas will likely increase his borrowing costs and attract legal attacks and he has less to gain.

HII just really dipped below it's intrinsic value. It actually dipped significantly more than the market despite revenues and profits having virtually nothing to do with the economy. An easy buy, but I had no way of knowing if I would have to hold it until the dividends came out to recognize the success. Turns out I only had to wait a couple months.

So neither of these look reproducible. I have no really good ideas at the moment. I do take some comfort from Buffet's idea:

"The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch."

Still looking for that next pitch though...

[Couple smaller things. Yen down vs dollar 4.97% for the year; however I have decided to move back to the US so believe 100% USD is now the best unit of accounting. Also, my account size is small relative to my annual income and savings. Still thinking and learning about position sizing, but they will probably be smaller in the future.]