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I’ve decided to move my investing writing off of this blog. I’m still investing, despite the pat few rough months and I’m still beating the market over the long haul. I may also share some of my ideas about investing, but the personal portfolio may have to come down. It’s just too much of a hassle calculating my returns and updating my portfolio in so many different places at once, especially since investing is a topic a bit outside of most of this blog’s readers sphere of interest.

I’ll leave everything here for a week or so, so that anyone who wants to read it can, but most of the investing updates will come down.

My one “classic” investing piece, the first one I did on this blog, will stay.

Baidu- Valuations and Verse

It’s already time consuming to calculate annualized returns, but presenting them has taken me far more time than I can afford to spend. Creating HTML tables and populating them with my investment data just sucks. It’s not so bad when presenting the results of a single sale. An update of my entire portfolio, is a different matter.

So, starting now, I’ll be relying on the charts generated by Stockalicious. Here’s one that compares my portfolio performance over the last year to that of the NASDAQ and the SP500.

A rough year
As Investor Blogger pointed out, I’ve been “treading water”. It’s true. The Toshuo Portfolio has fallen by about 3% over the last year. The market as a whole, though, has suffered far worse. Over the same time period, the SP500 and NASDAQ each fell by over 20%.

Yeah, I've crushed the market!

The two-year chart is much more dramatic– 60% growth for the Toshuo Port while the market indexes were in the negative.

In the future, I plan to use Stockalicious to do portfolio recaps. It saves quite a bit of time, and takes care off all the error-prone calculations for us.

Tracking how well your investments do is important. Without a clear idea of what kind of returns you’re getting, you’ll have no idea of whether you’re crushing the market or fettering your money away to those who are. As a long term investor, it isn’t necessary to panic about losing against the market on occasion. If I’m losing year after year, though, then it might be time to abandon active investing in favor of an index fund which will at least guarantee you’ll match the market (minus a modest management fee).

For a one-off investment, it’s easy to calculate annualized returns. Annualized growth of capital (or anything for that matter) is

((Current Value / Initial Value) ^ (1/years passed)) -1

For example, if you’ve doubled your money and it took three years, then your annualized return was 2 to the one-third power minus one, or just under 26%. This same formula is useful for calculating revenue and earnings growth of individual companies.

For an entire stock portfolio on the other hand, it isn’t possible to use such a simple process. As soon as you start adding money, which investors should be doing regularly, it becomes necessary to calculate a Net Asset Value before and after the addition of funds and dilute your asset growth calculation accordingly. It’s a messy messy process and the easiest way to deal with it is probably using the XIRR function on a Google spreadsheet.

Here’s the post-2007 update for my portfolio. All the quotes are from the close of December 31, 2007. As usual, I’m not posting my IRA investments.
continue reading…

In all honesty one of the factors that has led me to invest so much in Chinese companies is the undervaluation of the RMB. The explosive growth of the middle class and the economy as a whole is the main reason, but currency concerns definitely factor in. Yesterday, I stumbled on the most jaw-dropping estimate for RMB-appreciation I’ve seen yet.

Jim Rogers, chairman of Beeland Interests Inc. and a former partner of George Soros, said yesterday the yuan may quadruple in the next decade. If it did then the yuan would be at 1.8 to 1.9 to the US dollar. China’s economy would be at 13 trillion US dollar even if there was zero growth. I have noted that I expect China’s economy to pass the United STates on an exchange rated basis before 2020.

Non-deliverable forward contracts show traders are betting the yuan will reach 7.0070 in 12 months, a gain of 6.9 percent from the spot rate, and 6.95 by the end of 2008.

The government should revalue the yuan by as much as 20 percent, according to a report circulated inside the National Development and Reform Commission, Market News International said.

This would put the exchange rate at 6 to 1. China’s economy next year would be almost equal to Japan on an exchange rate basis.

Brian Wang: China Currency Update

Normally, I’d be extremely skeptical about this kind of prediction, but Brian’s proven himself to be an expert at predicting the future before.

Whenever the stock market takes a hit, some people (and lolcats) act like the SKY IS FALLING. As scary as a drop like this seems, it’s a good thing for the vast majority of us. For people who are retired and living off of their investments, or those who need to sell them for one reason or another, a huge dive like this really bad news. Hopefully, those people invest more conservatively than I do. Whenever the market takes a dive, my portfolio seems to get punished twice as much as the rest of the market. That’s probably due to the fact that I tend to invest in either less known or less popular stocks that institutional investors would want to distance themselves from at the first sign of trouble. Losing a bunch of money by investing in the same thing that everyone else did, is one thing. Losing a bunch of money in some stock nobody’s heard of is something else. Fund managers buying into Microsoft at the end of 1999 had plenty of company. Those who loaded up on Gigamedia like I did last week might face some tougher questions.

As usual, there are some cooler heads at the Motley Fool. For the majority of us, a drop in prices is a good thing. That’s because most of us who invest plan to be net buyers in the near to mid-term future and when we’re buying, we want prices to be low. It’s only for those who chose to, or, due to excessive margin debt, are forced to sell now, that low prices are a bad thing. There’s an old Chinese chengyu related to this situation.

杞人憂天

Literally, 杞人 just means a person from the ancient country of and 憂天 means worry (about) the sky. This phrase comes from an old story about a man from Qǐ who often spent time sitting by himself considering all manner of problems. One day, he considered that the sky might collapse some day. The more he thought about it, the more worried he became. Realizing that everyone, good people along with bad would certainly be crushed by the sky when it collapsed, his spirits continued to sink. It disrupted his sleeping and eating and in the end, he worried himself to death. Ever after, “Qǐ man worrying about the sky” has been a short phrase associated with needless and possibly self-destructive worrying.

In the case of stock investing, selling out of everything after a sharp drop in prices is about as self destructive as it gets. A more logical position is that of Warren Buffet’s old mentor Benjamin Graham- be greedy when others are fearful. He should know, considering he made his fortune by buying stocks during the great crash early last century and then literally writing the book about value investing. The way I see it, whatever stocks I thought were good purchases three days ago are now even better purchases.

Right now, most of my portfolio is worth less than what it was in June, and most of the companies should be worth a bit more, since they’ve continued to grow. Considering the 15% plus dive in 盛大 prices, I was strongly tempted to buy more. It’s done so well since I bought it the last time the sky was falling that it represents a huge chunk of my portfolio, though. Buffalo Wings has dropped a bit, but it still isn’t what I would call cheap. Harris and Harris, Gigamedia, and Middlebury to a lesser extent, look awfully cheap, though. Other stocks I’ve been looking at also offer some bargains. A couple of Chinese power companies developing green power, Huaneng Power and Suntech Power, both look intriguing, as does online real estate company Loopnet. With this many bargains around, I’m very, very glad that I’ve been working so hard to keep a low margin balance and allow myself so much room for days like this.

In the end, I decided to make three investments.

1) Panera Bread- My investment choices continue to reveal my love of food. Fortunately, it’s a pretty safe bet that Americans will continue dining out in greater and greater numbers. Like Chipotle, Panera has an experienced, successful leader at the helm, is in the midst of regional expansion, and offers high quality, fresh, yummy stuff. Unlike Chipotle, Panera has hit a couple of set-backs in terms of meeting estimated EPS, and its price reflects that. I bought 50 shares at $40.47.

2) Panacos Pharmaceuticals- They’ve got a promising HIV treatment that’s making it’s way through phase 2b trials. It works on a different pathway than existing treatments, and it’s showing effectiveness on people who have already been given other treatments. The risk on this investment is extreme, but so is the upside. I bought 600 shares at $3.23.

3) Gigamedia- I did a thorough analysis of Gigamedia last week. With absolutely no new news, its price is down by nearly 20%. Buying the exact same good for way less than I was willing to buy it for two days ago is a no-brainer. I bought 175 more shares at $10.96.

Legal Disclaimer: All of the information in this article is accurate to the best of my knowledge. However, I make no guarantee about the accuracy of anything written above. I’m not responsible for any mis-typings, or any other errors in the information. If you purchase any stock solely because I did, you do so at your own risk.

Here’s the mid-2007 update for my portfolio. All the quotes are from the close of June 1, 2007. As usual, I’m not posting my IRA investments.
continue reading…

Harris & Harris (Nasdaq: TINY) is a publicly traded venture capital firm. Normally, I would prefer to invest directly in individual companies, rather than a venture capital firm, but this case is special. From everything I’ve been reading, I’m convinced that nano-technology is on the verge of profitability on many fronts. There are both short term opportunities such as building materials with altered characteristics, and long term opportunities that are currently in the realm of science fiction only.

There are some public companies investing in nano-tech right now, but the problem is they don’t offer a pure play. Sure, part of IBM’s great research team is working in nano-tech, but the company is so large that only a tiny fraction of its earnings are likely to come from nano-tech, even if their research goes well. Of the companies out there that are primarily focused on nano-tech, I haven’t been able to find any that are publicly traded. That’s where Harris & Harris comes in. Being a venture capital firm, they are investing in several of those little “pure” nano-tech companies- over 30 to date.

The Upside

There are exciting things coming out of several of the companies Harris & Harris is investing in. Molecular Imprints is already working with Motorola, Nanosys is working with Intel, and Xradia is designing and manufacturing ultra-high resolution imaging systems. The most exciting company in the Harris & Harris portfolio, though, is D-Wave a Canadian-based start-up that’s building quantum computers. That’s right. Quantum computers. Earlier this year, they provided the first-ever commercial demonstration of adiabatic quantum computing. It employed superconducting magnetic flux qubits, to solve simple sudoku puzzles. It was only a 16-qubit processor, but they plan to have a 512-qubit processor built by early next year, and a 1024-qubit processor before the end of next year. D-Wave believes that as their computers become more powerful, there will be a $9 billion market for its services. Considering the advantages quantum computing has to offer encryption, bio-informatics, and other tasks which would require exponentially more (non-quantum) computing resources as they scale up in size, $9 billion is a figure I have little difficulty believing.

The Risks

I could make a very, very long list. The main risks I see are as follows:

  1. None of the companies in Harris & Harris’s portfolio are profitable yet
  2. There are no guarantees when it comes to theoretical research
  3. Even if the research is fruitful, it may be other companies that benefit

Other Thoughts

The companies in the Harris & Harris portfolio have made a great deal of progress over the last year, but the stock price hasn’t changed much. Also I’ve noticed insider buying recently. That’s always a good thing. I’ve wanted to buy this stock for quite a while, but I just haven’t had the money to do so. Since I sold my Amgen shares that I’ve owned since way back, I was able to make this purchase without taking on more margin debt than I am comfortable with.

I bought 250 shares.

Disclaimer

Everything in this entry is true to the best of my knowledge, but I don’t make any guarantees. Don’t make your investment choices based upon mine. Only you can be responsible for your own financial decisions.

I recently found the following question and answer session between Warren Buffet and a group of MBA students on Kempton’s blog. Obviously, as a value investor, I pay close attention to what the “Oracle of Omaha” has to say. What impressed me most about this video, though, was Buffet’s personal philosophy. He’s the least materialistic billionaire the world has ever seen, and his values show through clearly in this speech. “Do what you love. Have integrity.” That’s his message.

Here’s the end of 2006 update for my portfolio. All the quotes are from the close of December 29th, 2006. As usual, I’m not posting my IRA investments.

Stocks I’ve bought since 2005:

SymbolSharesCurrent PriceCurrent ValuePurchase DateCost$ Gain% Gain
BWLD4053.202,128.0002/28/20051,500.00 628.00 41.9
BWLD 40 53.2 2,12805/05/2005 1,160.00 968 83.4
COLM 40 55.7 2,22806/30/2005 1,950.80 277.2 14.2
CTRP 100 62.37 6,23705/02/2006 4,558.00 1679.00 36.8
FHR 50 45* 2,250.0008/02/2005 1,611.50 685.5 39.62
FLML 80 29.95 2,39608/05/2005 1,500.00 896.00 59.7
MIDD40 104.674,186.802/28/20052,189.20 1,997.60 91.2
MIDD20104.67 2,093.4003/17/20051,061.79 1031.61 97.2
NTES 80 18.69 1,495.2008/08/2005 1,504.00 -8.80 -0.6
SCSS 90[1] 17.39 1,565.110/06/2005 1,103.40 461.70 41.8
SNDA 120 21.67 2,600.4012/19/2005 2,040.00 560.40 27.5
SNDA 130 21.67 2,817.1002/21/2006 2,025.50 791.60 39.1
SNDA 150 21.67 3,250.5003/01/2006 2,045.00 1,205.50 58.9
UFCS 50 35.25 1,762.5003/28/2005 1,713.00 49.50 2.9
Total$37,138$25,962$11,176+43.0

My Annualized Gain: +37.6%
SP 500: +8.1%
Wilshire 5000: +9.1%
Russel 2000: +9.8%

Sales

I haven’t sold anything at all since my last update.

Other holdings

I’ve still got my Amgen stock from way back when, a little bit of my in an index fund and my IRA investments. I carry a margin balance, so my portfolio isn’t worth the amount listed above.[2].

Looking Back

I feel vindicated about buying 盛大. I’m pretty happy with all of my holdings, and I still want to buy some 尚德电力, once I have some money.

All in all, though, this half a year was an investing failure- I didn’t add a single dollar to my savings. That’s a terrible mistake, especially at my age.

Looking Forward

Since moving back into the city to work at a start-up company, I really haven’t had any extra money to put aside. It’s really too bad, because I missed a great opportunity to finally invest in 百度 (Baidu). With how much its price has increased recently, I’m not sure if I will or not now. As my new job becomes more profitable, I’ll definitely starting saving and investing in something, though. Pretty much all of the companies I’m looking at now are the same ones I wanted to buy six months ago.

[1] Due to a 3-2 stock split, I now have 90 shares instead of 60.
[2] I carry a margin balance. That means that I’ve borrowed money to make some of my investments. The liquidation value of my account isn’t actually $37k.

Legal Disclaimer: All of the information in this article is accurate to the best of my knowledge. However, I make no guarantee about the accuracy of anything written above. I’m not responsible for any mis-typings, or any other errors in the information. If you purchase any stock solely because I did, you do so at your own risk.

Related post: Stocks 2006- Part 1
Related post: My 2005 Investments