2015 performance +8.42%
At the end of 2014 we viewed the coming year as a poor return environment for passive allocation as well as a poor risk adjusted return year for stocks overall. In light of this we established a portfolio with dual objectives; tactical allocation to asset classes while avoiding some asset classes altogether and 2) invest in specific stock or stock sectors we like only on corrections in the market. Although in hindsight that strategy proved to be correct a vast majority of our performance for the year was attributed to 3 factors. 1) we did not allocate or exited quickly any capital allocation to high yield, emerging markets, and oil during outsized declines. 2) our market timing on the equity market was one of the best in a very long time. As seen in the history of the blog- we went to 100% cash in july and reentered the equity market at the end of september, sidestepping the market declines and catching the majority of Octobers 8.3% move. In terms of individual stocks, we maintained our strategy of committing most of our capital to positions on significant pull backs. See a graph of our winners and losers on a relative basis.
Going into 2016 we have the same view about the poor risk adjusted return in the market and the performance of a passive allocation model. We also believe its possible to have significant drawdowns in 2016 without corresponding quick bounces of the magnitude we saw in 2015. Ie tactical and agile, even more than in 2015.