2021 First Half Results
Vacation is over
In total for for the first 6 months of 2021, nVariant Capital achieved an average return of 14.1% across all accounts (using a monthly weighted basis to account for inflows/outflows). That was 1.1 points worse than the S&P 500, which was up 15.2% over the same period.
The good news is that weighted client returns were better, beating the S&P by nearly 3% at 19.1% total. Bad news (for me) is that means my personal accounts took the losers.*
While client funds beat the S&P by nearly 3% and annualized at nearly 42% return, it’s a little disappointing. Most of my gains was due to a heavy over-weighting of Berkshire B shares in client accounts. Berkshires first half 22% return offset lesser results in new ideas which haven’t fully flowered yet. So the success of the first half was been built on decisions made in previous years, not yet on any of the hard work put in this year. But I continue to find good new ideas and plan to continue to sell down Berkshire to redeploy into these ideas believing they will offer higher returns in the future.
* My poorer results are primarily because of my decision to use about 5% of my account to buy one year puts to bet against what I saw as a set of vastly overpriced tech stocks in February and March. I purchased none for client account as I deemed them too risky.
The problem with options is they decline in value over time unless their underlying equity price moves strongly towards the exercise price. So despite most of my target stocks declining, those declines haven’t been remotely strong enough to offset their loss in time value.
The vast majority expire in January of 2022 so there is still hope the bubble will deflate in time. The lesson so far isn’t that they were too risky for clients, it’s that they were too risky for me as well. This is my first short bet since Krispy Kreme in 2003-2004 and so far is keeping intact my perfect record of badly timing them. If these puts also expire worthless I pledge to take another decade long vacation from short ideas. So look for my personal accounts to be in another losing short bet in 2031.