Divestor

My very unaudited portfolio performance in the first quarter of 2010 is approximately +8%, which is more than I was expecting considering the asset mix.

The performance cannot be attributed to any one factor; equity prices and corporate debt prices rose slightly in the portfolio.

This quarter has also been a record low in terms of portfolio turnover – I logged 9 trades for the quarter, at a total portfolio management expense of $71.40. As a percentage of assets held, it is well under what one would pay for a low-cost index fund.

The best trade made was scaling into Davis and Henderson when retail investors had no idea how to interpret a seemingly adverse news release. Still, it is such a minor component of my portfolio that it was inconsequential. Hindsight is 20/20 in trading.

The worst trade made was moving my TFSA into First Uranium debentures. Less than a week after doing so, they announced some very adverse news concerning the environmental assessment given to a critical component of their mine tailings operation. As a result, their bonds traded about 15% under my purchase price for a substantial period of time. Now they are trading slightly above my purchase price. The business itself is undergoing a recapitalization and when that financing is completed, there is a very high chance that the convertible debentures will be made whole, or at least trade about 15-20% higher than current prices (where I will consider a liquidation).

Currently, equity consists of about 39% of my portfolio, short term debt (maturing between December 2011 to June 30, 2012) is 27%, long term corporate debt (maturing between 2028 and 2033) is 28%, and cash is 6%. Blended together, the current yield on the portfolio is 8.1%. Excluding cash, it is 8.6%.

It is a strange feeling when I think my performance for the rest of the year will be as flat as a pancake. In theory, I should be liquidating holdings and keeping as much dry powder (cash) for the time that markets will take a dive like they did in 2008, but I don’t think that moment is coming. The decision is also made a little more difficult with tax issues and that there is a substantial amount of unrealized gains that I don’t want to be crystallizing in 2010.

My equity and debt holdings I believe are (mostly) fairly valued, but I hope the market can be irrational and take them higher in their thirst for yield. I especially believe that retail funds will be channeling more capital into the fixed income side, which will be beneficial for my portfolio as funds will be forced to blindly buy into such products.

I am struggling to find places to deploy cash, and I have not had enough time as I want to do proper research in identifying and ‘stalking’ investment candidates. I would not be surprised if the second quarter will log less than 9 trades.