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2012 In Review: Lots of Hits (And a Few Misses)

With the markets closed today, the first day of 2013, let’s take a few moments to review the Club’s portfolios, and their ups and downs for the year past.

Oxford Trading Portfolio

We finished 2012 with a total of 22 stocks in the OTP. Our average return for the year was about 14.5%.

Among the stocks we added in our 2012 editions of The Communique, our best performer has been Toyota (NYSE: TM). The shares are up more than 35%. A big chunk of the stock’s gains in recent weeks are due to something Alex predicted when he introduced the stock in our February edition: an eventual weakening of the Japanese yen.

And Club members who purchased the shares all those months ago are being well-rewarded for their patience in his recommendation.

Cerner (Nasdaq: CERN) was Alex’s recommendation for our Forecast (January) 2012 edition (it was added officially to the portfolio in mid-December after the edition was emailed to members). It’s up 24% in 2012, and 31% overall.

Seaspan (NYSE: SSW) and TJX Companies (NYSE: TJX) were added in the Communique‘s March and May editions. Both are marginally positive since being added to the Trading Portfolio. Range Resources (NYSE: RRC) was added in our June edition. It’s down roughly 2%. As Alex’s Toyota recommendation shows – if you want large gains, it pays to sit tight and have some patience.

We believe the same can be said of our other 2012 additions. Alex introduced Luxottica (NYSE: LUX) in November; the shares are up 8% since then. Yandex (Nasdaq: YNDX) and Parexel (Nasdaq: PRXL) are down 12% and 8% respectively, since being recommended in our October and December editions. Members will, from time to time, weigh in through our OC Social forums, asking what’s wrong with stocks like these. Again, often, nothing at all is “wrong” – the shares are temporarily out of favor, or off Wall Street’s radar. It usually doesn’t last for long.

Our longtime performers continued their winning ways. Out of 14 positions that remain in the OTP since being added between 2009 and 2011, ten were up by double-digit percentage amounts in 2012.

Discovery Communications (Nasdaq: DISCA) was up about 50% in 2012, representing the single biggest gainer in the OTP this year. The shares jumped 183% since being added in 2009. Other longtime performers, like Diageo (NYSE: DEO), Union Pacific (NYSE: UNP), and McKesson (NYSE: MCK) continued to outperform.

Gone But Not Forgotten

Trailing stops are a key part of the Oxford Club’s investment philosophy. With that in mind, we saw eight positions hit their stops during 2012, with the associated stocks removed from the Trading Portfolio: RealPage (Nasdaq: RP) +9%; Fortinet (Nasdaq: FTNT) -21%; Ralcorp Holdings (NYSE: RAH) +54%; Cepheid (Nasdaq: CPHD)-21%; AngloGold Ashanti (NYSE: AU) -15%; Liquidity Services (Nasdaq: LQDT) +6%; Check Point Software (Nasdaq: CHKP) +11%; Teradata (NYSE: TDC) +9%.

In the case of Cepheid and Fortinet, our trailing stops were hit only a few months after those stocks were added to the portfolio. That’s never a lot of fun to endure. But it happens. Afterward, time and capital is focused on looking for new and profitable opportunities, rather than waiting and hoping that a stock will “come back.”

All-Star Portfolio

I’d be remiss if I didn’t point out that we added two stocks to the All-Star Portfolio in 2012. Alex wrote about Biglari Holdings (NYSE: BH) in the just-issued January 2013 Forecast issue; it was added to the portfolio when we emailed that edition to members in mid-December. The shares are up about five percent. And Loews (NYSE: L), down about one to two percent right now, was recommended in the August edition of the Communique.

The two managers who head up the firms, Loews’ James Tisch and Sardar Biglari, don’t get the ink from the mainstream media that Warren Buffett does. But both invest in the same mold as the Oracle of Omaha himself, with a long-term “value plus growth” investment orientation.

Speaking of Buffett, Berkshire-Hathaway (NYSE: BRK.B) was added to the All-Star Portfolio way back in 2001. It posted a 16% return this year. David Dreman’s Contrarian Small Cap Value Fund (DRSVX), rose nearly 12%. The Templeton Emerging Markets Fund (NYSE: EMF) and Templeton Dragon Fund (NYSE: TDF), managed by international-investing maven Mark Mobius, both saw gains of eight to nine percent. Sam Zell’s Equity Residential (NYSE: EQR) lost about two percent.

Gone Fishin’ Portfolio

The Gone Fishin’ Portfolio continues to prove Alex’s point, when he put the portfolio together in 2003, that it’s possible to get market-beating returns by holding a select group of low-cost, passive mutual funds that provide coverage to a range of market conditions. Out of ten Vanguard funds in the GFP, only one lost money: the Vanguard Precious Metals and Mining Fund (VGPMX), which fell 19%. Of the other nine, six posted double-digit gains. The Vanguard Short-Term Investment-Grade Fund (VFSTX) and the firm’s Inflation Protected Securities Fund (VIPSX) were up one percent and three percent respectively.

In short, 2012 was a pretty good year for the Oxford Club’s portfolios.

Good investing,

Jeff Yastine

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