2012 YEAR END PERFORMANCE SUMMARY AND LOOKING AHEAD TO JANUARY
*This is a copy of my letter to investors summarizing the month of December. Portfolio December Performance: +18.45% S&P 500 December Performance: +0.71% Portfolio YTD Performance: +58.61% S&P 500 YTD Performance: +13.41% A list of every individual investment gain and loss made throughout 2012 is available by clicking here. Portfolio Highlights For December - Four months of waiting while WMIH essentially carved out a narrow, sideways trading range paid off in December as the stock finished the month with a 75% gain. As noted previously, WMIH has been the largest position in the portfolios for sometime now. A majority of the gain during December is attributable to the move up in WMIH. The best news of all (from my standpoint, at least) was that the enormous run came on no news, and volume that was well above average. I tend to have a greater trust - built up over years of observing price relative to news - of large moves in stocks that do not have a tangible fundamental component to them. The share price is often times factoring in an event that is yet to be made public or word of the positive attributes of the investment has essentially leaked and the price is no longer willing to be accommodating in nature, allowing "cheap" accumulation. I did not sell a single share of WMIH during the month. Here are the reasons: 1. Our cost basis of around .50 cents coming off of a substantial technical base presents substantial probability that the lows have been witnessed for the name. At the same time, the upside for WMIH continues to be substantial in nature. While a 75% move in a month for a stock is significant by any stretch, WMIH's risk/reward equation is not as far stretched as such a move would imply. This becomes especially true when considering our cost basis. 2. The technical structure of the move in WMIH has been nothing less than perfect. From the volume accompanying pullbacks. To the price and volume action during consolidations. All the way up to the manner in which it creates gains. All of these moves have been textbook in their consistency and favorable nature. 3. Consider this: WMIH has a float of some 185 million (my average investments usually have between 10 to 50 million share floats) shares. Yet, on an average day recently, it has taken no more than 500,000 to 1 million share trading days to cause the stock to put together up days in the 5 to 15 percent range. This tells of a company that is extremely tightly held. We know, for example, that WMIH majority...