Portfolio manager’s Letter January 2006
2005 Investment year results: this year was a pretty dull year for Losch Management Company’s accounts and the market as a whole. With the composite of company’s accounts up 2.18% for the year, we fell in between the Dow which was down 0.61% in 2005 and the S&P 500 which was up 3.0%.
Our 2005 investment year results were accomplished while maintaining a very low level of risk. This was possible with the company’s long positions in Berkshire Hathaway hedged with the two Rydex short funds and a high cash level. As long as Losch Management Company can stay close to market performance in a flat market, we can maintain a lot of downside protection.
The current bull market is now over three years old, and is getting very long of tooth. The last secular bear market (1966 – 1982) contained no bull market that lasted more than two years. That does not mean that we cannot have another year like the last, but, for now, we will continue our defensive posture. Most of the strategies that outperformed with 2005 investment year results did so by accepting many risks. Chasing performance in a high-risk market is just not our thing.
Some of the bulls claim that the secular bear market is over, but we remain unconvinced. We prefer to wait a while and see how the slow down in real estate plays out, or perhaps more important, to see if inflation starts to reemerge.
A list of Bill Gates’ purchases since September 20
|Total September: 360|
|Total December-January: 390|
That comes to 750 “A” Shares so far, or about $66 million at the current market. I doubt that you will find many other insider purchases this large in that period.
The patterns are interesting. Even though the amounts seem small, they represent a significant portion of the volume for the day. For instance, on Dec 23 when he bought 30 shares and the total volume for the day was 100 shares. It appears that he is buying about as much as he can at any one time without running the stock.
He has purchased no “B” shares, even though these are more liquid and he could purchase larger dollar amounts without moving the market. This would indicate that voting rights are important to him. It is not clear to me why this would be so, and may indicate that his goal is to own more than the 4,030 shares he now holds. Why would voting rights be important if you only hold 0.31% of the 1,268,783 voting shares?
The purchases in September were at lower prices ($82,500 to $83,700) so price may not be his only consideration. He may be more interested in Berkshire Hathaway’s 2005 Investment year results.