Portfolio manager’s Letter January 2008
2007 investment results: Losch Management Company‘s accounts with over $1 million showed an average gain of 19.92%. Accounts with less than $1 million gained on average 23.15%. The 2007 investment results difference comes from the fact that the larger accounts are generally managed more conservatively, and may have long term gains that make changing positions difficult. In addition, there are a few smaller accounts that engage in (gasp) short term trading (mostly in Berkshire Hathaway) and they have beaten the long term buy-hold approach for the last few years. For the year the S&P 500 was up 3.82% in price or 5.49% when you include dividends.
This means that we beat the index by somewhere between 14.4% and 17.6% for 2007 so in spite of a poor start the year turned out to be quite satisfactory. For me the best news is that this strong performance came while holding a limited number of low risk stocks and high cash levels throughout the year. Losch Management Company’s focus has been, and will continue to be on limiting risk.
As I have said before, it is more important to out-perform in a bad market that it is bull market. Losch Management Company feel that the current market correction has a ways to run, but we will be watching for fat pitches. Losch Management Company expect to add a few new positions and gradually reduce our cash, and our positions in Berkshire Hathaway over the next year or two. If Mr. Market cooperates, and compelling values do appear, I expect that our Portfolios will look quite a bit different by the end of 2009.
In addition to 2007 investment results, Longer term results are as follows:
|2 Years||3 Years||8 Years||10 Years|
|Losch Management Conservative Accounts||18.2%||12.1%||8.4%||11.8%|
|Losch Management Aggressive Accounts||18.8%||13.6%||15.4%||13.6%|
|S&P 500 With Dividends||10.3%||8.6%||2.0%||5.9%|
|Difference Conservative Accounts||+7.9%||+3.5%||+8.4%||+5.9%|
|Difference Aggressive Accounts||+8.5%||+5.0%||+13.4%||+7.7%|
Since all of Losch Management Company accounts are managed on an individual basis, there will always be some difference between the 2007 investment results and long term figures for individual accounts. These differences occur because of several factors.
There may not be specific accounts that have experienced the exact 2007 investment results shown in the above table. Still, the above classification represents a range of 2007 investment results and long term figures that does include almost all of our client accounts.