The credit quality analysis processes and software we’ve developed were originally designed in our options business, in particular to write options premium. We continue to use them for that purpose. The returns have been excellent — well in excess of one hundred percent a year — but this is more an active business than passive investing.
Each January, we calculate the return as if the positions we took were in the underlying common stock (as opposed to the options). It probably also should be noted that we are continually, daily or weekly, tweaking the software to improve it and to improve its ease of use for clients. The graphs, for instance, were introduced to allow clients to understand the financial statement trends of companies in their portfolios at a glance. Another fairly common modification involves outliers and anomalies — companies that lose money, for instance, and that have negative shareholder equity. These skew the averages and throw the program off because it relies fairly heavily on changes in return on fixed capital and changes in debt versus equity.
Performance Update January 4, 2018
Overall performance 28% annualized. Performance by year:
- 2014: 19%
- 2015: 62%
- 2016: 20%
- 2017: 16%