2015 was a year in which many Value Investors seem to have struggled and underperformed the world index. One explanation for this poor performance has been put down to the fact that a handful of companies, that few Value Investors own, outperformed. These companies have become known by the acronym FANG because it consists of Facebook, Amazon, Netflix and Google.
I do not own any of the FANG companies so I am delighted to report that my DAFT portfolio managed to outperform. DAFT consisting of DCC, Amadeus Fire, Fairwood Holdings and Total Produce. These smaller companies are not technology leaders, they operate in much duller industries - an Irish headquartered oil distributer, a German recruitment agency, a Hong Kong restaurant chain and an Irish headquartered fruit distributer. These four companies are quality companies (high returns on invested capital) generating excellent free cash flow and selling for a reasonable price. At year end these four made up 19% of the portfolio and were responsible for a significant proportion of the 4% outperformance.
One new holding was added to the portfolio, a small Dutch company, and given that one of my German companies bought another one of my German companies I ended up with the same size portfolio at year end.
It is a strange coincidence that for the third year in a row I generated a return of 14%. I will eat my hat if I manage to do that again!
Finally outperformance this year means that my overall track record over the 8 years remains good (but it is still not good enough to give Warren Buffett a call looking for a job with him at Berkshire!).
|Directors:|| Kenneth Power (Managing) B.Comm, MBS, ASIP, Regular Member of the CFA Institute.