Decade of Daddy Mirror Fundâ„¢ Quarterly Report

Here I had promised Jason Kirby (at least I think it was Jason) that I’d ditch this project on the 2nd anniversary, and yet I find it impossible to euthanize the Decade of Daddy Mirror Fundâ„¢.

To be honest, the Swiss Watch-like returns are very alluring, and I continue to delight in just how easy it is to ride these excellent investment picks. Of course, when the market’s sailing higher, it isn’t hard to get excited about your picks — the trick is to check for your relative return.

The first quarter of 2011 was satisfactory. We added those two Venezuelan bonds and sold some of our BCE (see prior post “Decade of Daddy Mirror Fundâ„¢update” March 8-11). Other than that, we’ve just let the sleeping dogs lie, although they’ve had to pay us to do so. Frankly, I think I might just register that as a Trademark: Get Paid While You Sleep. Seems so much more relaxing than getting Paid While You Wait.

People can be anxious when they wait to get paid. Particularly when a 2.5% MER is pounding away, plus an expensive portfolio churn to boot. But sleeping while you get paid: who doesn’t love that? Kind of like the reverse of owning a race horse.

It will come as no surprise that we continue to beat the key indicies and our true benchmark: OGE.UN:TSX. Although it will now be much harder to figure that last part out. You see, KO has terminated the OGE Fund. Was it bad behaviour?, high churn?, poor performance?, serving as fodder for embarrasing blog posts?, the end of the income trust boondoggle?

Whatever the real reason, OGE was terminated on March 15, 2011. Gone is the daily quote, and we are left with some new Global Equity Yield mutual fund to use as our benchmark.

At last count, as of March 8th, OGE was up a grand sum of 17 basis points from the 2008 IPO (including distributions). With an additional special distribution of 20.5 cents last month, the 2.5 year OGE investor experience looks to have wound up with a gain of ~35 basis points. Sounds as though the outcome was about as predicted back in 2008 (see prior post “O’Leary Fund promises to share the wealth and wisdom” May 8-08).

Our Mirror Fund was up 6.8% to $42.7 million as of the one year mark, and is now up 28.4% to $51.4 million as of the last close. During the same timeframe post-launch (Canada Day 2008), the Dow is up 8.7% and the S&P 500 is up 5.6%.

In the Mirror Fund, we’re making money in BCE (+1.6%), BMO (+12.6%), BNS (+20.4%), Bristol Myers (+19%), Goldman Sachs 2037 Subdebt (+35%), Duke Energy (+5%), JPM (+11%), Merck (+3%), MKS (+116%), Spectra Energy (+27%), TD Bank (+13%), Thomson Reuters (+3.7%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+4%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+9%).

Since the fund began we’ve locked in our gains on BMO ($775k and $1.133MM but we are back in again), BNS ($136k but are back in again), CIBC ($242k), JP Morgan ($1MM but are back in again), Merrill Lynch ($799k), Royal Bank ($566k but are back in again) and Teranet ($307k plus distributions) as you’ve read in prior reports. We’ve also taken losses on Canadian Oilsands and Eli Lilly (see prior post “Decade of Daddy Mirror Fund™ takes its medicine” Dec 5-10). About flat when we cut back our BCE stake last month.

In the red column: Berkshire Hathaway (-9.6%) and Merck (-6%).

Over at OGE.UN:TSX, the trading price of the fund (plus distributions) trailed the S&P, Dow Jones and our little test fund during the entire experiment. Lots of waiting, but the payday just never arrived.

MRM
(disclosure: this post, like all blogs, is an Opinion Piece; we own BCE, BMO, BMY, BNS, MKX, GS sub debt, RY, SE, TD and those Venezuelan bonds in our household)