Decade of Daddy Mirror Fundâ„¢ Q4 Report

Happy Days, indeed.

The cash balance continues to grow as our dividends and interest payments pile up, but things are on autopilot otherwise at the Decade of Daddy Mirror Fundâ„¢. I’d almost say that we are getting paid to wait. BCE (BCE:TSX) and Bristol Myers (BMY:NYSE) have proven to be rock stars in a difficult market, and Spectra Energy (SE:NYSE) has been a champ as well — even before the dividend increase a few weeks ago. Our two Venezuelan bonds are back up nicely as the global financial crisis appears to be fading.

It is almost getting to be sans news, but we continue to beat the key indicies and our true benchmark: OGE.UN:TSX, which is now a mutual fund called the O’Leary Global Equity Yield Fund. I had initially feared that it was going to be impossible to figure out how exactly the OGE investor is doing as compared to our own Mirror Fund, once our man KO terminated the original OGE Fund last May.

We don’t have the daily OGE quote on the TSX anymore, but the new Global Equity Yield mutual fund has a NAV and distributions to monitor; so we can continue to track our true benchmark and see how things stack up against the greatest Canadian mutual fund asset gatherer of this Century.

Our Decade of Daddy Mirror Fundâ„¢ was up 6.8% to $42.7 million as of the one year mark (July 1, 2009), and 32.6% to $53 million as of Canada Day 2011 (the 3rd anniversary). We are up again over the past six months, to $55.959 million in total, thanks to a few great stocks and the ongoing dividend and income stream. Since inception, we are up 39.9%.

During the same timeframe post-launch (which was Canada Day 2008), the Dow is up 7.3% and the S&P 500 is off 0.3%.

In the Mirror Fund, we’re making money in BCE (+23%), BNS (+3%), Bristol Myers (+59%), Goldman Sachs 2037 Subdebt (+33%), Duke Energy (+27%), Merck (+7%), Spectra Energy (+42%), TD Bank (+17%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+9%), Discovery Air 2016 8.35% Unsecured Convertible Debentures (+0%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+16%).

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 plus dividends), JP Morgan ($1MM but are back in again), Merrill Lynch ($799k), MKS ($3.19MM plus dividends), Royal Bank ($566k but are back in again) and Teranet ($307k plus distributions) as you’ve read in prior reports. We’ve also realized losses on Canadian Oilsands and Eli Lilly.

In the red column: Berkshire Hathaway (-17%), BMO (-1%), JPM (-20%), Royal Bank (-8%), and Thomson Reuters (-26%).

Over at OGE.UN:TSX, the trading price of the three year old KO fund (plus distributions) trailed the S&P, Dow Jones and our little test fund during the entire experiment, ending at a NAV of $10.13 plus distributions of $1.92 as compared to a $12 IPO price. The mutual fund initially kept about $26 million of OGE’s assets, and has since traded from an initial $10 NAV down to a NAV of $7.94 over the past nine months or so. Distributions on the new mutual fund have totalled $0.33 so far, but if you’d bought the original OGE IPO in 2008 at $12 and agreed to roll into the new mutual fund last March, you’ve lost money; which is telling when the Dow and S&P have held their own during difficult times. OGE mutual fund investors redeemed $5 million in the April-June timeframe, leaving just $20 million or so under management in this particular fund as of June 30th. A far cry from the $40 million OGE IPO that kicked off KO’s first ever public investment vehicle.

Not that any of this matters, of course. Mr. O’Leary and his worthy team have accumulated $1.9 billion of assets since the summer of 2008, despite the colourful experience it has been for all involved (see representative posts “O’Leary: ‘We have never dipped into the principal’” June 7-11, “Even Shark Tankers are confused” Feb 11-10, and “Money manager churn alert!” Sept 8-09).

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