Decade of Daddy Mirror Fund Annual Report #4

Things are so busy at my real job that I’ve not had a moment to update you all on the status of the Decade of Daddy Mirror Fund as at the end of June (4 years in operation now). A 6 week delay! Gravest of apologies.

Although I’ve gone to 20% cash personally (as Kim Parlee and I discussed on BNN a few weeks ago), I’ve stuck with the Mirror Fund’s investments on the basis that it’s too much trouble to trade it constantly, and we’ve been sitting at about 10% cash for the longest time now — which is kind of like going from being fully invested a year ago to being 20% in cash today, right?

The delightful news is that the sleepy Mirror Fund continues 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. As has been mentioned in the past, there’s no daily OGE Unit quote on the TSX anymore, but the replacement Global Equity Yield mutual fund has a NAV and distributions to monitor, but it still isn’t keeping up with our modest fund offering. That said, Kevin O’Leary may be one of the greatest Canadian mutual fund asset gatherers of this Century.

Our Decade of Daddy Mirror Fund was up 6.8% to $42.7 million as of the one year mark (July 1, 2009), and was worth $58.397 million in total as at the end of year four (June 30, 2012), thanks to a a stable group of dividend paying stocks and the income stream of our high yielding bonds. Since inception, we are up 46% all-in.

During the same timeframe post-launch (which was Canada Day 2008), the Dow is up 13.2% and the S&P 500 has risen 7.3% (I can’t easily track the impact of dividend reinvestment there).

In the Mirror Fund, we’re making money (as of today’s date) in BCE (+29%), BMO (+1%), BNS (+6%), Bristol Myers (+44%), Goldman Sachs 2037 Subdebt (+34%), Duke Energy (+26%), Merck (+26%), Spectra Energy (+36%), TD Bank (+22%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+16%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+27%).

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 (as of today): Berkshire Hathaway (-8%), Discovery Air 2016 8.35% Unsecured Convertible Debentures (-1%), JPM (-11%), RBC (-6%) and Thomson Reuters (-19%).

Over at OGE.UN:TSX, the trading price of the three year KO fund (inc. distributions) trailed the S&P, Dow Jones and our 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 original $40 million of IPO assets when it converted from a Trust, and has since traded from an initial $10 NAV down to a NAV of $8.30 since its March 23, 2011 start date.

Distributions on the converted mutual fund have totalled $0.60 so far, but if you’d bought the original OGE IPO in 2008 and agreed to roll into the new mutual fund last March, you’ve lost about 12% over 16 months (inc. distributions); which is noteworthy when the Dow is up 11% over the same 16 month period. According to the July 2012 O’Leary Global Equity Yield Fund investor monthly report, total fund assets are now down to $12.6 million.

But our reliable, if slapdash, Fund continues to chug along; if only I’d given KO the Mirror Fund’s utterly simplistic stock picks before he went a different direction. He might have saved his investors some pain, and they wouldn’t need to be so patient while they wait for the brighter days.

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)