Decade of Daddy Mirror Fund Q1 report

Our Decade of Daddy Mirror Fund report for the end of Q4 2012 (see prior post “Decade of Daddy Mirror Fund Q4 report” Jan. 12-13) looks unusually prophetic for us amateurs, what with the Dow Jones up something like 11% during the first quarter of 2013:

Now that Italy can borrow money below 2% again, for the first time in more than two and a half years, I think we are well positioned to benefit in the Decade of Daddy Mirror Fund (see prior post “Decade of Daddy Mirror Fund update” Nov. 21-12).

Over the last 6 weeks, our Goldman subdebt and both Venezuelan bonds have performed like champs, as have JPM and BRK, telling me that the Euro crisis continues to fade…at least in the minds’ of investors. Most of our share positions have done well with this backdrop; something to do with a market high, perhaps?

Things just kept going up last quarter, and the Mirror Fund continues to soar and stay well ahead of our benchmark: OGE.UN:TSX (and its successor mutual fund). We are getting close to the fifth anniversary of the Decade of Daddy Fund’s IPO, in fact (aka the O’Leary Global Equity Yield Fund). Now a mutual fund called the O’Leary Global Equity Yield Fund. Although there is no longer the daily OGE quote on the TSX, the replacement Global Equity Yield mutual fund has a NAV and distributions to monitor to continue to check against our own amateur stock-picking track record.

Sadly, O’Leary’s first fund investors are still losing money, leaving aside the pain of inflation, when you net everything out on the original OGE investment; and we’re talking $40 million of real investor capital. Unlike our $40 million of Monopoly money.

Our Decade of Daddy Mirror Fund was up 6.8% to $42.7 million as of the one year mark (July 1, 2009), and is now worth $66.7 million in total, thanks to a few great stocks and bonds and the wonders of the ongoing dividend and income stream. Since inception, we are now up 67%.

During the same timeframe post-launch (which was Canada Day 2008), the Dow is up 28.1% and the S&P 500 has risen 23.1%.

In the Mirror Fund, we’re making money in Berkshire Hathaway (+13%), BCE (+33%), BMO (+10%), BNS (+16%), Bristol Myers (+83%), Constellation Software (+2%), Goldman Sachs 2037 Subdebt (+55%), Duke Energy (+36%), JP Morgan (+15%), Merck (+29%), Royal Bank (+6%), Spectra Energy (+38%), TD Bank (+12%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+38%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+43%).

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: Discovery Air 2016 8.35% Unsecured Convertible Debentures (-4%), and Thomson Reuters (-12%).

Over at OGE.UN:TSX, the trading price of the three year old KO fund (inc. 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 OGE mutual fund initially kept about $26 million of OGE’s $40 million of initial assets when it converted in March 2011 from a Closed-End fund to a mutual fund product. The current price reflects a broken structure in my mind, as the mutual fund traded from an initial $10 NAV (post conversion) down to a NAV of $8.42. As you may recall, the NAV was $8.50 last April (see prior post “Decade of Daddy Mirror Fund Q1 Report” April 8-12). It now sits around a NAV of $8.64.

Distributions on the new O’Leary mutual fund have totalled $0.9987 so far, but if you’d bought the original OGE IPO in 2008 at $12 and agreed to roll into the new mutual fund in March 2011, you’ve still lost money when you look at your current NAV plus all of the distributons since 2008; which is telling when the Dow is up 28% (plus dividends) over the same time period.

OGE mutual fund investors started out with $26 million, but as of Feb. 28, 2013, O’Leary reports that the fund’s assets have shrunk to $10.9 million. Compared to the $40 million initially raised via the OGE closed end fund IPO, it appears that most investors have figured out that the only person making money off this particular fund — the first born of the fund company’s litter — is Mr. O’Leary and the team and Stanton Asset Management.

Perhaps that’s why its called the Decade of Daddy (H/T Globe and Mail)!

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