Decade of Daddy Mirror Fund Q3 report

Ok, so I’ve been more than a bit negligent in my updates.

Fortunately, the portfolio that we built some years ago for our Decade of Daddy Mirror Fund has roared along this Fall, despite my lack of attention.

I’m sorry to report that Kevin O’Leary’s investors aren’t in the same happy boat, even though The Globe and Mail recently referred to him as an “investment guru” in a photo cut line. Perhaps that section’s Editor didn’t read the newspaper’s sister publication ROB Magazine, and its authoritative article headed “He’s not a billionaire, he just plays one on TV” (see prior post “Highlights of our Kevin O’Leary Blog Posts” Sept. 27-12).

Our Mirror Fund continues to outperform Kevin O’Leary’s stock picks in OGE.UN:TSX (and its successor mutual funds). We are five and a half years past the launch of the Decade of Daddy Fund’s IPO (aka the O’Leary Global Equity Yield Fund aka the O’Leary Global Dividend Fund; what was once a mutual fund called the O’Leary Global Equity Yield Fund is now the O’Leary Global Dividend Fund; which replaced the original and brutal performer called the O’Leary Global Equity Income Fund.)

The lack of a daily OGE quote on the TSX takes away a bit of the fun, but the replacement mutual fund has a NAV and distributions to monitor against our own amateur stock-picking track record.

Incredibly, O’Leary’s first fund investors are treading water, before inflation, when you net everything out on the original OGE investment; and we’re talking $40 million of real investor capital. Unlike the $40 million of Monopoly money we started with five years ago.

In the Mirror Fund, we’re making money in Berkshire Hathaway (+26%), BCE (+34%), BMO (+31%), BNS (+34%), Bristol Myers (+141%), Constellation Software (+56%), Goldman Sachs 2037 Subdebt (+60%), Duke Energy (+34%), JP Morgan (+38%), Merck (+39%), Royal Bank (+27%), Spectra Energy (+57%), TD Bank (+35%), Thomson Reuters (+9%), BOLIVARIAN REPUBLIC VENEZUELA AMORTIZING BD REG S 2022-08-23 12.7500% (+11%), and PETROLEOS DE VENEZU NOTE 2014-10-28 4.9000% (+42%).

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, Discovery Air bonds and Eli Lilly.

We hold nothing in the portfolio that’s currently in the red column.

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 $75.8 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 89.5%.

During the same timeframe post-launch (which was Canada Day 2008), the Dow is up 41.1% and the S&P 500 has risen 43.1%.

Over at OGE.UN:TSX, the trading price of the original 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. That asset figure continues to hover at a tiny $11 million, reflecting its horrific performance as the mutual fund traded from an initial $10 NAV (post conversion) down to a NAV of $8.42. It now has a NAV $9.14 for the X series.

Distributions on the replacement O’Leary mutual fund have totalled $1.19 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 have made just 25 cents when you look at your current mutual fund NAV plus all of your distributons since 2008.

Five and a half years of “investment guru” Kevin O’Leary’s prowess has generated a gain of just 2% for these original investors on their initial capital, including all of their distributions over the years; and that’s before they’ve paid any tax. The S&P 500 is up 43% over the same time period, plus dividends.

How does KO do it?

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 a few lots of those Venezuelan bonds in our household)