Model Portfolio Performance 1/18/2021, Member Compliments, & Understanding The Bigger Picture

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Contrarian, Deep Value, Long/Short Equity, Portfolio Strategy

Contributor Since 2013

Founder of "The Contrarian", a premium research service, featuring a committed, collegial group that has uncovered a number of hidden gems, hidden in plain sight.  Immensely proud of what our members have accomplished.  Actively investing since 1995, I have soared like an eagle, and been unmercifully humbled by the markets. Achieved positive returns in 2008, and turned an account with $60,310 on 1/1/2009 into an account with $3,177,937 on 11/30/2009. My best years have been 1995-2003, 2008-2012, 2016, 2020, & 2021. My worst years were 2013-2015 & 2017-2019. I believe inflation is coming, and we are at an inflection point in the markets.


Twenty plus year career as an investment analyst, investor, portfolio manager, consultant, and writer. Founder of Koldus Contrarian Investments, Ltd, which was incorporated in the spring of 2009. Dyed in the wool contrarian investor, who has learned, the hard way, that a good contrarian is only contrarian 20% of the time, but being right at key inflection points is the key to meaningful wealth creation in the markets. I believe we are near a meaningful inflection point, perhaps the biggest one yet, for the third time in the past 15 years.


Historically, I have had huge wins and impressive losses based on a concentrated, contrarian strategy. Trying to keep the good while filtering out the bad.

Seeking to run an all weather portfolio with minimal volatility and index overlays to capture my strategic and tactical recommendations along with a concentrated best ideas portfolio, which is my bread and butter, but the volatility only makes it suitable for a small piece of an investor's overall portfolio. The following are a couple of my favorite investment quotes.


"Life and investing are long ballgames." Julian Robertson

"A diamond is a chunk of coal that is made good under pressure."

Henry Kissinger

"Knowledge is limited. Imagination encircles the world." Albert Einstein

I’ve been on top of the world, and the world has been on top of me. I have learned to enjoy the perspective from each view, and use opportunities to persistently acquire knowledge, and enjoy the company of those around me, especially loved ones, family, and friends.

At heart, I am a market historian with an unrivaled passion for the capital markets. I have had a long history and specialization with concentrated positions and options trading. Made money in 2008 with a net long portfolio, deploying capital in some of the market's darkest hours into long positions including purchases of American Express, Atlas Energy, Crosstex, First Industrial Real Estate, General Growth Properties, Genworth, Macquarie Infrastructure, Ruth Chris Steakhouse, and Vornado near their lows. Shorting, hedging, and option strategies also helped me in 2007 and 2009, and these are skills that I have developed ever since I started trading heavily in 1996.I enjoy reading, accumulating knowledge, and putting this knowledge to work in the active capital markets, learning lessons along the way.To this day, I continue to learn, and some of these learning lessons have been excruciatingly difficult ones, especially over the past several years, as I made mistakes allocating capital, including a sizable portion of my own capital (I always invest alongside my clients), to commodity related stocks. While all commodity related stocks have struggled since April of 2011, coal companies, which attracted me due to their extremely cheap valuations, and out-of-favor status (I am a strong believer in behavioral finance alongside fundamentals and technicals) have been the worst investing mistake of my career. The focus on the commodity arena has been the biggest mistake of my investment career thus far, yet in its aftermath, I see tremendous opportunity, even larger in scope than the fortuitous 2008/2009 environment.The capital that I accumulated and the confidence gained in navigating the treacherous investment waters of 2008 gave me the confidence to launch my own investment firm in the spring of 2009, right before the ultimate lows in the stock market. At the time I was working as a senior analyst at one of the largest RIA's in the country, and I felt strongly that the market environment was the best time since 1974/1975 to start an investment firm.

Prior to starting my firm, I was a senior analyst for three different firms over approximately 10 years (Charles Schwab, Redwood, Oxford), moving up in responsibility and scope at each stop along my journey. Since I was a paperboy, I have always had an interest in the investment markets. I love researching and finding opportunities. I was a Chartered Financial Analyst, CFA from 2006-2018. Additionally, I have been a Chartered Alternative Investment Analyst, CAIA. After starting in the teaching program at Ball State University, I switched to a career in finance when I turned a small student loan into a substantial amount of capital. I graduated summa cum laude with a degree in finance from Ball State.


Full disclosure, I am not currently a registered investment advisor, though I did serve in this capacity from 2009-2014, while owning Koldus Contrarian Investments, Ltd. Additionally, I held various securities licenses from 2000-2014 without a single formal complaint filed. At the end of 2014, I voluntarily let my state registration expire, as I transitioned the business to a different structure after going through a brutal business environment, divestiture and difficult divorce and custody battle. Prior to this, I had passed, and held, various securities exams and licenses, including the Series 7, Series 63, and Series 65 exams, in addition to others, alongside the CFA and CAIA designations. Unfortunately, I did not file the proper paperwork to withdraw my state registration, and I did not disclose a personal arrangement, and subsequent civil case, between myself and a former close personal friend and client. This arrangement was initiated informally in 2011, after a substantial period of success, as we aimed to be business partners, and it ultimately resulted in a dispute. I was unaware that I was required to disclose these items, and my securities attorney, at the time, did not advise me to do so. Previously, I had managed a portfolio for this gentleman, and we had taken an investment of approximately $7 million in 2009, and grown it to over $25 million at the beginning of 2012. After a very difficult year of performance, an employee of the firm I owned, and friend, resigned in early 2013, and took the aforementioned client to a competing firm. As a result of not filing the proper paperwork, I agreed to a settlement, with a potential $2500 fine in the future, depending on if I choose to reapply to be a non-exempt advisor. Additionally, while going through the difficult divorce and business dispute and divestiture, I did not file the proper disclosure on two of the annual CFA renewals. As a result, the CFA Institute sought a 3-Year Suspension of my right to use the CFA designation, which I appealed, since the primary investigator in the case sought a 1-year suspension of my right to use the CFA designation for a majority of the investigation. A Hearing Panel heard the case, and went against the recommendation of the CFA's Institute's Professional Conduct Department. Long story short, be careful who you trust, especially when substantial money is involved, and always disclose everything properly, which is hard to do when you are going through difficult situations, as this is the last thing you are probably thinking of at the time. In closing, I have had more experience in the markets, business, and life than most, yet I am grateful & thankful for every day. Additionally, I have learned through success and failures that you have to move forward, and if you can do this, your life will form a rich tapestry of stories.

Summary

  • 2021 YTD Model Portfolio performance has been exceptional, with the Bet-The-Farm-Model Portfolio up 69.1% YTD in 2021 (a lucky start) and the Best Ideas Model Portfolio up 22.8% YTD.
  • This follows a tremendous 2020 year of performance for Model Portfolios, with the Bet-The-Farm-Model-Portfolio up 161.1% and the Best Ideas Model Portfolio up 51.1% in 2020.
  • Performance since the model portfolios inception has been very good too, including for the newest model Portfolio launched in August of 2020, Uncle Tony's Model Portfolio.
  • The road has not always been an easy one, and a high pain tolerance was required to reap the rewards of the outperformance for many of our members.
  • The lesson here is that the bigger picture needs to be understood, all the detailed portfolio models do not necessarily help if you cannot stay the course, and patience is required.

"On the day that I die,I wanna say that I,Was a man who really lived/loved and never compromised."

-Zac Brown Band

Introduction

First, I want to say thank you for the folks along this journey, which has not been an easy one.  Second, last week, for the week ending 1/15/2021, we saw another banner week for our targeted equity positions and our model portfolios.

Range Resources (RRC), which I wrote about in this January of 2020 public article, where shares have risen 123.7% since this articles publication versus a gain of 15.8% in the SPDR S&P 500 Index ETF (SPY), saw its shares gain 35.6% for the week. EQT Corp. (EQT) shares, which I wrote about in March of 2020, "EQT Corp. Surges As The Bearish Natural Gas Thesis Is Dead", rose 27.4% for the week.  Southwestern Energy (SWN), which I publicly advocated as a stock of the next decade in July of 2019 (do not laugh too much, as SWN shares are up 63.6% in that article versus a gain of 26.5% in SPY), saw its shares rise 25.3%. Antero Resources (AR), which I cover prominently in our dream scenario member articles and in a series of private and public research, including this recent article, saw its shares gain 21.4%. CNX Resources (CNX) shares rose 14.3%, and even Cabot Oil & Gas (COG) shares were higher by 10.4%.

There were many other equities that contributed to the positive model portfolio performance during the week.  This included Equitrans Midstream (ETRN), whose shares were higher by 12.2% last week, Occidental Petroleum (OXY), whose shares rose 11.5% last week, Brighthouse Financial (BHF), which gained 9.3% for the week, Kinder Morgan (KMI), whose shares gained 6.9% last week, Williams Companies (WMB), whose shares rose 5.6% last week, Antero Midstream (AM), whose shares gained 5.2% last week, RH Corp (RH) whose shares rose 4.7% last week, and whose shares are up 1576% since we purchased them in October of 2016, Nutrien (NTR), whose shares gained 4.4% last week, and Micron Technology (MU), whose shares gained 4.3% last week, and whose shares are up 458% since our December 9th, 2015 purchase.  

This is just a few of the equities highlighted that we cover, and who contributed to the positive performance.  There were down weeks two, for stocks like Cleveland-Cliffs (CLF), and U.S. Steel (X), which have both been cumulative big winners in our portfolios, yet whose shares fell back by 8.7%, and 6.3% last week.

In summary, a historical capital rotation is in full bloom, something I have outlined privately, and publicly.

Understanding the bigger picture, then having the understanding of the bottom-up fundamentals (link to an important member article) has been the key, and it has not been easy, yet that is where the historic opportunity has been, and that is where it still stands, from my perspective.

Model Portfolio Performance

Bet The Farm Model Portfolio

  • 2021 - Up 69.1% YTD
  • 2020 - Up 161.1%

Best Ideas Model Portfolio

  • 2021 - Up 22.8% YTD
  • 2020 - Up 51.1%

Stuck On Yield Model Portfolio

  • 2021 - Up 11.5% YTD
  • 2020 - Down 6.0%

Contrarian Long/Short All Weather Model Portfolio

  • 2021 - Up 19.3% YTD
  • 2020 - Up 13.3% 

Uncle Tony's Model Portfolio (launched August 21st, 2020 for a family friend with $650k looking at retirement)

  • 2021 - Up 16.2% YTD
  • 2020 - Up 12.4%

For perspective, the SPDR S&P 500 ETF is higher by 0.5% YTD in 2021, and finished higher by 18.3% in 2020.  For additional perspective, it has not always been rosy, particularly from 2017-2019, yet perseverance and understanding the bigger picture, along with bottom-up fundamentals has led to extremely strong relative and absolute performance since the inception of the model portfolios with the Bet The Farm & The Best Ideas Portfolios dating back to December 7th, 2015.

Member & Future Member Compliments

The success of others has been extremely gratifying to watch happen in real time, with a lot of naysayers drifting aside, yet still a fair amount of skepticism and criticism remaining.

Beconan Premium Comments2

@KCI Research Ltd.

I want to thank you for your timely article on 2/19/2020 Antero Resources is A Generational Buy. Your article helped me reached a conclusion that AR would not file for BK. Soon after studying your article carefully, I started betting my farm ( funds from all my IRA accounts) on AR. 1/3 @1.83, 1/3 @1.40 and 1/3 @1.30. I accumulated about 500,000 shares of AR. Then AR fell to all time low of 0.67. A thought of cutting loss flashed in my mind. I overcame the fear eventually and stayed all the way up to now. Lately I ask myself where should I get off the moving train. Most target price mentioned is $17, some say $26, a new number mentioned is $50. I am going to try to get to $35 which is about 1/2 of all time high. I do not know if we can get there or not. I worked for McDermott for a year in 2002, a thousand dollar company matched stock in my 401K account grew to over $30,000 as company stock went from single digit to over $100 in a few years. That personal experience also helped me to decide to bet the farm.

You helped me and my wife to be able to retire comfortably and help my children go to Universities. Thank you so much. I will be your The Contrarian subscriber soon.

- Posted January 13, 2021

myk3077 Premium Marketplace Comments96 

@ KCI research... I have been a member of your investing service for a couple of years. I want to share with everyone that Travis' research going all the way back to 2018 is unbelievably outstanding. My knowledge has grown 5 fold in the space just from pouring over his previously published members only articles. The valuation work and detailed analysis of individual basin characteristics is second to none and to be honest.. is better than many professional energy consulting firms research reports i have read over this time. Simply put... Travis will probably be the single largest reason why i am able to retire early... His service is invaluable..and it doesn't matter if you disagree with his research.. just having it to offset/make better investment decisions is the idea. There is nobody better at his size in the industry... The fact that unaccredited investors have access to him is truly unbelievable.

- Posted January 13th, 2021

And I want to thank you for the research, without which I wouldn't have the conviction to concentrate my portfolio. It is up more than 200% this year. Very likely I will be able to retire in the coming year.

Member compliment received December 15th, 2020.

I have accumulated over 96K shares from MAR 10th until 2 weeks ago (in Antero Resources shares). My average price is $1.67 (the stock was trading recently around $5 per share). KCI research is the reason for this... Its about the thoroughness of research that led me to have the conviction to jump in.. I simply added his analysis coupled with understanding the ramifications of the oil price war and Covid on the Energy Sector. I wrote this to thank KCI for his insight, research and investing service which is outstanding.

Member compliment posted here on December 8th, 2020.

Before 2020, I thought it would have been crazy to pay over $1,000 for a subscription. Yet after reading one of Travis' articles and a 2-week trial, I realized that the value offered here, vs other services, is substantially greater. I initially subscribed to The Contrarian for knowledge and if I made money, then great; I've become a better investor due to this close-knit group and the return potential has been far more extraordinary than I imagined coming into this year. The crazy thing is that things are just getting started, as financial markets are at relative extremes, rarely reached historically, according to The Contrarian's analysis. Travis is not your typical go-with-the-flow investor, hence the group name, The Contrarian. The group focuses on the most undervalued sectors of the market that have outstanding growth opportunities and while our gains have been extraordinary this year, I am still in awe of the enormous future return potential. Here, you will find many highly competent investors contributing towards a variety of topics that will leave you learning something new every day. If you are looking for an author who is competent, respectful, formally educated, and thinks outside the box, then give The Contrarian a try – I’m glad I did, and my portfolio is happy too.

Member compliment posted as part of a formal review on August 27th, 2020

Thanks for your input Travis. I must say you do have a very pragmatic and calming way of framing things and make some really good points. I don’t think I have ever come across anyone with so good hand holding skills regarding stock investments.

Member compliment posted on August 22nd, 2020.

I completely agree that Travis' style is calming, professional, poised and (positively) unique. It's Travis' style and professionalism (especially responding to rude responses in public articles) that really distinguished him (besides good research and a shared contrarian view) and attracted me to The Contrarian.

Travis enables counterpoints to be shared and, as he's done here, actually encourages it. Iron sharpens iron and an echo chamber is dangerous. Many of us have very (probably irresponsibly) high portfolio percentages allocated to our favored names so I think it's important for us to continue enabling these questions and this dialogue.

Member compliment also posted on August 22nd, 2020.

I think of you as the Wayne Gretzky of analysts. A couple things I remember you saying that have happened - PM's would lead the way higher for commodities in general, then E&P stocks would lead the way up before the underlying. We're starting to see some strength in natural gas here recently. Things are looking pretty darn good to me.

Member compliment received on August 11th, 2020, and as a sports fan for most of my life, I appreciated the context.

The investment commentary is first rate. Also, Travis has expert knowledge of the natural gas industry and specific high potential stock picks in this area. (Lots more besides.) All this builds confidence in his stock picks. Another real plus is the member chat area, which is full of really excellent ideas, observations, forecasts, etc. Am grateful to the lords of investments for allowing me to discover The Contrarian.

Member compliment was received on August 8th, 2020, and this was also posted as a formal review.

I’ve been a subscriber to KCI’s research service and all I can say is that I wish I had done so sooner. Definitely the best of the 4-5 I’ve tried so far.

Member compliment was posted on August 7th, 2020.

Having spent my career as a market research analyst, being surrounded by competent analysts, I observed what we might call the “analyst fallacy”. Indeed, I subscribed to The Contrarian despite a high price compared to other Seeking Alpha subscriptions, because it is explicitly anti-herd or orthogonal to the herd. Indeed, the more I study it, the more I find The Contrarian subscription price to be a relative bargain.

Member compliment posted in a series on July 30th, 2020.

As I like to say, the feedback, positive and negative, indicates that I am headed in the right direction with The Contrarian.

Closing Thoughts - Perspective & Perseverance Are Needed

All the detailed spreadsheet models in the world are not a substitute for understanding the bigger picture and being able to look forwards instead of looking backwards.  Ideally, getting the "macro" and "micro" right is what you want, however, this is hard to do in practicality, and there are going to be unexpected twists and bumps along the way.  Said another way, investing is a full contact sport, and you have to be prepared for the mental and physical capital challenges if you want to materially outperform.

Ironically, right now, the best thing most traditional investors could do, meaning those that focus in traditional stocks, bonds, real estate, etc. is to take a vacation for the next seven years.  I will be expounding on this topic more shortly.  Alternatively, investors who want to stay in the game should consider non-correlated and alternative asset classes.

For now, I am going to close with the same refrain I have been hammering in with these blog posts.

Many investors operating in the commodity equity arena have had to run a long/short portfolio to simply survive the past seven years, however, the irony today, is that the most operationally leveraged companies, which are generally the short positions in these aforementioned long/short portfolios, have the most upside return potential at historical inflection points.

We are seeing that right now, and two specific public examples that I have highlighted include U.S. Steel (X), which I wrote about here, and Occidental Petroleum (OXY), which I wrote about in this public article. If those two are too high octane for you to look at as a investor, consider Wells Fargo (WFC), which has some of the same out-of-favor characteristics, as I detailed in this recent article.

In summary, investors chase performance, that is just part of human nature, and many investors are chasing performance in the hottest sectors today, including the technology sector, even though energy equities (XOP), (XLE) at a broad lever are outperforming technology equities (XLK) over the past two months by a substantial margin. Having said that, market participants will generally not consider the out-of-favor equities today, even acknowledged industry leaders, until they have a long-run of outperformance.

I witnessed this first hand with Realty Income (O), which I have written about this year here, in late 1999 and early 2000, trying to sell this position as part of a portfolio in my role at Charles Schwab (SCHW) and Chicago Equity Analytics, yet very few investors would even consider it. This was the case, even though Realty Income shares had roughly a 10% dividend yield back then, and most investors have it as core holding today, with a dividend yield that is less than half what it was, and a narrowing growth runway after a twenty-year good run of strong performance.

I also witnessed the same thing when I was buying out-of-favor REITs, specifically General Growth Properties, and First Industrial Real Estate (FR) in late 2008 and early 2009, which I chronicled in this article that I published on February 27th, 2020.

Use Panic Selling To Your Advantage - Highlighting A 14% Yielding Model Portfolio - KCI Research Ltd.

The key to build real wealth, IMO, is to own concentrated positions, ideally buying into panic selling, in the best outperforming companies of the next 20 years, not the best performing positions of the past twenty years.

We have been able to do this real time at The Contrarian.

$50 Million Plus In Profits On One Stock - KCI Research Ltd.

For help in that endeavor to outperform, consider a membership to one of my research services. On that note, I am continuing to offer a 20% discount to membership (I am extending this through January due to popular demand and my desire to help the greatest number of investors and then pricing will return to the normal levels) to "The Contrarian" (past members can also direct message me for a special rate). Remember, this compliment when it comes to pricing.

Indeed, I subscribed to The Contrarian despite a high price compared to other Seeking Alpha subscriptions, because it is explicitly anti-herd or orthogonal to the herd. Indeed, the more I study it, the more I find The Contrarian subscription price to be a relative bargain.

And this one on pricing too.

Before 2020, I thought it would have been crazy to pay over $1,000 for a subscription. Yet after reading one of Travis' articles and a 2-week trial, I realized that the value offered here, vs other services, is substantially greater.

Additionally, I am once again offering a limited time 30% discount for the first 10 new members (I expect these slots, some of which I view as a stepping stone to "The Contrarian", to fill up fast as they have done previously) to a host of research options, including a lower price point. If you subscribe to a premium option, I will set-aside time for a personal phone call to get up to speed. To get these offers, go here, and enter coupon code "january" without the quotes.

Reach out with any questions via direct message.

Via my research services, or another avenue, please do your due diligence, and take advantage of what I believe is a historic inflection point, which I believe will supersede 2000-2002, and 2000-2007, in the growth-to-value rotation.

Best of luck to all,

Travis

P.S. Resilience is perhaps the most important ingredient to be successful in life, and in the markets. Keep that in mind right now.

Disclosure: I am/we are long AM, aR, BHF, CLF, CNX, COG, EQT, ETRN, MU, NTR, OXY, RH, RRC, sWN, WFC, X, and short spy in a long/short portfolio.

Additional disclosure: Every investor's situation is different. Positions can change at any time without warning. Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication and are subject to change without notice.

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