My Year in: Investing

The year of 2016 was the second full year I spent invested in securities. Rather than imitate the pros by starting to write publicly about my performance only when I got good, I decided to start right away and here’s the second edition.

Since these are personal figures, instead of revealing actual currencies I chose a more important measurement of the worth of money to me (and I suppose to most non-rich people): months of life in current regular living conditions.

Performance in securities was +30.02% for the year.

Overall savings change was +131.96% for the year.

Expressed in months of living expenses, my total savings at the end of 2015 are at about 2 to 3 months. That’s roughly -25% compared to last year. I have a two-year-old daughter and we have to pay for school among other things, so our cost of living grew immensely this year. Here’s hoping it stays at the current level next year.

It’s almost impossible to look at a savings addition of over one hundred percent and not think you did something really right. If you want to show great percentage improvements, I do recommend having close to nothing to begin with.

An investing gain of 30 percent is also in the range of the most brilliant minds in the history of investing. But the Ibovespa rose 39% this year, so my active engagement cost me 9 percentage points compared to just buying an index fund.

The year was full of activity in the portfolio, with 14 transactions total. Last year I did 3. I end this year holding none of the 4 companies I owned when it began. At the moment I own long positions in 3 companies.

I expect to hold the current companies for at the very least 3 years from purchase dates, which ranged from May to December.

One company in particular took me in a new path, and since it is now sold, I feel at ease to discuss it. Whirlpool Latin America owns 3 highly respected brands in household appliances: Brastemp, Consul and Kitchenaid. In early June I had analyzed the company and found a comfortable debt situation, even though looking back the liabilities were a bit high. Still, the company was selling at a PE10 of 5.2, and excluding the less profitable year of 2015, a market cap of about 3 times earnings for recent years. I bought in at R$2.35 per share. One day I woke up to see the price at over R$3.00. Whirlpool had issued a public offer to buy back all its shares for R$3.31. I sold out at R$3.25, a 38% return in 5 months. I believe Whirlpool’s management appraised the company at too low a valuation, the company easily being worth between R$4 and 5 per share. Later I learned that not enough shareholders agreed with the price, and management failed to take the company private.

More than any numeric result for this year, which is truly a consequence of the effort put in over previous years, the most fortunate development was that I was able to dedicate a lot more time to investment studies, perhaps 20 times as much as I did in any previous year. With the exception of banks and financial companies, which I am not able to analyze at the moment, I studied every Brazilian public company, a number approaching 300. I started a YouTube channel where I analyze companies’ financial statements, which I strongly encourage you to subscribe to, and now counts 55 episodes, all with (spoiler alert) investment ideas that end up being rejected. This dedication should bear fruit in the future.

My goal as we entered 2016 was to beat inflation. That was accomplished. From 2017 on, my benchmarks will be the Bovespa index and the major global indexes.

My Year in: Software Development

The beginning of 2016 was a little scary for me professionally. I started the year projectless, having just left a React-based project because I needed to earn more money. I had been paying a bit of a tuition for the dubious privilege of learning React. And my country was an economic disaster.

In the end everything worked out, although, as it happens, in unforeseeable ways.

I had been contacted in 2015 by a Brazilian entrepreneur about a project he had been working on. We had both done our time (pun intended) at Startup Rio, a tech hub, in 2014. Early this year, I agreed to design his product, which I did for about a month.

I had been looking around, doing some interviews and talking to people, and my friend Lucas Alves reminded me of Toptal, a development agency. I applied and passed, and soon was working on a revamp of Spacer, an interesting space rental company from Australia. The people were quite nice at Spacer, but the technical side wasn’t much fun — the platform was template-based and files could only be uploaded through a web interface.  At least it was Ruby, but it was slow going.

Over the month or so I worked on Spacer, I kept in touch about the Brazilian project and knew the entrepreneur needed help with the development as well. It was a Rails application. I hopped along with the team, and contributed with most of the frontend but also with project management and the flow of things. Think testing, task tracking and a simple but constant way of communicating, since the team was spread around 3 cities.

We soft-launched the product and I took on another project via Toptal, which is the one I’m working on at the moment. It’s in a field I have been very interested in, finance. I’m writing their Ember web client. I learned Ember from scratch for the project, and I’m still learning it. Every day I wish it was done in React. Of course I tried to convince the team to use React, given the growing user base compared to a dwindling base for Ember. They politely declined, I suppose because the main backend dev for the project is very good at Ember. Ember itself is not bad at all. Hopefully people will maintain libs in the future, many are starting to feel old without updates for months or more than a year. I ended up contributing to a few open source Ember projects along the way, which I was happy to do.

I also managed to do some work on a project of mine, Look in Tens, an Elixir/Phoenix application. I built a nice little crawler, and enjoyed the experience a lot. When it was deemed a 1.0, I stopped, at least for now, because I realized I wanted to really analyze companies, not “screen” companies for good buying opportunities. Not a software issue here, I suppose.

All along the year I studied as much Elixir as I could. I have been retyping the Elixir code base so that I can get a feel and understanding of the internals. It’s been a blast, and my respect for the Elixir core team has grown and grown — not least for simply taking a ride on Erlang. What a great idea. I ended up contributing a number of small fixes to Elixir itself, and thanks to Github’s idiosyncratic ranking system, am now contributor #35 to the language.

My only certainties as we enter 2017 are my intention to continue studying the Elixir ecosystem and to stay open to changes in the software landscape.

My Year in: Books

In 2016 I read 28 books. As always this excludes computer programming books and children’s books, of which I always read some, but I recall having read no extraordinary children’s book this year.

The topics I pursued in 2015 stayed true in 2016: psychology and investing. Biographies have always been a favorite of mine, and I read a few this year too.

The greatest book I read this year was A History of Western Philosophy by Bertrand Russell. The book is a mind-altering, soul-improving piece of work. It’s funny all through its 900 or so pages, and Russell goes all the way without really agreeing with any of the philosophers whose thoughts he addresses. A book to go back to, over and over.

The most surprising book I read this year was Vehicles: Experiments in Synthetic Psychology, by Valentino Braitenberg. This book is in Alan Kay’s reading list, and that’s where I got the tip. In it, Braitenberg introduces thought experiments comprised of very simple “vehicles”, with engines and sensors. The first experiment is very simple, featuring a vehicle with a sensor in its front triggered by, say, light, reacting by turning its engine on. It gets progressively more complex, and very soon phenomena that can be called “behavior” emerge. Think love, doubt, jealousy and other deep stuff. To me it was a very nice bridge between technology and psychology, two fields I like, and also a point of departure that’s diametrically opposed to psychologic analysis.

A very fun and sometimes sad book, filled with things I had never known, was Walt Disney: The Triumph of the American Imagination by Neal Gabler. It is an extraordinarily detailed book about Disney and his times. It shouldn’t ruin it for you to know that life was very difficult for him as an entrepreneur, and then we he “made it” it didn’t get much easier.

Finally, another book that had an impact on me was Do No Harm: Stories of Life, Death and Brain Surgery by Henry Marsh. In it, the doctor recalls his career as a brain surgeon. I read it while in bed with dengue fever, and I think my state intensified the ambivalent feelings of helplessness and the relatively miraculous capabilities of contemporary medicine. Mr. Marsh is great at telling lay people about his very technical profession, while at the same time giving his book a lot of heart.

I use to log the books I read. It’s great, I recommend it and will be glad to see you there next year.