Happy new year and welcome to the performance report!   

By most accounts, 2020 was a disaster.  COVID.  Insane US and Global politics.  Economic Meltdown.  Governments scrambling to play catch up to limit the human and financial carnage.  The costs of 2020 are immense, not yet understood and they are still ongoing.   The impacts on politics, economics, health care, human rights, globalization, technology – will be broad, deep and lasting.   

And this is the year the DTM5 Strategy was launched!  

I’ve always been a fan of watching how public companies time their stock issuance.   The ‘smart’ ones go to market at the highest price possible so as to raise money at the best terms with the lowest dilution to existing shareholders.   The implied trade off is that new investors are more likely paying a premium to the companies value. This is particularly true with closely held companies where the controlling shareholder is taking advantage of market conditions to get liquid.  

Conversely, there are public companies who go to market when things look horrible – And raise capital at a fair price, in a depressed market – And consequently post great returns when their underlying market / industry / sector recovers.  

Both strategies are common in the asset management industry.   Raising capital at a market peak is easier as investors, being investors, want to load into ‘hot’ investments.    But I admire the other way.   Deploying capital at the bottom of a cycle (or beginning) and having wind at my back.

As examples, I give you two excellent Canadian Asset Management Firms, who have provided long term investors with two different experiences (from a share price perspective)

Cymbria Corp. is an investment management company that IPO’d on Nov 7, 2008, to raise money for investing in the markets as well as to finance their privately held company ‘Edgepoint’.    Talk about timing.   A smart team, destined to do a good job for their clients irrespective of timing, went public in the middle of the global financial crisis.    Needless to say their asset performance numbers (in edgepoint) and stock price  performance were excellent coming out of the crisis, and this gave them amazing ‘wind at their back’ to grow their business.  The stock price has gone up almost 15% per year since issuance, from $10 to $52  If you bought Cymbria stock and held it you’d be a satisfied investor.

Sprott Inc. went public in the spring of 2008 when, as a result of the financial crisis, gold and precious metals were on a tear.  And that is the point Eric Sprott decided to take money off the table.  If you would have taken his shares from him at the $10 (CAD) price he got, you’d still be very unhappy a dozen years later (as the stock trades at below $4 currently on a pre consolidation basis).   Now, Sprott Inc is a great company.  I’ve owned and profited from their stock in the past.  And Eric is a genius of investing.   But HIS timing, of cashing out, was brilliant.  But to buy the stock from him….Not so much.  

When I launched the DTM5 strategy in May of 2020 I suspected it was good timing, because of the long term potential of the sectors it is initially targeting (Crypto & gold / PM).   I also was aware that these sectors had been ‘hot’, but interestingly not hot enough…..considering the state of the world little attention (relatively) was being paid to these sectors despite, in my opinion, the massive opportunity presenting itself.

I’m rambling here to make a point.  Timing is very important.  If you are a bread and butter investor, you’ve been told countless times that ‘timing the market’ doesn’t work.   And perhaps for an average investor, it doesn’t.  But timing matters.  It is critical.  It determines the rise and fall of fortunes, it is the proverbial missed boat or seized opportunity.   It is the wind at your back or in your face.   It is part of the success or failure of any venture or enterprise.   Of your whole life.

As Musashi said…..

Lets examine the performance of the DTM5 Strategy and dive a little deeper into how timing has helped and potentially hindered our progress so far (remember the proverb – good luck, bad luck, who can tell?)

At this point I think it makes the most sense to share 3 rates of return – Simple, time weighted, and money weighted.  I only have time weighted and money weighted for 6 months at this point.  Performance numbers are provided by DTM5’s brokerage firm.  

The strategy started on May 15, 2020.   It has been running 7.5 months.  It is a dollar cost averaging strategy with roughly equal deposits occurring on a weekly basis.   

DTM5 Performance – As of Dec 31, 2020

Rate of return since inception (7.5 month)	173.90%
Time weighted rate of return (6 month)	271.00%
Money weighted rate of return (6 month)	340.42%

Now these are pretty dramatic numbers…..the time weighted and money weighted are skewed by the recent super dramatic performance of the DTM5 (basically the month of December, which accounted for approx 50% of the performance)  So take those with a grain of salt for now.  Timing has given this a HUGE lift.  And timing can work the other way.  

BUT – 173.93% growth on capital that was being dollar cost averaged over 7.5 months (the implication here is all the capital was not working right out of the gate – only a little at a time – which explains the crazy time and money weighted rates).   Wowsa.   Talk about a start!

When we get a 12 month period under our belt, and beyond,  I suspect we’ll start to see numbers that look a little (or a lot) less spectacular.  The impact of ongoing investment and – at some point – investments cooling off will see to that.  But wow what a Launch!   And, lets not forget, this is a bear hunting strategy.  If I don’t at least occasionally see something spectacular looking in the performance numbers, Its not working.  

So was the timing good or bad?  Well, at this point, who can tell?  Looks great.  I’m happy with the start, but as I mentioned in a previous post I really want to build positions as inexpensively as possible for a reasonable period of time before my thesis’s start playing out.  I only have about 6% of the capital I’m going to deploy in the strategy so far.    BUT – as this is a 10 year venture….we are still in the top of the first inning.  Lots of opportunity and challenge ahead.  Its not the start I expected, but that is what makes it so interesting.   

Next, I’ll comment on some of the individual positions I hold and how they’ve contributed to the performance of the strategy so far, as well as my thoughts about the upcoming year.    

Happy New Year to all!  

DTM