2013 Shareholder Letter

Warren Buffet’s #1 fan!

One of the ways that Mr. PoP has enjoyed learning about business and investing over the years is by reading (and re-reading!) Warren Buffet’s annual Shareholder Letters written to the shareholders of Berkshire Hathaway. In honor of the recent release of Buffett’s 2013 letter, here is our own PoP 2013 Shareholder Letter. Click here for the 2012 edition.

Executive Summary

2013 was a very good year for us financially, though it was quite hectic and stressful at times.  While we like the former part of that statement, the latter is something we’d like to continue to address as we seek to continually improve quality of life.

In last year’s letter I mentioned that even in good years our net worth gains would likely decrease on a percentage basis; this is one of those times where I hate being right! Our increase in net worth was 49% instead of 66.3%; a respectable $207K regardless. Here is this year’s prediction: As the market grows as a portion of our net worth we are at a greater risk of being whipsawed by its fluctuations.

  • End of 2011 Net Worth: $256.7K  
  • End of 2012 Net Worth: $417.3K ( YOY increase of $170.2K or +66.3%)
    • 2012 Gross Income: $184.0K Employment / $16.9K Investment Properties
    • 2012 Spending: $55.2K Personal / $16.5K Investment Properties
  • End of 2013 Net Worth: $624.4K (YOY increase of $207.1K or 49.6%)
    • 2013 Gross Income: $183.6K Employment / $17.7K Investment Properties
    • 2013 Spending: $59.4K Personal / $12.7K Investment Properties

Money

Real Estate:  While 2013 saw us book an increase in the value on our primary residence due to rising prices in our town, that doesn’t feel particularly noteworthy as it’s an asset that we have no intention of selling.

In terms of investment properties, our rental duplex earned a solid income for us, even despite the large expense of purchasing a new air conditioning system for one of the units. Still lagging, however, is the value of our empty residential canal lot.  While we knew that the recovery in lot prices would trail the recovery in prices on existing structures, we were hoping we would start to see recovery by now.  Happily, construction has begun to pick up again.  As that sops up inventory of empty lots, we expect that the relative rarity of our lot will lead to an increased value.

Stock Market: The stock market was on an absolute tear in 2013.  

The stock market was on an absolute tear last year, with the SP500 rising over 30% year over year.  We caught a good portion of that upward momentum in our 401Ks and IRAs, though we did miss out on some upside by prioritizing paying off the $50K loan from Mr PoP’s parents in lieu of investing more in a taxable brokerage account.  Overall, the balances on our stock accounts increased by $107.3, or 59.4%, helped by market growth, but clearly driven by continued deposits.

Income: Our income this year was within a thousand dollars of our 2012 figure – we are nothing if not consistent! Mr PoP had another excellent year in sales, and luckily most of that passed through directly to our bottom line. Our duplex income was slightly higher because of increased monthly rents and higher occupancy rates.

Spending:  Spending was a bit higher than our goal, but nearly 100% of the difference between 2012 and 2013 was paying off a car loan. Additional one-time expenses include re-doing the garage.

Happiness

General Emotional State: Overall, 2013 was a good year for the PoPs, though it was a hectic one with some bumps along the way.

Stress Level:  Starting in Q2, biking to/from work became a form of stress relief for Mrs PoP.  It continues to function quite well in decreasing the amount of work stress she brings home on a daily basis.  Nonetheless, our overall stress levels in 2013 were higher than we would like.  Q3 and Q4 were particularly brutal for a variety of reasons, and we’re not hoping for repeats of them anytime soon. Having said that, our growing net worth seems to smooth over the bumps, and the idea of an early retirement or not-so-brief sabbatical is admittedly tantalizing.

Kittens

Kitty PoP: Had an overall happy year, however he is not nearly as happy traveling as we are, and spent the vast majority of the 5 days he vacationed with us cowering under the hotel bed.  On a happier note, Kitty PoP has learned that the best way to get what he wants (which is, generally, food) is not to bite, but to sit behind Mrs PoP on the couch and purr in her ear.  This is huge progress.

Discussions On An Additional Acquisition Kitten: Stalled.  After reading the book Cat Sense, Mrs PoP is not convinced that the little PoP house is big enough to successfully introduce a second cat while allowing them to retain separate territories.

2013 Highlight Reel

  • Mrs PoP ran a marathon PR
  • Mr. PoP got a promotion in June, over-achieved his sales goals for the 3rd year running
  • Successfully killed all non-mortgage debt including the HELOC, the car loan, and the $50K loan from Mr PoP’s folks
  • Best money spent was on the garage.  Hands down.
  • Worst money spent was for tires on the Jeep.  We put them on just a couple months before the Q1 Car Challenge, and the car will likely be sold with just 1000 miles on those tires.

If you like the idea of writing a shareholder letter, start your own tradition! To you get you started here is a link to Buffett’s letters, along with a link to the annual letter from Bill Gates.

Anyone else out there devour Buffet’s Shareholder Letter every year the way Mr. PoP does? How would your shareholder letter read for FY 2013?

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