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Parting Thoughts for Our Portfolio

Friday - 8/30/2013, 3:38am  ET

Ever since its inception, it's been a blast managing the Street Fighter Portfolio with Matt Argersinger here on Fool.com. We got to share some interesting ideas and collaborate with each other, though we've had our share of losers given our energy focus.

After a lot of discussion between us, we've decided to discontinue our portfolio. As we've been increasingly pulled in many directions, we've often been unable to devote the necessary time that this portfolio deserves. Rather than continue on and not be able to give it the time and attention that it needs, we've decided the best move is to go our separate ways.

We thank you for your interest in our portfolio and to anyone who has followed our trades with us. We have a very interesting group of companies that we've collected over our time and we'd like to give you our final thoughts on them before we disband our portfolio. I consulted with Matt for his final thoughts on the stocks that he introduced to the portfolio and added thoughts about my own stocks. With that, we leave you with our final thoughts on our companies:

Alleghany joined our real-money portfolio because of its Berkshire-like qualities: a stable of conservatively run insurance businesses, a top-notch management team, and a market-beating investment pedigree. These qualities all remain true, but we were also especially attracted to Alleghany's heavy focus on the energy sector, which accounted for a huge part of Alleghany's investment portfolio. While we think this will be a source of strength in the future, it has certainly hurt Alleghany's investment returns in the short-run as energy stocks, particularly natural gas producers and explorers, have under performed. That said, we really liked Alleghany's move to acquire Transatlantic Reinsurance last year, which diversified Alleghany's insurance business and nearly doubled the size of its investible float. In our view, this move almost guarantees Alleghany will return to its market-beating ways soon, especially if the energy sector rebounds.

Apache is one of the best exploitation companies out there. It's done very well buying assets from majors at a bargain-basement price and then pulling out every last bit of oil and gas from those acquired assets. The company's likely being punished due to the ongoing political turmoil in Egypt over the past few years. After the ouster of Mubarak in May 2011, the stock has lost upwards of $20 billion in market value and has yet to recover. The company's been selling assets with the intent of reducing debt and buying back shares. Just yesterday, the company announced intentions to sell a 33% stake in its Egyptian assets for $3.1 billion, de-risking the Egyptian assets. We still like this global oil company's prospects going forward.

ArcelorMittal is the world's largest steelmaker. It's vertically integrated and has access to many of the world's major steel markets. At just 0.45 times book value, the company is priced for persistent value destruction. Under performing and high-cost plants will likely continue to be closed, but we believe this steel behemoth is a great way to play future economic recovery. The best time to buy a cyclical such as this is when things look ugly, not when the consensus is sunny.

Our thesis for Arcos Dorados was simple. I mean, how could the largest franchisor of McDonald's restaurants in Latin America not be a sound investment? Well, as it turns out, sales were slow out of the gate for many of Arcos's newer restaurants in Brazil, Argentina and Mexico. And higher costs – thanks in large part to beef prices – have hurt Arcos' s restaurant margins. But Arcos's most recent quarterly results were strong. Systemwide comparable restaurant sales were up 11.6%, and EBITDA, adjusted for the stronger dollar, which has taken a big chunk out of the company's dollar-reported results lately, was up a healthy 18.2%. Trading for just over half of trailing annual sales, Arcos is a bargain with years of above-average growth in some of the world's fastest growing emerging markets.

Debt-adjusted cash flow per share. That's Devon Energy's overarching goal and it couldn't be a more shareholder-friendly objective. The market's punishing Devon's lack of production growth, but the company is smart to let natural gas production decline and to pursue liquids growth instead. Devon is a nice way to play a natural gas rebound while keeping downside muted thanks to its liquids exposure across the US and Canada.

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