How have
this column’s suggestions fared so far
I’m not one
to jump up and make big, bold predictions. I do, at times, have strong opinions
on particular issues that basically amount to some type of prediction or market
timing issue. This week, I’ll review the recommendations I’ve made since I
began this column to see how they’ve done up to the end of 2001. Only
recommendations up to the end of June 2001 will be featured this week, to
ensure there is enough time to perform some type of evaluation.
On
September 15, 2000 - just three weeks after my debut column in this space – I
recommended starting to sell technology holdings. I reiterated the risk in tech
stocks just a month later on October 13, when I stated that tech stocks still
had room to fall. Just over two months later, on December 22, I said I was
pessimistic on technology stocks. (Admittedly, in that December 2000 article, I
did say that those investors who “had to have” some technology exposure should
only do so on a dollar-cost-averaging basis to reduce risk.) Finally, in March
of 2001, I asserted that the rebound in tech stocks would not be quick and that
significant risk remained in the sector. How did I do?
The Nasdaq 100 ended 2001 at 1979.26. That’s 7.6 per cent higher than the close at the end of March 2001, but down 21, 41, and 49 per cent since the December, October, and September 2000 articles, respectively. So far, so good.
Just a couple of weeks following the terrorist attacks of 9-11, I did say that it might be a decent time to start tip-toeing back into tech stocks via an averaging strategy. Since things have come up so strongly and so quickly, I would probably suggest slowing down the pace of investment in tech stocks or even taking some profits off the table.
This was
perhaps my most passionate recommendation of the past year. Many journalists
had simply dumped on this fund for two years straight. In fact, my predecessor
in this space made the bold recommendation to sell this fund, in favour of more
growth-oriented funds like CI Global Boomernomics. My December 15, 2000 article
on Templeton Growth simply stated that the fund’s disciplined investment
process, deeply skilled team, and value-oriented approach were good reasons to
buy it.
Since that
time, this fund has performed leaps and bounds ahead of most of its peers and
the MSCI World Index. Meanwhile, growth-oriented funds like the CI fund have
taken a beating this past year. This continues to be a great core holding.
On March 9,
2001, I wrote about and recommended three Canadian funds – Mawer New Canada,
Beutel Goodman Small Cap, and McLean Budden Fixed Income – that I felt were
ignored by fund investors. Since that time, each of the funds has returned
between 6 and 12 per cent to the end of 2001.
Along the
same lines, on May 18, 2001, I wrote about three foreign funds that deserve
some of investors’ money – Mawer World Investment, Saxon World Growth, and
Sceptre Global Equity. All have so far lost money, to the tune of about 12 to
14 per cent to the end of 2001. Okay, so nobody’s perfect but I continue to
like all of these funds.
Oil prices
began soaring in 1999 and embarked on a two-year ascent. On June 1, 2001, I
said that the longer-term prospects for oil and oil stocks looked relatively
positive but that we should expect to start seeing a gradual drop in prices. I
recommended maintaining some energy exposure but that it would be a good time
to take some money off the table.
Since that
time, the average energy fund is down nearly 20 per cent and oil prices fell by
about 25 per cent. Prices obviously dropped quicker than I expected but at
least I got the direction and timing right – not bad.
Mid-2001,
on June 29, I reiterated the importance of forming the core of investor
portfolios based on value-oriented stock pickers. I recommended three funds run
by a few of the stingiest fund managers in the business today. CI Harbour is up
0.6 per cent; Cundill Value C is down 11 per cent; and ABC American Value is up
11 per cent to the end of 2001. These, and other good quality value funds,
should continue to occupy long-term positions in portfolios.
When I make
a recommendation, it’s rarely, if ever, meant as a short-term move. I will
freely admit that I just don’t know what will happen in six or twelve months’
time. Frankly, I’m not sure anybody does. Sure, I have an opinion, but I don’t
“know”. I find it easier in many cases to look further down the road. Hence,
this week’s article was, to some extent, a bit of a fun exercise.
Anybody can
be right for a period of time. Frankly, anybody who brags about how many
successful predictions they’ve made should make sure to also tell about the
calls they got wrong.
What
readers do with their own portfolios should truly be decided only after fully
considering their own personal circumstances – perhaps even with the help of an
advisor. The opinions expressed in this column are general in nature and really
won’t apply to everybody. For instance, perhaps a software programmer shouldn’t
invest in technology at all since his/her compensation, arguably the most
valuable asset any of us have, is already tied to the fate of the tech
industry. This isn’t a disclaimer but a little prudent advice when reading
this, or any other investment article.
Dan Hallett, B.Comm., CFP, CFA is Senior
Investment Analyst with Sterling Mutuals Inc. He can be reached at dhallett@sterlingmutuals.com Sterling Mutuals Inc. is registered as a mutual
fund dealer in Ontario, British Columbia, and Manitoba.