Tags
Argo Group, Asta Funding, Colony Financial, Cresud, Dhir India, EIIB, Fair Value, portfolio performance, purchasing power, Sirius Real Estate, Total Produce, Trinity Biotech
I’m sure you’ve noticed I’m not shy about setting Fair Value Price Targets for recommended stocks. I don’t see a lot of people out there doing this – pretty obvious why…I’m sure someone will be sure to point out how precisely wrong I’ve been when I come up with a few duds! Ouch!
But, in an ideal world, the best way I’d evaluate any recommendation from a website or blog is to know the writer’s price target and portfolio stake. Ownership demonstrates their conviction, the size of their stake confirms the strength of this conviction, and their price target allows the reader to perform their own risk/reward evaluation. What are your own thoughts? Do you agree whole-heartedly, partially, or do you think this approach is a danger or a hindrance in some way?
Anyway, this calls out for a similarly precise performance evaluation – as I note some other bloggers do – yup, this is where the rubber meets the road..! Since I only launched Wexboy in November, I’ll keep it pretty simple this time ‘round – hopefully, I’ll come up with something more accurate next year.
I’m just going to assume a portfolio that has an equal stake in each stock recommendation. It’s simple to calculate a % gain/loss from the recommendation date to year-end for each stock, and then calculate a simple average portfolio return. I’m ignoring currency for simplicity, and because any measured FX gains/losses are completely dependent on the base/home currency you choose.
Btw I recommend you measure your portfolio over time in your base/home currency, AND at least one other currency. What?! I’ll write more at another date, but this lets you track the real purchasing power of your portfolio. Here’s a simple example: Picture you’re an investor who only invests in home market stocks. By default, most of your exposure’s in your home currency, and of course you measure performance solely in your home currency. This is the worst form of ‘home bias’ I can imagine! Now let’s assume you’re making 10% a year, and feeling pretty good. But I neglected to mention that your home currency has collapsed 75%. How do you feel now? Would you believe Nixon in this situation saying that you are just as well off?
I’m confident if you follow this approach you’ll become a lot more conscious of your real global purchasing power, and will begin to (re)structure your portfolio (and even finances) accordingly. With developments in the past year, it’s hard to be enthusiastic about pretty much all of the developed market currencies – so in 2012 I plan to further diversify away from these currencies. This presents a difficult challenge in terms of broader portfolio risk control, but it’s still a top priority.
I’m also going to provide performance for the ISEQ, FTSE 100 and S&P 500 (from the date of the first stock recommendation in each market), plus a simple index average. This is really just for reference – don’t mind the usual fund manager pablum, relative performance means sweet FA, my bank manager’s really only interested in my absolute performance..! Here are the results:
| Stock |
Ccy |
Rec Price |
Yr-End Price |
% Gain |
|
| Sirius Real Estate (SRE:LN) | EUR |
0.22 |
0.21 |
(4.5)% |
|
| Cresud (CRESY:US) | USD |
11.30 |
11.39 |
0.8% |
|
| Total Produce (TOT:ID) | EUR |
0.39 |
0.37 |
(5.1)% |
|
| EIIB (EIIB:LN) | GBP |
0.03625 |
0.036 |
(0.7)% |
|
| Trinity Biotech (TRIB:US) | USD |
9.57 |
10.18 |
6.4% |
|
| Colony Financial (CLNY:US) | USD |
13.97 |
15.71 |
12.5% |
|
| Argo Group (ARGO:LN) | GBP |
0.145 |
0.145 |
0.0% |
|
| Asta Funding (ASFI:US) | USD |
7.65 |
7.98 |
4.3% |
|
| Dhir India (DHIR:LN) | GBP |
0.16 |
0.375 |
134.4% |
|
| Portfolio |
Average |
16.4% |
|||
| ISEQ | EUR |
2,662 |
2,902 |
9.0% |
|
| FTSE 100 | GBP |
5,460 |
5,572 |
2.0% |
|
| S&P 500 | USD |
1,240 |
1,258 |
1.5% |
|
|
Average |
4.2% |
I might as well also throw in a few other recommendations I made, but don’t take these too seriously – they’re all Shorts (and I’m not sure a short is possible for all of them), and I don’t have a position:
| Shorts |
Ccy |
Rec Price |
Yr-End Price |
% Gain |
|
| Hot Tuna (HTT:LN) | GBP |
0.0007 |
0.0008 |
(14.3)% |
|
| Brent-WTI Spread | USD |
15.17 |
8.39 |
44.7% |
|
| Landkom (LKI:LN) | GBP |
0.03125 |
0.02875 |
8.0% |
|
| Kinder Morgan (KMP:US) | USD |
76.92 |
84.95 |
(10.4)% |
|
| Greencore (GNC:ID) | EUR |
0.635 |
0.63 |
0.8% |
|
|
Average |
5.8% |
Wexboy 
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