Six months ago when this column began, I promised to interview superior money managers, as well as provide some opinions myself occasionally. Since that time, five guests graced this column and told how they do what they do. As a bonus, they also provided some investment picks; and yours truly did his share, too.
How well did these work out? Last column I promised to provide the track record. But before I delve into it, let me stress that all those I interviewed are long-term investors, not short-term traders, and the record here is too brief to do justice to their art: The earliest interview was on June 11, and the latest, on Sept. 17. (My latest pick was in November.) So the length of time -- two to six months -- has been very short. Nevertheless, the record is impressive.
Northern Rivers Capital Management's Hugh Cleland's pick, Systems Xcellence (SXC-TSX), has risen 69 per cent since June 11, when it was recommended. The two picks of Resolute Funds' Tom Stanley, UTS Energy (UTS-TSX) and Cameco (CCO-TSX), have gained 60 per cent and 45 per cent, respectively.
The July 23 pick of both BMO Nesbitt Burns' high-tech analyst Brian Piccioni and yours truly, Mosaid (MSD-TSX), has risen 19 per cent, and its dividend yield has added 2 per cent.
Recently (Nov. 26) I also called Research In Motion (RIM-TSX) a short, but the stock rose 7 per cent during that month and a half. Even more recently (Oct. 1) I said I saw the Nasdaq composite index doubling in the next two years. In the two months since then, it has gained 11 per cent.
On Aug. 20, John Di Tomasso, a commodity fund manager, recommended eight commodities. Since then they have risen 13 per cent on average. Even more impressively, if we take out the two (canola and corn) that he declared as ho-hum, the gain becomes 19 per cent. Furthermore, John's timely puts on crude oil must have netted him a tidy profit.
Finally, the last interviewed (Sept. 17) was Groundlayer Capital's Ann MacLean. Her first pick, TSX Group (X-TSX), has risen 7 per cent since then; the other, Wendy's International (WEN-NYSE) has jumped 20 per cent.
Although the Toronto market also rose during these months, what I find extraordinary is that none of the interviewees picked a clear clunker. All did well and in very different fields. How come?
One possible reason (that I almost hesitate to mention) is that besides being a reasonable stock picker, yours truly is also a good picker of stock pickers -- a legacy from his days as a research director on Bay Street. But once we put this self-serving idea aside, we can conclude that the success of all these pickers -- each has his or her own unique methodology -- proves that there is no single way to invest. The trick is to find what you yourself are good at, then stick to it, and obstinately resist temptation to stray. For example, I don't do commodities and John Di Tomassa doesn't do techs. Not that we couldn't, if we spent the time. It's just so much more profitable to specialize.
Well, this was the past. What of the future? I haven't asked any of the interviewees what they think of their picks today. (Holiday parties intervened.)
But I can update you on my own three mentions. I had pointed to Nortel Networks (NT-TSX) as a spec. It has gained 12 per cent since then. Should it be seen as an investment? The test should be how it treats its recent acquisition of Tasman Networks. If it amortizes most of the purchase price, it would indicate Nortel has learned its lesson and its accounting -- and decision making -- have improved. If not, I'd stay away.
RIM is still a short in my opinion. In particular, if the U.S. patent office throws out NTP's patents, or the court simply sides with RIM, the stock would pop, and that's when I would short it once more, because in the long term, competition is increasing, margins are falling, and although the BlackBerrys are still as sweet as before, the stock will likely be bitter.
And what of the Nasdaq? Do I still see it doubling in two years? Yes I do -- or at most, in two and a half. But when even down-market newspapers now sport headlines proclaiming a bull market reborn, the euphoria may be overtoasted at present and I wouldn't be surprised to see a selloff here as some big techs take final writedowns.
This should, one hopes, inject some healthy fear into the market (and bring gloomy headlines); and if the U.S. Federal Reserve Board turns fearful, too, and loosens up the money tap, we would have the best of all worlds. So yes, by the year's end you'll likely make lots of money in tech stocks; but you'll probably first pay for it with short-term indigestion -- and the medicine for it should be to buy more.
Over the next few months I'll interview some more stock mavens, and I hope they will have some opposite viewpoints. That's what makes a market.
Avner Mandelman is president and chief investment officer of Giraffe Capital Corp., a Toronto-based money management firm.
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