Keeping Score

A look back at some investment hits and misses

When I worked for a major brokerage firm many years ago, I was always amazed to see how few of the Investment Advisors had exposure of their own portfolios to the very products that they were selling to their clients.

If these managed products were so good, why did the brokers hold only a minimal amount of their own money in them? This suggested to me that many of these advisors saw better opportunities for themselves elsewhere.

At ValueTrend, I am proud to say that the majority of my personal wealth is held in our equity and fixed income models. Thus, I have a strong vested interest in the performance of our portfolios – I fare as my clients do!

We even post our model performance versus the market index on our corporate website ( This type of accountability and exposure makes it difficult to hide from bad results. It makes me wonder why so many Advisors don’t post their performances publically.

In the name of accountability, I would like to use this column to review some of the suggestions that I have made through my columns in The MoneyLetter over the past two years.

As an intermediate-termed trader, I will go back about a year. The reason for such a short horizon is simple: Most of my trades are influenced by seasonal and technical patterns lasting only three to six months.

True, some of my stocks are held for a few years, but these longer termed positions usually represent no more than one-third of my managed platform positions.

Many of my suggestions were summer-or winter-only trades. Please note that I usually provide the time horizon that I am focusing on for each of my recommendations at the time of writing, giving readers a trading horizon that they can (and should) follow on these positions. So let’s get started.

In the April/First Report 2013 edition of The MoneyLetter, I recommended investors hold some downside hedged equity ETF’s for the summer (May-September).

My suggestion was to participate in market upside, yet be protected should things decline rapidly. Specifically, I suggested you consider Powershares S&P 500 Downside Hedged ETF (NASDAQ-PHDG) and Barclays ETN S&P Vector ETN (NYSE-VQT).

The results: both were entirely flat over the summer. The S&P 500 rose about 200 points or 13 per cent by September. The hedged ETF’s did not offer the upside as expected over the season, and underperformed significantly.

As with many investment products selling the “have your cake and eat it too” promise, these securities proved too good to be true. Score one against me here.

In the May/Second Report 2013 issue, I recommended investors avoid the emerging markets space, specifically suggesting that the iShares MSCI Emerging Markets Index (NYSE-EEM) at $42.19 may not offer much upside, given the consolidation patterns I saw on the chart. It has declined to $40 since that date.

In the June/First Report 2012 issue of The MoneyLetter, I made reference to a short-termed (buy in summer, sell in the fall) trade in gold – which did play out quite nicely (gold rose from $1600 to $1800 from June to October, then proceeded to decline, right on its seasonal schedule).

I also recommended a similar-timeframe seasonal trade for oil. Oil rose from $80 in June to $92.00 that September. Here are some other longer termed stocks/ETF’s I liked at the time: TSX Global Healthcare ETF (TSX-XHC): then $21.57, now $33.46; SPDR Technology ETF (NYSE-XLK): then $28.06 now $36 (note that I also mentioned Canadian technology but preferred the US SPDR); and Apple Inc. (NYSE-AAPL): then $579, currently flat.

SPDR Consumer discretionary ETF (NYSE-XLY): then $43.19, now $63. I also suggested investors consider consumer stocks within that ETF such as Walt Disney Company (NYSE-DIS), McDonalds Corp. (NYSE-MCD), Nike Inc. (NYSE-NKE) and Home Depot (NYSE-HD).

All of these are up, in line with the ETF since that date. Right now, we still hold Walt Disney Company in our portfolio, although we have moved into the Consumer Staples Select Sect. SPR (NYSE-XLP, $44.20) rather than continuing to hold the XLY units.

In the July 2012 issue I recommended investors focus on short-termed bonds and target ETF’s as well as preferred shares for their fixed-income holdings. This advice was timely, given the negative movements on long bonds last summer.

All in all, the trades recommended over the past two years in The MoneyLetter have been fairly good. I scored big on my shorter-termed trades in oil and gold (we focused on the gold trade here at ValueTrend), I was flat on Apple and the hedged ETF’s, I was up nicely on the consumer discretionary sector ETF’s and stocks, and the technology and healthcare ETF’s did well too.

Meanwhile, my advice to avoid the Emerging Markets space was prudent, as was the timing of my “stay short term” advice on fixed income securities last summer.


Keith Richards, Portfolio Manager, can be contacted at He may hold positions in the securities mentioned. Worldsource Securities Inc. – Member: Canadian Investor Protection Fund, and sponsoring investment dealer of Keith Richards. The opinions expressed are those solely of Keith Richards and may not necessarily reflect that of Worldsource Securities, its employees or affiliates. The contents are for information purposes only and do not represent investment advice. ETFs may have exposure to aggressive investment techniques that include leveraging, which magnify gains and losses and can result in greater volatility in value, and be subject to aggressive investment risk and price volatility risk. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Please read the prospectus before investing.


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