Tuesday, August 7, 2007 0 comments ++[ CLICK TO COMMENT ]++

Past Historical Evaluation of My Investments

I decided to evaluate my investments and to see how I have evolved. I am a newbie and only started investing a few years ago. My record has been satisfactory in that period (nothing great, but not horrible either). My returns in 2004, 2005, 2006, and 2007 YTD are: 5%, 15%, 30%, -12% YTD. This year is turning out to be a disaster (mostly because the Canadian $ appreciated strongly against the US$ and most of my holdings are in US$; and because my short of the TSX has not gone well) but the verdict is still out.

I started within a bull market so the returns are higher than what I would expect. Also, my portfolio is tiny (basically started with $0 so small positive returns have had a big effect). The tough part is yet to come as we enter, what I think will be, a bear market. After all, everyone is a genius during a bull market...

My strategies have changed over the years. Here is how my strategies have changed:

Less speculation now

Before I was more into speculative stuff--although not as speculative as what a typical 'speculator' or 'trader' would do. Nowadays, I am more into value investing (I still speculate, especially on turnaround situations or potential takeovers, but not as much). Since I'm a newbie, I think everything I do is a speculation to a large degree.

Almost entirely contrarian investing now

I used to be heavily into a strategy called sector rotation but have shifted over to contrarian-value investing. Sector rotation entails trying to pick what sectors one thinks will outperform. I used to be bullish on gold and oil&gas sectors, among others, a few years but turned bearish (very early it seems). I still think of sector performance--more so than what a value investor would do--but I approach it as a secondary criteria after picking a stock. In the past, it would be the opposite (i.e. I would pick the sector and then look for a stock within that sector).

I was still into contrarian investing before (it's my personality so it fits me) but now it is my main strategy.

More into smallcaps and microcaps

I used to look at large-caps and other so-called "safe" investments in the past. There was a time when I was scared of Pink Sheet, OTC, and TSX Venture (Canada) stocks. Now I actually don't mind investing in them. I really haven't done that yet but that's one area I look at these days. I shifted to the smallcaps and microcaps because the large-caps are more efficiently priced. Also, since I follow more of a value investing style, I think I am more comfortable with these stocks. For example, I generally only consider stocks that are trading 'net-net' (i.e. current assets > total liabilities) or are way below book value.

More into foreign stocks

This isn't anything special (I would have done this anyway) but I look at the whole world now. Before I mainly looked at foreign stocks listed on the NYSE or NASDAQ but now I am willing to consider buying stocks on foreign exchanges. It's too expensive for small investors to buy directly on foreign exchanges (commissions are high, taxes can be higher) but as my portfolio gets larger, this becomes more of an option. Since getting information in English is not easy, I have only looked at British, Japanese, and South African companies so far. I haven't invested in any of them yet but my feeling is that I'm going to go big into Japan. I think Japan may be ready to rise from its long deflation.


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