Wednesday, March 12, 2014

Where Were You Five Years Ago?

You cannot turn on the TV this last few days, without hearing that the current bull market has reached  its five year mark. Not sure about readers of my blog, but "ah yes, I remember it well".

We met at nine.
We met at eight
I was on time
No, you were late.
Ah yes, I remember it well...

And I do remember it well. I remember Jim Cramer on Mad Money making the case for Dow 5,000 (we were at about 7,000 then). "Sell, sell, sell!"

As my fearless readers know, I do keep pretty detailed records.   Feel free and go back and read some of my blogs. At one point, near the end of February I mentioned that even Larry Kudlow had turned bearish, and that was a definite sign of the bottom.  Five years ago, with my multiplier, my portfolio was worth about $678,000.  Today it stands at $2,618,000 (with multiplier).  Now all of that gain is not just from stocks going up. I have added significant money from savings to my brokerage account over the five years.  Fidelity has a cool feature that tracks performance. For my brokerage account (so excludes IRA and my more recent Merrill Lynch account), I have gained (with multipler) $1,093,000 in past five years.  My annualized return is 17.2%. While that sounds good, I have actually lagged the S&P 500 and Russell 3000 (they are 19% and 20%) respectively (over ten years I beat them both by about three points).

I suspect I have underperformed a bit due to some poor stock picking in 2010 and 2011 (even a bit in 2012) when I got enamored with some reverse Chinese stocks that ended up being fraudulent.  It was an expensive lesson.  I also got crushed on Ideararc, a yellow pages company that went bankrupt and I lost 100%. Part of it could be that the brokerage account also acts as my checking account, so I do keep a fair amount just in cash.


O Junker said...

Hi Marshall,

I sorry if I am asking to many questions lately of you but I really like the way you invest. No knock against Ed but sometimes he falls in and out of love with a stock in a week. I am more comfortable investing in the longer term and your style seems more suited to my comfort level.

This post really got me thinking because I look back over the last 3 years and I have lagged the market. Two reasons are I got heavily into cash thinking the market would correct, that has hurt returns and also I like value/turnaround stocks and got hit badly with a couple blowing up like CEDC(Jubak pick at one time).

I am still in a lot of cash as I see high margin debt and individual investors piling into the market now. I also figure that I have been hurt by being in cash and at this point I rather take my chances on a market correction and picking up good companies on the cheap so that I can try to make up for the last few years.

So to my question:) I have MET on my watchlist and I know you have some other insurance along with IBM and CSCO. Do you keep a watchlist of companies to pick up if the market has a big correction? I look for companies that overall can give me between a 10-15% annual return. I try to juice portfolio returns on smaller bets like DLIA or TC. Core companies I currently own are BAM, PM, and EMC. Also do you ever use ETF's to bet on a sector?

Again sorry for the long email but I am trying to become a better investor. I have the time at the moment since I am laidoff after my position was eliminated.

Marsh_Gerda said...

In no way do I have the "answers". Everyone needs to find their own approach.

I do often make a list of stocks as a watch list with specific target prices. That helps me remember to buy them. Sometimes I even place a buy order in 10% under the current price. In event of a correction (say 10% drop) I would definitely put together a buy list and share on my blog.

I would suggest caution in buying in right now, but sounds like you are thinking that way. I rarely use ETFs, I enjoy picking stocks. I would only use an eft to access something that was difficult to access via stocks. And I am anti these leveraged etfs that are used a lot on ETS.

O Junker said...

Thanks Marshall,

I know you don't have all the answers, but of people out there I think your investment style is similiar to what I want to do.