Monday, December 28, 2009
Part two of the year-end Hulbert Financial Digest newsletter performance summary was posted over at MarketWatch this morning. Peter Brimelow provides this report on the top 10 performers, a follow up to the HFD's bottom ten as noted here last week.
No less than five of this year's Top 10 also appeared on last year's Terrible 10 -- the bottom performers of more than 180 letters followed by the HFD. ( See Dec. 23, 2008 column.)In the July 13 link above, Brimelow notes that the Closed-End Country Fund Report hasn't been published since 2004 but, for some reason, HFD continues to follow it anyway. This year's result appears to be the exception to the recent rule since, over the last three years, the newsletter has an annualized loss of almost two percent.
Three of them were hard-asset letters that had done well in this decade through last year and essentially rode right through the Crash of 2008: The Ruff Times, International Harry Schultz Letter, and The Dines Letter. (See columns from Aug. 13, April 13 and Nov. 19.)
But one of them, along with another of this year's Top 10, didn't trade at all for assorted reasons: Closed End Country Fund Report and Equities Special Situations. They are examples of what I call the "El Cid Effect" -- after the Spanish crusader whose armored corpse was put atop his horse and sent into battle to scatter the enemy -- right by luck or judgment on a stock of a major trend. ( See July 13 column.)
Closed End Country Fund hasn't traded since 2004 -- its major trend, a weakening dollar, is indeed pretty major.
What's funny about this year's top ten is that many of them are high risk-high return strategies that produced some horrific losses in 2008 and, here in 2009, not even triple-digit gains can recoup last year's declines.
The Top 10 of 2009Looking back at last year's results, the Ruff Times 168.5 percent gain followed a loss of 65.2 percent for a net decline of 6.6 percent over the last two years. (I don't know about you, but once I start working with numbers bigger than a 50 percent decline followed by a 100 percent gain that brings you back to even, I don't have a clue whether the two-year result would be positive or negative until the math is done).
- Equities Special Situations 174%
- The Ruff Times 168.5%
- Linde Equity Report 157.2%
- The Dines Letter 149.4%
- International Harry Schultz Letter 141.4%
- Michael Murphy's New World Investor 120.1%
- Closed End Country Fund Report 81.7%
- Global Investing 71.7%
- Forbes Special Situation Survey 69.9%
- Motley Fool Rule Breakers 68.3%
The Dines Letter was down 72.1 percent in 2008 and up 149.4 percent in 2009 for an overall loss of 30.4 percent and Harry Schultz followed a 2008 loss of 75.6 percent with a gain of 141.4 percent for a two-year decline of 41.4 percent.
As an important point of reference, note that for an 80 percent decline, you need a 400 percent gain to get back to even, so, Mr. Schultz could have posted a gain of more than 300 percent in 2009 and still not made back 2008's losses.
For a 90 percent decline it takes a 900 percent gain to recoup the losses and, for the maximum loss of 100 percent, it would take an infinite gain to get back to even.
To their credit, HFD publishes a list of the ten best newsletters that takes into account these wild swings, eliminating publications from consideration if they've appeared in bottom ten lists as many investors would have bailed long before the triple-digit gains that follow these humongous losses.