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Recommendations report card
How have this column's suggestions fared so far

I'm not one to jump up and make big, bold predictions. I do, at times, have strong opinions on particular issues that basically amount to some type of prediction or market timing issue. This week, I'll review the recommendations I've made since I began this column to see how they've done up to the end of 2001. Only recommendations up to the end of June 2001 will be featured this week, to ensure there is enough time to perform some type of evaluation.

Technology stocks

On September 15, 2000 - just three weeks after my debut column in this space - I recommended starting to sell technology holdings. I reiterated the risk in tech stocks just a month later on October 13, when I stated that tech stocks still had room to fall. Just over two months later, on December 22, I said I was pessimistic on technology stocks. (Admittedly, in that December 2000 article, I did say that those investors who "had to have" some technology exposure should only do so on a dollar-cost-averaging basis to reduce risk.) Finally, in March of 2001, I asserted that the rebound in tech stocks would not be quick and that significant risk remained in the sector. How did I do?

The Nasdaq 100 ended 2001 at 1979.26. That's 7.6 per cent higher than the close at the end of March 2001, but down 21, 41, and 49 per cent since the December, October, and September 2000 articles, respectively. So far, so good.

Just a couple of weeks following the terrorist attacks of 9-11, I did say that it might be a decent time to start tip-toeing back into tech stocks via an averaging strategy. Since things have come up so strongly and so quickly, I would probably suggest slowing down the pace of investment in tech stocks or even taking some profits off the table.

Templeton Growth

This was perhaps my most passionate recommendation of the past year. Many journalists had simply dumped on this fund for two years straight. Many writers and so-called pundits boldly advised investors to punt this fund from their portfolios, in favour of more growth-oriented. My December 15, 2000 article on Templeton Growth simply stated that the fund's disciplined investment process, deeply skilled team, and value-oriented approach were good reasons to buy it.

Since that time, this fund has performed leaps and bounds ahead of most of its peers and the MSCI World Index. Meanwhile, growth-oriented funds have taken a beating this past year. This continues to be a great core holding.

Hidden mutual fund gems

On March 9, 2001, I wrote about and recommended three Canadian funds - Mawer New Canada, Beutel Goodman Small Cap, and McLean Budden Fixed Income - that I felt were ignored by fund investors. Since that time, each of the funds has returned between 6 and 12 per cent to the end of 2001.

Along the same lines, on May 18, 2001, I wrote about three foreign funds that deserve some of investors' money - Mawer World Investment, Saxon World Growth, and Sceptre Global Equity. All have so far lost money, to the tune of about 12 to 14 per cent to the end of 2001. Okay, so nobody's perfect but I continue to like all of these funds.

Oil prices

Oil prices began soaring in 1999 and embarked on a two-year ascent. On June 1, 2001, I said that the longer-term prospects for oil and oil stocks looked relatively positive but that we should expect to start seeing a gradual drop in prices. I recommended maintaining some energy exposure but that it would be a good time to take some money off the table.

Since that time, the average energy fund is down nearly 20 per cent and oil prices fell by about 25 per cent. Prices obviously dropped quicker than I expected but at least I got the direction and timing right - not bad.

Buy value funds

Mid-2001, on June 29, I reiterated the importance of forming the core of investor portfolios based on value-oriented stock pickers. I recommended three funds run by a few of the stingiest fund managers in the business today. CI Harbour is up 0.6 per cent; Cundill Value C is down 11 per cent; and ABC American Value is up 11 per cent to the end of 2001. These, and other good quality value funds, should continue to occupy long-term positions in portfolios.

Reality check

When I make a recommendation, it's rarely, if ever, meant as a short-term move. I will freely admit that I just don't know what will happen in six or twelve months' time. Frankly, I'm not sure anybody does. Sure, I have an opinion, but I don't "know". I find it easier in many cases to look further down the road. Hence, this week's article was, to some extent, a fun exercise.

Anybody can be right for a period of time. Frankly, anybody who brags about how many successful predictions they've made should make sure to also tell about the calls they got wrong.

What readers do with their own portfolios should truly be decided only after fully considering their own personal circumstances - perhaps even with the help of an advisor. The opinions expressed in this column are general in nature and really won't apply to everybody. For instance, perhaps a software programmer shouldn't invest in technology at all since his/her compensation, arguably the most valuable asset any of us have, is already tied to the fate of the tech industry. This isn't a disclaimer but a little prudent advice when reading this, or any other investment article.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and provides independent investment research to financial advisors. He can be reached at dha@danhallett.com
 
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