2015 Performance – Europe +11.7% and North America struggled

//2015 Performance – Europe +11.7% and North America struggled

dear fellow investor (blue)

 
 

As I said when I wrote to you last month, 2015 was not a very exciting year in terms of investment returns.

Europe 5% better than the market

Nevertheless, the European portfolio did surprisingly well – up by 11.7% in 2015 although it was 54% (on average) in cash throughout the year.

This is nearly 5% better than the market!

North America lagged behind the market

The North American portfolio had a disappointing year, losing 5.3% compared to the -0.7% the market returned.

This was only because of the unbelievable performance of the four largest companies in the S&P 500 index (which I did not recommend), the so-called FANG companies (Facebook, Amazon, Netflix and Google), which went up by 73% in 2015.

The remaining 496 companies in the S&P 500 index declined on average by 3% in 2015.

 

Average returns still outstanding

As you have most likely not been a subscriber to the newsletter since the start, or have not followed all the recommendations (this is perfectly normal), I also show the average returns of all the recommended companies.

And as you can see the returns have been outstanding!

Europe up 32% and North America up 17% on average

On average European ideas have increased by 32.3% and in North America the average return of all investment ideas is +17.1%.

 

Current cash percentage

Because it has been so difficult to find attractive investment ideas, the cash part of the two portfolios was high at the end of 2015.

Europe was 56% in cash and the North American portfolio 81%.

As I have said in past newsletter, I would rather lose you as a subscriber than recommend bad ideas (just to fill the newsletter) that will most likely give you awful returns.

The percentage of your portfolio in cash will of course be different but it gives you an idea of how much of each portfolio (Europe and North America) is invested at the moment.

 

How we calculate performance

Before I show you the 2015 performance figures, first a short reminder of how we calculate the newsletter’s performance.

 

Exclude dividends and include 2% fees

We calculate the performance without dividends and include a 1% buying and selling fee (2% in total) for all investments bought and sold.

Dividends are not included (although this would make performance look better) in order to make the performance figures comparable with the indices (which also exclude dividends).

A 1% buying and selling fee is conservative; you can get away with lower fees if you use an online broker (my broker charges 0.25%).

 

Equal to the results you can get

The aim is to make the newsletter’s performance equal to what you can make if you follow its recommendations.

 

2015 returns

Europe up 11.7%

In 2015, the European portfolio returned 11.7%. This compares very well to the 6.8% return of the European STOXX 600 index.

 

North America down 5.3%

In 2015, the North American portfolio declined by 5.3%, worse than the 0.7% decline in the S&P 500 index.

The table below shows the performance of the indices in 2015.

1

 

 

 

 

 

 

 

Newsletter performance

This is the performance of the newsletter over the same period.

2

 

 

 

 

The charts below show the performance of the two portfolios in 2015.

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4

 

 

Performance since inception

The following charts show the overall performance of the newsletter since the service was launched.

 

European recommendations (started July 2010)

5

 

 

Up 123% over 5 years, index only 44% (3 times better)

Helped by a performance slightly better than the index this year, if you followed all the European portfolio’s recommendations from when they were started in July 2010, your portfolio would have grown by 123%.

Compare this to if you had invested in the European STOXX 600 index, in which case your return would have been only 44%.

This is 2.8 times better than the index.

Another way of looking at it is that if you had invested €1,000 in the European portfolio, your investment would have grown to €2,230, compared to only €1,441 if you had invested in the index.

 

Percentage of positive investments 72% – average returns 32.3%

Since June 2010, more than five years ago, the newsletter has recommended 132 investment ideas, 75% of these would have given you a positive return.

On average, had you invested in all the European investment recommendations, you would have earned a return of 32.3%.

 

 

North American recommendations (started October 2011)

6

Percentage of positive investments 58%; average return 17.1%

Since October 2011, four years ago, the newsletter has recommended 92 North American companies. 57.6% of these would have given you a positive return.

On average, had you invested in all the North American ideas, you would have earned a return of 17.1%.

Why North American ideas are lagging behind the index

As you can see, the European recommendations have substantially outperformed the index and the North American ideas are lagging behind the index.

This is mainly because North American recommendations did not include Apple or some of the other large companies that were the major drivers of the good performance of the S&P 500 in 2012 and 2013.

2014’s weak performance was mainly because small companies (the ones I mainly recommend in the newsletter) did not do as well as the large companies that make up a big part of the S&P 500 index.

And as mentioned in 2015, the so-called FANG companies (Facebook, Amazon, Netflix and Google), which went up by 73% were not included in the newsletter’s recommendations because they were already wildly overvalued (expensive). The remaining 496 companies in the S&P 500 index on average declined by 3% in 2015, which made it extremely difficult to outperform the market.

Change the strategy?

Although the North American investment ideas have lagged behind the S&P 500 index, I am not planning to change the model I use to select investment recommendations.

As you know, regardless of how well they have performed in the past, even the best investment strategies can underperform the market as Joel Greenblatt mentioned in his excellent book The Little Book that Still Beats the Market before they catch up and start to outperform again.

Why bad performance is good

In his book, Joel also says that periods of underperformance are a good thing for a good investment strategy, because without such periods, the strategy would be used by so many investors that it would stop working.

We have to be patient

I am repeating what I have said many times: we just have to be patient. It is simply a matter of time before the North American strategy starts outperforming the market.

 

 

Wishing you profitable investing

Blue writing_signature option 2

 

 
 

Head Analyst

By | 2017-05-21T07:19:00+00:00 March 1st, 2016|