Performance Assessment for Investment Ideas on Thoughtsworththinking.net at 2010 Stock Market Close

In her classic novels The Foutainhead and Atlas Shrugged, Ayn Rand distinguished between people who make choices based on their own objective observations, and “second-handers” – people who are more apt to follow the opinions of other people than their own just because those other people are popular.

The case I want to make is that if you are in the first group, reading Thoughtsworththinking.net is for you.  Since my first post on March 30, 2009 – just as the United States was crawling out of the depths of the financial crisis, I’ve been writing about personal finance and international economics on Thoughtsworththinking.net.  Now the numbers are in, and for those willing to decide what to read based on objective data, there is a strong case for reading this web site.

The investment ideas on Thoughtsworththinking.net cumulatively outperformed the stock market.  You can see the data here.

I benchmarked each specific investment idea I posted that is more than 6 months days old to the Standard & Poor’s 500 index on the same day. 1  I excluded more recent ideas because I do not generally consider the brief time period long enough for the long-term factors I focus on to be expected to influence value, and my primary orientation is to provide material for investors who seek to obtain returns over investments lasting several years. 2   For one company I posted about twice, I included both posts in the data.  The time period in my comparison was the publication date of each idea to market close on December 31, 2010.

The result was that while the market went up an average of 24.19 % since the time of each idea, the investments I posted on went up an average of 61.49% over the same periods, outperforming the stock market as measured by the S&P 500 by an average of over 37%.

I realize that this methodology is not perfect, but it should demonstrate the seriousness and rigor I apply to producing material for this site. In addition to various large cap U.S. companies, my reviews also included some smaller U.S. and non-U.S. equities and a preferred stock, which are not included in the S&P 500.  Nevertheless, because the S&P 500 represents the most widely used measure of U.S. equity markets, beating it is an important threshold for fund managers and individual investors who seek to obtain better results than index investing.

Of course the results in each of my investment ideas varied significantly.  My blockbuster idea in this period was Ford, for which I posted on April 6, 2009,3 and its shares are up 416.62%.   Other superstars were ING’s cumulative preferred shares, which measured through the ISP cumulative preferred issue gained 55.42% from my post on September 4, 2009 (without including its massive 12% dividend at the original time of writing), and Barrick Gold (ABX), which gained 52.73% from February 1, 2010.  My July 12, 2009 post on Altria (MO) was also published on Seekingalpha.com as an Editors’ Pick, and the shares have gained 49.48% since without even including Altria’s huge dividend. My post on USEC (USU), issued months before interest in Uranium became fashionable, also significantly outperformed with a 47.91% gain.  ING’s common American Depository Shares mildly outperformed the market by 2.93% with a 15.72% gain since my post on June 7, 2010.

Even when the stellar results from my 2009 Ford post are taken out of the picture, my ideas still outperformed the S&P 500 by a shade under 2% (1.91%) using the same methodology.  I want to put this in context.  Top professional fund managers struggle just to beat the market, and finishing 1.5-2% above the S&P 500 is a respectable result on Wall Street. 4

So finishing 1.91% above the market without including my top performing recommendation, and 37% with it, makes a good case that reading Thoughtsworththinking.net is worth your valuable time.

Of course at least as important as touting successes is to review disappointments.  While Pfizer gained 15.27% since my recommendation on May 31, 2009, the S&P 500 gained 36.83%.  This underperformance was likely due to continuing concern over Liptor’s patent expiration and new health care legislation, though the underperformance is softened by Pfizer’s generous dividend.  E*Trade (ETFC) gained 1.27% and 30.29% respectively since my posts on May 4 and June 28, 2009, but underperformed the market by 36.35% and 6.57% over the same periods.  Sprint (S) gained 1.93% since my May 12, 2010 post but underperformed by 5.38%.  My only idea in the period covered by this review that lost value by the end of 2010 was my original post on Diana Shipping (DSX), losing 10.23% and thus underperforming by 32.81%.

The good news on the underperforming ideas was that nothing was a real disaster.  I think that Pfizer, E*Trade, Sprint and Diana Shipping all remain undervalued, and I even recently reinforced my thesis on Diana and Sprint in posts too young to include in this assessment.

I also want to say a few words about the two negative ideas I issued: my November 19, 2009 post on being careful in investing in gold-related assets specifically in the fourth quarter of 2009, and my caution against investing in Apple (AAPL) on June 2, 2010.  Neither one of these was an idea to bet against the asset, just a caution against going in on it.  Accordingly, I have not included these posts in the statistics.  The recommendation against gold for that period proved accurate, with the metal falling 5% from the time of my recommendation against gold-related assets to my subsequent positive recommendation on Barrick Gold, versus a milder 2% fall in the S&P 500 over the same time span.  While Apple is up 20% from since my June 2, 2010 caution on the stock, I specifically acknowledged in that post the prospect that Apple could rise, and the risk factors I outlined remain in my view a threat to its premium value for long-term investors.

Nobody who makes an investment decisions is always going to be right.  I would never encourage anyone to mechanically adopt my ideas, and to the contrary I feel strongly that investors should carefully consider all information, including their individual circumstances and the opinion of a professional advisor, before making an investment decision.

Rather, my contention in providing these statistics is to show that the material on this site is useful for the prudent investor who wants to take a good range of responsible opinion into account before making an objective investment decision, and good enough so that reading it regularly is worth your valuable time.

So please sign up to subscribe to Thoughtsworththinking.net.  You can receive alerts that I have posted by following me on Twitter, or by subscribing to my feed.  Please also share posts you like and tell people you know about Thoughtsworththinking.net.

I manage this site in my spare time, so the more visitors I get the more it is worth it for me to produce material you can use.

Of course past performance does not necessarily indicate future results.  This is my first serious analysis of the performance of investment ideas on Thoughtsworththinking.net during its first two calendar years – only time will tell whether future ideas will be successful.

Again, you can see the raw information on which this performance assessment is based at this link.  Thank you for reading Thoughtsworththinking.net.

Disclaimer: The information provided on Thoughtsworththinking.net does not constitute professional investment advice, and should only be used in consonance with all available information, including the opinion of a professional adviser, to make an investment decision.

  1. In most cases last closing prices were used since most posts were made when the market was closed.  For one case where I posted during trading, I used the closing price that day since the post was in the afternoon. []
  2. For this same reason I had reservations about including recommendations that were six months to a year old, but decided to include them since this was the first comprehensive review of Thoughtsworththinking.net’s performance, subject to reassessing their inclusion in future assessments. []
  3. While I made a second recommendation on Ford on September 16, 2010 that at 2010 close had outperformed the S&P 500 by 87.14% in the same period, it is too recent for inclusion in this review. []
  4. See Insider Monkey, “Warren Buffett Knew These 9 Fund Managers Would Outperform The Market,” at http://www.insidermonkey.com/blog/2010/12/01/warren-buffett-knew-these-9-fund-managers-would-outperform-the-market/. []

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