Wednesday, April 16, 2014

Dogs versus Darlings Week 5

In a previous post about 5 weeks back, I mentioned that I have set up a tracker portfolio comprising of 4 market darlings and 4 market dogs.

Except for week 1, the dogs have outperformed in every subsequent week. The dogs are currently down average 0.6%, and the darlings are down average 17.5%. Relative performance 16.9% in favour of dogs.

There is a little bit of "unfairness" in this comparison as technology stocks have gotten a bit of jitters lately. Plus 5 weeks is such a short period.  So we will continue monitoring and keeping track of this little exercise periodically.

Just as an interesting aside, one of the market darlings is XRO. 5 weeks ago, a prominent and popular newsletter put out a recommendation for XRO.  Apparently it is the best thing since sliced bread.  The bread is now being offered by Mr Market at nearly 50% off. This would make it twice the bargain it once was. Why do I not hear more stringent buy calls now from the newsletter?

In this game, valuation matters a lot. 


Shades of Sway said...

I read that original recommendation for XRO screaming 2014 No 1 Stock and thought it was such an ill considered piece of advice for many reasons including that they have yet to make a profit. The reasons supporting why we should buy it were spurious such as US tech investors who had success elsewhere are in and that they were the upstart new kids on the block with cloud computing. When I then looked at the price at the time, I thought you have got to be kidding. It devalued that newsletter in my mind. Good luck with the challenge. I've been long mining services for a while and probably (no did) get in too early but that is always my problem.

Peter Phan said...

Article in the small business section of the SMH on 20 April 2014 described several cases where accounting firms attempt to lock in clients with continual support fees billing by registering Xero subscription in the firms name rather than the clients name. Client not able to access their own data directly, hence difficult to move. Although anecdoctal, it appears that Xero knows about this. One of Xeros distribution strategy is to push product via accountants. Smells fishy.