November 28, 2007

Luckily for me, we aren’t really required to keep a regular diary for this assignment, just follow our investment portfolio over the course of the semester. I’ve been busy over the past month or so, and have been letting my portfolio ride.

Not much has happened over the past few weeks. As expected, the market has moved “sideways”, investors still unsure about the total effects of the sub-prime lending fallout. The weak dollar hasn’t really manifested into foreign money flowing into American markets, probably due to the sub-prime lending issues, and the general impression that the Fed may continue to lower interest rates (further handicapping the US Dollar).

However, none of that really matters for this assignment, since I am done! Here’s my final summary sheet:

Date	Action	Symbol	Amount	Price	Extended Value
8/30	Deposit	(Cash)			100000.00
8/30	BUY	AAPL	73	136.25	(9946.25)
8/30	BUY	BAC	199	50.21	(9991.79)
8/30	BUY	CAT	134	74.66	(10004.44)
8/30	BUY	CVX	115	87.19	(10026.85)
8/30	BUY	XOM	117	85.40	(9991.80)
8/31	BUY	PBW	472	21.17	(9992.24)
9/10	DIV	CVX	115	0.58	66.70
9/10	DIV	XOM	117	0.35	40.95
9/10	BUY	VMMXX	40154.28	1.00	(40154.28)
9/21	SELL	VMMXX	40154.28	1.00	40154.28
9/21	DIV	VMMXX	40154.28	0.0012	48.41
9/21	BUY	VEIEX	1269	31.66	(40176.54)
9/27	SELL	VEIEX	306	32.32	9889.92
9/27	BUY	FLY	443	22.58	(10002.94)
9/28	SELL	VEIEX	306	32.83	10045.98
9/28	BUY	DUF	550	18.25	(10037.50)
9/30	DIV	BAC	199	0.56	111.44
10/22	SELL	FLY	443	22.35	9901.05
10/22	SELL	BAC	199	47.78	9508.22
10/22	SELL	CAT	134	73.50	9849.00
10/22	BUY	AAPL	171	171.36	(29302.56)
11/28	SELL	AAPL	244	180.22	43978.68
11/28	SELL	CVX	115	85.98	9887.70
11/28	SELL	DUF	550	19.83	10906.50
11/28	SELL	PBW	472	23.25	10974.00
11/28	SELL	VEIEX	654	32.52	21268.08
11/28	SELL	XOM	117	87.92	10286.64
11/28	Withdraw	(Cash)			107398.27
11/28	Net Gain	(Yay!)			7398.27
11/28	% Gain				7.40

 

 

Market	Initial (8/28)	Final (11/29)	Net Gain/(Loss)	% Gain/(Loss)
DJIA	13256.78	13289.45	32.67	0.25
S&P 500	1457.66	1471.16	13.50	0.93
NASDAQ	2565.30	2663.41	98.11	3.82

The bottom line? I kicked butt!

Managing to outperform the market by at least 2:1 ratio (30:1, if you use the DJIA as the measuring stick) is something most professional investment fund managers would be proud of. Unfortunately, I can’t claim to be all that skilled. Really, I got lucky. A couple of my stocks really managed to carry me (AAPL and the PBW fund). Had I concentrated more on tech and foreign stocks, I would have done better. Of course, had I concentrated on blue-chips, I would have done worse.

My two experiments didn’t really produce spectacular conclusions either way.

The IPOs of Duff & Phelps and Babcock & Brown didn’t produce the IPO run-up of the late 90s, but I didn’t expect them to. Duff and Phelps has had a decent return of almost 9% over the two months since its IPO. Babcock & Brown had lost about 1% when I sold it after 3 weeks. Its gone down more since then.

Oil started, in August at about $80 per barrel. It has been getting close to $100 recently. The two oil company stocks haven’t really benefitted from the rise in oil prices as one would have expected. Chevron (CVX) is down 1.2%, while Exxon (XOM) had a decent gain of about 3% (note: both CVX and XOM paid dividends during the period, which made them gainers). The “Head vs. Heart” experiment really seems to have gone the other way on me. The PowerShares Clean Energy fund seems to have benefitted more from higher oil prices than the major oil companies. PBW was up almost 10%...So maybe there is something to investing with companies that are “doing the right thing”. Well, not really...In the case of the huge rise in oil prices, the “Head” should have realized that alternative energy sources start to cross over into financially viable territory. Formerly unprofitable energy companies become suddenly viable. Major oil companies are already profitable, and their profits don’t have a 100% correlation to oil prices. Therefore, with foreknowledge of a 30% gain in oil prices, I might have picked a clean energy fund with both my head and my heart.

The PowerShares fund success also brings up another point. Both of my managed funds did better than the market. Generally, professional fund managers are going to do the same or better than the market, so if I was going to take the “hands off” approach I used during the past month, I would probably be better picking a couple of managed funds. Granted, there’s a tradeoff, especially when it comes to tax benefits, but that’s another discussion.