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The cash register is ringing:
Taipan's contrarian stock picks crush the Dow
by James Passin
No matter how you look at it, 1999 was an outstanding year for Taipan subscribers. Explosive gains in technology, commodities, Asia, and Russia fueled a massive re-rating of our recommended portfolio. My own modest contributon of picks returned an average profit of 58%, more the double the performance of the record-setting Dow Jones Industrial Average. Seven positions generated triple-digit profits.
The "Global Commodity" portfolio returned 91% on the back of a broad recovery in commodity prices. A rebound in crude oil from US$10 to US$25 per barrel supported a massive rally in Russian stocks. The top performer was Surgutneftegaz ADR (SGTZY-OTC), gaining 483% to a record high. There was only one significant loser in the Global Commodity portfolio: Ashanti Goldfields (ASL-NYSE). ASL declined 71% after its hedging strategy backfired. Considering the high level of real interest rates and continued growth in Asia, I remain moderately bullish towards commodity-related positions in 2000.
Our "Global Technology" portfolio participated in the tech craze, generating an average 86% profit. Elbit Ltd. (ELBTF) was the top performer, climbing 405%. Other Israeli techs produced outstanding results, including Elron (ELRNF) and Orckit (ORCT). Uproar (UPRO-EASDAQ, the former EPUB-Austrian BB), my play on the Internet Bubble, changed its name, split 20-for-1, and filed with the SEC for a NASDAQ offering -- driving the stock up 117%. While I am concerned about the likelihood of a shakeout in the U.S. tech market, I am inclined to let winners run. However, I recommend waiting for material pullbacks before adding to any positions.
The only big disappointment was "U.S. Small Cap Technology." 1999 was a frustrating year for small-cap investors. The money flowed into big stocks. Why bother uncovering undervalued small caps when you can jump on fashionable momentum plays? Cumulative market breadth in NASDAQ collapsed, excluding the majority of small-cap stocks from the bull market. Ironically, a number of internet highflyers deserve to trade at small-cap valuations based on prospective cashflows or even sales. The U.S. small-cap tech portfolio shed 4%.
But don't you know it, there was a massive rally in small caps in the first two weeks of January 2000. GGNS, XOMA, and AVAN bounced sharply, contributing to a 22% average gain in the portfolio since January 1 (compare this to the 2% rally in the Russell 2000!).
I believe that the tide has turned; small-cap technology is positioned to compete for market leadership with ludicrously overstretched Internet highfliers. As I wrote in the December 1998 Special Update Issue of Taipan: "This will be the long awaited bull market in small caps, commencing near the eve of the new millennium."
James Passin is a Portfolio Manager with Firebird Management and Contributing Editor to Taipan. Passin's views are strictly his own and not necessarily those of Firebird Management or Taipan. Several funds managed by Firebird are currently shareholders in Surgutneftegaz and Uproar.
Go to the '99 Passin Portfolio
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