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Year of the Tiger performance review:
How you did in 1998
by J. Christoph Amberger
When I asked my Taipan crew to come up with a penultimate performance summary for how our stock picks did in 1998, I faced a long moment of silence.
I grew concerned. Was our track record for 1998 so bad nobody wanted to fess up to it?
Of course not. But have you ever tried to get a half-dozen triple-A personalities to pull together and throw their jealously-guarded personal successes into one big pot to arrive at a communal average?
It was then that I realized that my strategy had backfired...at least as far as my ease of work was concerned. Because for years, I have incited my editors to seek out competition with our industry: Competition in which the better should win...by virtue of better stock picks. Of course, I had intended that they focus their aggressive energy on the competition, not on each other. But suddenly, every backslap or congratulation on a profitable pick to me has taken on a new dimension: It is a veiled vow to outdo the friend and colleague the next turn around.
Honestly, I’m not unhappy with this. Because I know our (still friendly yet ambitious) internal competition will result in great profit opportunities for you in 1999.
But back to basics.
I laughed: I cried
I know one thing for sure. The year 1998 counts among the most stressful of my career. First Asia, then Russia, then the U.S. correction, followed by a decline in tech stocks, while Internet stocks sold like there was no tomorrow.
In roller-coaster years like this, you can be up an average 75% on your positions, and yet finish the year in the red.
Our editors’ picks closely mirrored the major trends of the market. Here’s how the indices and our editors’ picks did for the calendar year of 1998 at a glance:
| Dow Jones |
up 17% |
| Russell 2000 |
down 3% |
| S&P 500 |
up 26.3% |
| NASDAQ |
up 40% |
| Russia (RTSI) |
down 86% |
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| Taipan Webehead |
up 109.96% |
| Taipan U.S. Small Cap Technology |
down 25.48% |
| Taipan Microcaps |
up 20% |
| Taipan World Investor |
up 29% |
| Taipan Global Commodities |
down 35.33% |
| Taipan Global Technology |
up 51.2% |
| Taipan Emerging Services |
up 8.16% |
| Taipan IPOs |
up 65.3% |
Which means that if you put an equal amount of money into each and every one of Taipan’s 1998 stock recommendations, and bought and sold the day you received the recommendation (via our issue or on the hotline), you averaged a gain of 27.87% over the calendar year.
Leaders of the pack
A bunch of triple-digit winners made sure that 1998 was indeed quite a successful year after all was said and done:
| Bioject (BJCT) |
up 125% |
| Orbital (ORB) |
up 101% and 146% |
| Elbit Medical Imaging (EMITF) |
up 137.56% |
| Elscint (ELT) |
up 94% |
| Desnoes & Geddes |
up 102% |
| Human Pheromones (EROX) |
up 300% |
| Rambus (RMBS) |
up 118.13% |
| Real Networks (RNWK) |
down 25.48% |
| USWeb (USWB) |
up 273.5% |
| EBay (EBAY) |
up 100% |
Stop losses
Generally, we recommend that you establish and closely observe a 20% stop loss on your positions. It’s a basic risk management tool that allows you to control your downside, and lock in profits. (Of course, if your personal investment strategy is more risk-adverse, you can establish a stop loss at 10-15%. If your pain threshold is higher, establish one at 50%!)
But let’s face it: Executing a stop loss (i.e., selling when you think you’ve lost all you can stand to lose) requires that someone wants to buy your stock. But in cases when the bottom falls out from under a market ó as happened in Russia in 1998 ó you might not find a buyer...
Now, we know that many advisories apply an automatic stop loss in their annual review for anything that fell more than 20%. We didn’t feel comfortable doing that for 1998. This is why our review reflects the true loss ó which in the case of our 1998 Russia plays is about as enjoyable as a glimpse of Dennis Franz’s glutes on NYPD Blue...
Of course, if you actually managed to execute a stop loss on these positions, you’re way ahead of the game.
Prices
As a general rule, we peg the entry price of a stock at the publication date of the issue it is featured in ó which is the date the United States Postal Service delivers the bulk of the issue into the hands of our subscribers. For those taipans in more remote locations, we make the information available simultaneously on our website and on our telephone hotline. (That’s why I think it is important for you to take advantage of these additional features of your subscription... after all, there’s no special fee to access either of them.)
In cases of open positions carried over from a previous year, or positions where we advise to add to your holdings at different price levels, we averaged the entry price. (It’s marked with an *.) Call option premiums are added to the closing price, while we tend to subtract dividends from your entry cost.
Where no sell recommendation was made in 1998 (and consequently no exit price is available), the closing price on Dec. 31, 1998, is used to calculate the profit or loss for the calendar year.
Of course, every taipan will have a different entry and exit price to show on his statement... depending on when exactly your broker executed your orders in intraday trading. Your cost may also vary based on your brokerage fees. Let me point out that this review is a general overview based on generalized assumptions and is not intended to paraphrase your individual annual statement.
Time frame
We at Taipan reject the limited scope of annual mutual fund statements and reports: If you take risks in markets that can soar by 300% in a month, or lose 98% in a heartbeat, the calendar year of the suits and bean counters is but a pale shadow of our more sweeping perspective and philosophy.
(To be honest: What I really don’t like about the calendar year as your frame of reference is that it ends arbitrarily smack dab in the depressed middle of tax-loss selling, and thus makes things look worse than they are.)
But heck: We’re bragging with the best of them, so let’s put it all on the table. I’ve asked each of our editors to give you his (or her) take on how they justified their salaries in serving you through 1998...
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