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Year of the Tiger performance review:
The good, the bad, and the ugly
by James Passin
Don’t expect me to wax poetic about last year’s performance: 1998 was a rough year for global contrarian speculators. Russia utterly collapsed. Anything related to commodities collapsed. My Russian and ex-Soviet recommendations turned into outright blood baths while our Middle Eastern (ex-Israel) picks were hit mildly by the flight out of emerging markets.
My recommended U.S. small caps suffered along with the Russell 2000. Our biggest win in the U.S. was a six-week gain of 27% on our short position on Hemispherx. The worst-performing recommendation was Shaman, an eager participant in the biotech bear market.
There were plenty of bright spots: Israeli tech picks averaged a 51% gain, with big wins in Elbit Medical (up 137%) and Orbotech (up 94%). Our bottom fishing in Korea paid off: we picked up Pohang Iron and Steel at the bottom for a two-month gain of 47%.
Chop shop
For easier reference, I have organized the Taipan recommendations according to sectors.
My Global Technology picks -- comprising all my favorite Israeli companies -- closed the year at 51% above their Dec.31, 1997, levels. In fact, had you invested in all the picks and managed to close out at the 1998 top, you’d have averaged a gain of 70.5%.
Russia’s collapse not only wiped out 98% of its market valuation, it also wreaked havoc on our Emerging Commodity plays. Averaging the 1998 high for each stock, we were up a modest 9.12%óbefore the entire sector went down to close at -35.33% percent below our recommended (or carried-over averaged) entry level. Even if you were able to consequently execute your standard 20% trailing stop loss protection, you would be down 7.44%. (And I concur that in rapidly imploding markets like Russia, where no buyer remains alive, trailing stop losses are nearly impossible to apply...)
My U.S. Small Cap Technology picks, hit hard by the U.S. market shakeout -- the Russell 2000 had gone splat 40% at its low! -- dropped from an average gain of 21.74% at their respective 1998 highs, to close the calendar year valued 25.48% lower than at our entry levels. And our Emerging Services picks, up an average of 16.81% at their 1998 highs, wrapped up the business year up 8.16%.
Upward momentum
Any arbitrarily chosen time frame, of course, presents only a snippet of reality. The Taipan crew calculates annual gains and losses based on the entry price and the closing price at the last trading day of the year (this time around, Dec. 31, 1998).
Within a few days after our year-end deadline, on Jan. 4, 1999, to be specific, the picture looked quite different: Global Tech was up an average 66.73%. Emerging Services were up 11.19%, while maximum losses on our Global Commodity picks were slightly more digestible at -31.28% and -9.63% for the Small Cap. (Heck, some of my esteemed colleagues at other publications would call that a "Wealth Builder Portfolio.") After recent gains on Restaurant Brands, 1998 may seem like a bad dream after all.
And if you took my advice to dollar-cost average on my Russian picks (i.e., buy in at the lows): Mosenergo is up 166.67% from its 1998 low ask price, Surgutneftegaz weighed in at +170%, and TyumenAviaTrans is up 700%, for an average gain of 345.56% above the 1998 lows.
In 1999, I am anticipating a big rebound in commodity-related equities, which includes most of the emerging market recommendations. I also anticipate continued strength in Israeli tech, providing plenty of profit-taking opportunities.
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