Port Phillip Publishing 2016 Report Card — Part One
By Bernd Struben

  • Australian Small-Cap Investigator
  • Crisis & Opportunity
  • Currency Wars Trader
  • Gowdie Family Wealth
  • Microcap Trader
  • Options Trader
  • Quant Trader
  • Part two of the Report Card coming next week

It’s hard to believe 2017 is already well underway. If 2016 was any indication, this year is likely to pass in the blink of an eye. Seriously, they don’t seem to make years like they used to. Years that dragged on for, well, an entire year.

But, fast as it went, 2016 certainly wasn’t dull. Over in Europe, the UK decided to divorce the EU. In the US, voters decided to divorce themselves from reality, electing Donald Trump to lead the free world. (Not that they had any viable alternatives, mind you.)

There was plenty going on in South America too, including the impeachment of President Dilma Rousseff on corruption charges. In Asia, Philippine voters might do well to emulate the Brazilians and give madman…erm…President Rodrigo Duterte the boot.

Here in Oz, we had our own action-packed year.

Who can ever forget the nail-biting drama surrounding the government’s struggle to enact a backpacker tax of 15%? OK, maybe that doesn’t stack up with impeachments, geopolitical rifts, and murderous heads of state. But all of these events — and thousands more across the world — had an impact on global stock markets.

You probably remember this:



chart image

Source: Yahoo Finance
Click to enlarge


That was the ASX 200 from opening day on 4 January 2016 through to 20 January 2016. The index fell all the way to 4841 points.

At time of writing the ASX 200 is trading at 5805 points. That’s higher than at any time in 2016, and up an impressive 20% from the low on 20 January 2016. Year to date, though, it’s only up about 1.2% in 2017.

These kinds of moves are what make our editors’ jobs so challenging…and exciting. And in the Report Card that follows, you’ll see just how well they did for their subscribers last year.

But first, a look at the markets.

Markets

Overnight, the Dow Jones Industrial Average closed up by 92.25 points, or 0.45%.

The S&P 500 gained 9.33 points, or 0.40%.

In Europe, the Euro Stoxx 50 index ended the day 3.66 points higher, for a 0.11% gain. Meanwhile, the FTSE 100 lost 0.14% and Germany’s DAX index was down 0.02%.

In Asian markets, Japan’s Nikkei 225 is up 208.30 points, or 1.08%. China’s CSI 300 is up 0.25%.

In Australia, the S&P/ASX 200 is up 52.80 points, or 0.92%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$52.85 per barrel. Brent crude is US$55.65 per barrel.

Gold is trading for US$1,225.52 (AU$1,597.83) per troy ounce. Silver is US$17.89 (AU$23.33) per troy ounce.

The Aussie dollar is worth 76.70 US cents.

Now back to the matter at hand…

It’s a officially a tradition

This is the third year running we’ve decided to share this abridged report with all of our paid subscribers. Before that, the Report Card was only available to our Alliance partners. They receive the full version of this report ever year on New Year’s Day.

The unabridged Alliance Report Card includes detailed tables listing every stock our editors recommended buying or selling in 2016, and how these recommendations fared. These tables also include how every stock recommended in previous years performed in 2016.

Now, I obviously can’t share all of our editors’ stock tips with everyone. That’s a perk reserved solely for our Alliance members. But I do name some stocks in my written evaluations.

On that note, it’s important you realise that most of these stocks aren’t currently active recommendations. Many are now trading above their maximum buy-up-to prices, and, as you know, you should never buy a stock trading above this price. On the flip side, other stocks named in this report may be close to hitting their stop-losses and being shown the exit. Some may already have been sold.

So please view this report as it’s intended: A transparent evaluation of how our editors and their advisory services performed last year.

And, as you’ll see, I don’t pull any punches. A number of our services do receive high grades…because they performed very well. But others — including some of our premium services like Currency Wars Trader — receive marks that likely would have seen you grounded back in your high school days.

That’s part of why we do this internal evaluation each year. To see what’s working well and what needs improvement. And it’s why Currency Wars Trader received a complete revamp in January this year. One that, so far, looks like it will see this service make a big comeback in 2017.

On with the Report Card…

Over the following pages, I’ll detail the investment performance for seven of our publications over 2016. Next week I’ll cover the remaining six.

A quick bit of maths will tell you that we actually have 17 paid publications. But Money Morning Trader, Cycles Trends and Forecasts, and the recently launched Port Phillip Insider Extra do not make specific stock recommendations, though they’re all excellent publications in their own right. And Gold Stock Trader is too new to the scene for its performance to be fairly judged.

Now, obviously, I’d like to see every one of our editors and their recommendations smash any related benchmarks. But not every publication manages to do that every year. And my intention is to give you an unbiased scorecard. After all, at the end of the day, the point of any investment idea is whether or not it makes you money.

Of course, aside from helping you preserve and grow your wealth, our editors also aim to educate you about financial and global events, hopefully managing to entertain you along the way as well. On that front, they all excel.

Now let’s get to it.

I evaluated most publications on the following criteria:

  • Returns for stocks recommended in 2016 (4 January–9 December)
  • Returns for open positions from previous years (4 January–9 December)
  • Returns for stocks sold in 2016 (from date of recommendation)
  • Winners versus losers
  • How well they’ve met their stated service objectives

The first four points are all fairly objective, meaning the data speaks for itself. You should note that the ‘stocks recommended in 2016’ category only includes stocks that are still in the portfolio. Stocks recommended in 2016 and sold in 2016 are listed in the ‘stocks sold in 2016’ category.

The returns for stocks that were not sold this year use closing prices as at 9 December 2016. The ‘winners versus losers’ reflects the importance that, to make money, you must first not lose money.

To give you some benchmarks, below are the (rounded) returns from some relevant indices from 4 January through to 9 December 2016:

S&P/ASX 200: +5.5%
S&P/ASX 200 Resources: +40.2%
S&P/ASX Small Ordinaries: +6.8%
FTSE 100: +14.1%
NYSE S&P 500: +12.3%
NASDAQ: +8.9%
Nikkei 225: +3.0%
Hang Seng: +6.7%
Cash rate: +3.0%

That leads me to the fifth point, which is a bit more subjective. Each of our editors has a different goal in mind for their publications. Regardless of how the results stack up against a particular index, part of each publication’s grade will depend on how well they’ve achieved their stated objectives.

To reach an overall grade, I tally up all the categories. This involves another bit of subjectivity, as not all categories deserve equal weight for every publication. If only one stock was sold, and it happens to be for a loss, this shouldn’t disproportionately drag down the entire score. And though the proportion of winners to losers is important, if the losses are small compared to the gains — or vice versa — that has to be taken into account.

Did you get all that? Good, let’s get to it.

(Note: If you’d like to find out more about any of the services I’m reviewing today, simply click on the banner with the publication’s name.)

Sam Volkering

Returns for stocks recommended in 2016

Eden Innovations, recommended in January, easily tops the list for new recommendations in 2016, with a whopping gain of 333.96%.

Martin Aircraft Company, recommended in May, comes in at the bottom end, with a loss of 50%.

Overall, the 10 stocks recommended in 2016 that weren’t sold returned an average of 35.07%. Although that’s down from the 40.7% gain Sam scored in this category last year, it’s a great result, and handily beats the ASX Small Ordinaries gain of 6.8%.

Perfect score.

Returns for open positions from previous years

There are 24 open positions in the ASI price table recommended in previous years.

CleanTeQ Holdings is the top performer here, with a gain of 221.21%. Appen Ltd’s 65.45% return is also nothing to sneeze at.

A number of these stocks did suffer this year, alongside a broader trend in small-cap stocks. Capitol Health comes in last, with a loss of 60.71% since it was recommended. iSignthis has also disappointed, showing a loss of 52.17%.

All up, the 24 open positions returned a rather measly — yet still positive — gain of 0.78%. Lukewarm here…at best.

Returns for stocks sold in 2016

Sam recommended selling 12 stocks in 2016.

In June, he advised that you sell half your CleanTeQ Holdings stock for an eye-watering gain of 1,053%. With the share price having gone down considerably since, that was a well-timed recommendation. Collins Foods was sold for a gain of 208.63%. FAR Ltd clocked a gain of 166.67%. And BWP Trust gained 142.53%. Some truly impressive figures.

The biggest loss maker of the sold stocks was Vmoto — for a loss of 73.08% — followed by Yellow Brick Road, sold for a loss of 64.71%.

I’ll also point out that Sam recommended selling Bellamy’s in September last year at $10, for a 575% gain. He copped a fair bit of flak for it. While the stock traded higher earlier this year, at the time of writing the stock is trading at $6.68, and the ‘Chinese Baby Formula’ bubble looks to have well and truly burst.

Overall, the 12 stocks sold in 2016 delivered a very impressive gain of 132.05%. I don’t think anyone will be complaining about that result.

Winners versus losers

Of the 47 stocks on the buy list, 26 are in the black, while 21 are in the red. That may not sound like a great ratio, but, in the volatile world of small-caps, it’s not bad. Especially when the wins greatly outweigh the losses.

Good score here.

How well they’ve met their stated service objectives

Sam’s knowledge and fondness for the smaller end of the market comes through in every update and issue. He continues to deliver promising small-cap stock tips with excellent results every month. And he keeps readers up to date on the most important issues affecting the stocks in the buy list…without boring you with too many minor details.

With the primary goal of this service to deliver superior gains while taking on a bit more risk, this objective is well met.

Overall grade: A

Greg Canavan

Returns for stocks recommended in 2016

Greg’s ‘fusion method’ (combining technical and fundamental analysis) is approaching its second birthday. Last year the results were stellar. This year looks quite strong as well.

June’s recommendation, Oz Minerals , is up 53%…in less than six months.

The US Dollar ETF is the only lossmaking tip, down 0.23%.

All told, the 10 stocks recommended in 2016 still in the portfolio returned a gain of 12.1%. That’s more than double the return from the ASX 200. Good score here.

Returns for open positions from previous years

Only one stock remains in the portfolio from past years: Eureka Group, which is up 34.5%.

This category gets the big check plus.

Returns for stocks sold in 2016

Greg did not hesitate to follow his strict stop-loss strategy, selling 18 stocks this year. Notably, 13 of those were for gains, and only five were stopped out for losses.

Saracen Mineral Holdings returned an impressive 150% gain, while Gryphon Minerals came in a healthy second, with a gain of 115%.

Cash Converters was the leading loss maker, down 33% when Greg recommended selling.

Overall, the 18 stocks sold in 2016 returned 37%. No two ways about it. That’s an excellent result. And it demonstrates how an effective investment strategy, coupled with following your stop-losses, helps get you out of stocks before your losses pile up.

Winners versus losers

Out of the 29 stocks, 22 gained, one broke even, and six lost. Also an excellent result here.

How well they’ve met their stated service objectives

Greg’s managed to meet, or beat, the great results he achieved in 2015 once more in 2016. Aside from offering valuable stock advice, he also delivers unique macroeconomic insight on what may well lie ahead in the months to come.

His service continues to offer specific portfolio advice, with recommendations on how to allocate your capital. The intent is to minimise your overall risk, while still going for maximum gains.

Greg looks for opportunities wherever they present themselves. Often, as the title of his service would indicate, those are stocks that are only just beginning to recover from a crisis.

Objectives met.

Overall grade: A

Shae Russell

Currency Wars Trader has both stock and CFD recommendations, as well as options trades. We’ll cover the stock/CFD recommendations first.

Returns for stocks/CFDs recommended in 2016

Shae’s October Russian trade, the VanEck Vectors Russia ETF (LONG) trade, was the best performer in this category, with a gain of 11.2%.

Silver Wheaton Corp (LONG) showed the biggest losses, down 21.2%.

All up, the 11 stocks recommended in 2016 that are still on the buy list returned a loss of 5.9%. In a year when all the benchmark indices are up, that’s not good.

Returns for open positions from previous years

PowerShares DB Comm Index Tracking Fund ETF (LONG) was the best performer here, up 13.7%.

Dover Corporation (SHORT) was the worst performer, down 15.3%.

The three open positions from previous years returned a razor-thin gain of 0.33%. And, unfortunately, this is the best performing category.

Returns for stocks/CFDs sold in 2016

Shae sold 10 stock/CFD positions in 2016.

América Móvil (ADR) (SHORT) was the biggest (and only) gainer, up an impressive 25.2% since it entered the buy list in November.

The recommendation to short Fortescue Metals Group in June didn’t work out. The trade leads the losers, down 41.9%.

All told, the 10 sold positions are down an average 13.3%. Also not good.

Winners versus losers

Of the 24 stocks/CFDs, six gained, one broke even, and 17 lost. No way to sugar-coat this one. Very poor.

Returns for options recommended in 2016

The only option showing a gain as at 9 December is the VIX December 2016 $12 call option. It’s up 26.0%.

There are plenty of hefty losers to pick from. But the DE January 2017 $75 put option is bottom of the barrel, down 99.7%.

Of the 16 options recommended, the average loss is 66.9%. That’s, um, not good…at all.

Returns for options sold/closed in 2016

There were a few big winners here. The FXY January 2017 $90 call option tops the list, with a gain of 103.7%.

A fair number of options expired worthless, resulting in losses of 100%.

Of the 11 options sold or closed in 2016, the average loss was 58.8%. Quite a hefty loss.

Winners versus losers

Three options trades are in the black. 24 are in the red. That’s not what any investor wants to see.

How well they’ve met their stated service objectives

Despite an extremely disappointing performance result, the service does meet its objectives in many ways. Jim Rickards’ unique insights into governments’ global market and currency manipulations are second to none. And Shae’s explanations of how Jim’s views impact Australian investors in particular also live up to the service’s objectives.

The options trades, in particular, have not worked out. Many of the themes Jim and Shae identify in the ongoing currency and trade wars can take several years to play out. As Shae wrote to me earlier this week,

The way options are priced makes them extremely volatile. The outcome of the US markets once Trump was elected decimated our gold, treasury, SPY and VIX trade. I had expected all of these trades to perform well once Trump was elected, but the market decided a Trump election was good news, and the contrarian plays didn’t do very well as a result.’

In the newly revamped Currency Wars Trader, options have been phased out and a second analyst has been brought in to increase the frequency of trades. Just some of the positive changes ahead for 2017.

But for this year (2016), Currency Wars Trader barely sneaks by.

Overall grade: D-

Vern Gowdie

Returns for recommended stocks

It’s been a wild ride for gold this year — mostly all downhill in the past weeks. Vern’s Gold ETF recommendation has lost ground alongside the yellow metal, but remains up 4.2% since it was recommended in August last year. For the purposes of this report card, ETFS Physical Gold [ASX:GOLD] gained 5.3% this year through 9 December.

Vern made a second recommendation — also cash, but with a twist — in October this year. Seeing weakness in the British pound, he recommended investing up to 10% of your Aussie dollars into the pound…either directly or via the BetaShares British Pound ETF [ASX:POU]. That recommendation has played out well so far. It’s up 4.2%.

Vern recommends you keep the rest of your investable assets in Aussie dollars. The cash rate would have returned you 3.0%.

Going with 10% pounds, 5% Gold ETF, and the remaining 85% in Aussie dollars at the cash rate, the overall return is 3.2%. Now, that’s less than the 5.5% the ASX 200 delivered, but it sure came with a lot less stress and risk.

Winners versus losers

All three are winners. Nicely done.

How well they’ve met their stated service objectives

Vern’s objectives remain fixed on preserving your capital, for yourself and future generations. He keeps an eye out for low-risk/high-reward investments, and, this year, the pound trade fit the bill and paid off.

Vern’s also spent a lot more time writing to you about family wealth issues this year. Topics like how to set up your own family office, how to deal with trusts and inheritances, as well as educating your kids about the financial world in general.

Although the market meltdown Vern predicts didn’t happen in 2016, the service’s objectives have been well met.

Overall grade: A-

Sam Volkering

Returns for stocks recommended in 2016

After working together on the service for some time, Sam officially took over as editor of Microcap Trader from Kris Sayce earlier this year (2016).

Sam recommended 12 tiny companies in 2016 that are still in the portfolio. The big gainer here is Hazer Group, up 107.7%.

Abundant Produce comes in at the tail end, with a loss of 32.9%.

All told, the 12 stocks recommended in 2016 that remain in the portfolio delivered a loss of 3.3%. You expect some losses with these tiny companies, many of which are in their infancy. But you hope for some bigger gains to more than offset those losses. In this category, that didn’t happen. No way around it, that’s disappointing.

Returns for open positions from previous years

Farm Pride Foods tops the winners of open positions from last year, with a gain of 33.3%.

Strategic Elements is the biggest loser, down 50%.

The nine open positions from previous years delivered an average loss of 14.3%. Not what we want to see.

Returns for stocks sold in 2016

Even without the phenomenal returns from Eden Innovations, the sold stocks turn the story around to a very positive one. The sale of Eden came after a recommendation to sell half your holdings in late 2015. The 1,180% gain from Sam’s last sell recommendation is the highest gain of any stock from any publication in Port Phillip Publishing’s history. Well done! It makes the 203.8% gain on Hazer Group Ltd look tame by comparison.

A.M. Castle & Co was the biggest loser, down 79.8%.

The seven stocks sold in 2016 delivered an average gain of 201.1%. Now we’re talking!

Winners versus losers

Of the 28 stocks, 12 are in the black, and 16 are showing losses. That’s not a great ratio, but, with microcaps, you can expect a number of failures mixed in with some — hopefully huge — winners. This category is fair.

How well they’ve met their stated service objectives

Sam consistently brings you exciting, high-risk stocks with potentially explosive gains…as witnessed by Eden Innovations. That’s precisely what you want to see with this service, where just a few skyrocketing share prices can overwhelm any losses to give you outsized gains. The stocks are thoroughly researched and delivered in an engaging fashion, with just the right amount of information you need to make your own investment decisions.

Although the losses in the first two categories are disappointing, the great gains in stocks sold easily make up for this.

Objective met.

Overall grade: B

Matt Hibbard

Options Trader is one of the publications that doesn’t fit into the standard grading mould. No worries…we’ll take a different tack here.

Closed written put and call options

75% of both the put and call options expired unexercised (since October 2015). The average premium generated per put trade was $201. The call trades generated an average of $205 in premium. As noted above, that’s based on an average trade length of three months, with around $5,500 of capital on the line.

The (approximate) annualised return on capital then is 14.8%. That’s almost triple the 5.5% the higher-risk ASX 200 delivered. Very nicely done.

Took delivery of shares (via exercised put or buy/write trade)

Of the shares Matt took delivery of, either through being exercised or initiating a buy/write trade, only two have been closed out so far (from being exercised).

One was an exercised put option where Matt took delivery of shares which closed out for a loss of $218.

The other, a strategy of buying shares and writing call options, returned a gain of $310. The gain outweighs the loss here, though the numbers are nothing to write home about; but it’s the open trades where the strategy comes to the fore.

Open trades

The open trades are tracking well. Two Telstra trades have collected three option premiums and two dividends as at 9 December. Matt is working an order for a fourth option premium for both, as well as AMP, which has collected four premiums and two dividends since he initiated the trade. Another trade has collected two premiums. This is exactly what we like to see with this service.

How well they’ve met their stated service objectives

Options can be confusing. I know, because I had to get certified to be able to provide advice on options. And the educational material was…well…let’s just say a bit dense. One of the objectives of this service is to educate readers in a straightforward, simple way on how to use certain options strategies. Matt has done a great job there. And the income returns generated have been excellent.

Objectives well met.

Overall grade: A-

Jason McIntosh

Quant Trader is another service that doesn’t fit the standard grading metrics. Again, a different approach is needed. The complete list of trades for 2016 takes up many pages…I’ll spare you that.

Long trades opened in 2016

The performance of the long trades opened in 2016 was disappointing, with only $0.71 won for every dollar lost.

2016 was a challenging year for trend following. Plenty of signals got off to a start, but few went on to produce strong gains. The choppy trading conditions added an extra element of difficulty. As Jason wrote to me earlier, ‘Quant Trader’s strategy typically does best when the markets are trending. But there’ll be years when neither bull nor bear markets dominate. This was one of those times.

Short trades opened in 2016

The short trades opened in 2016 also struggled, returning $0.61 for every dollar lost. That’s not what we like to see.

Long trades from previous years

While this year’s signals generally didn’t do much, Quant Trader had solid results from earlier signals. Many of these hit their exit points during the year. The trades averaged a return of $5.91 for every dollar lost. Now we’re talking.

Short trades from previous years

The short trades from previous years also did much better, returning an average of $2.77 for every dollar lost. As Jason often mentions, the short trades generally won’t return as much as the long trades, but they can be an effective hedge in case the market takes an unexpected turn for the worse. Well done in this category.

How well they’ve met their stated service objectives

Quant Trader is intended to offer you many trade options over the course of the year, often with multiple trades each day. With Jason opening up the ‘Overflow Signals’, he’s certainly delivered on this objective. The service also manages to effectively take the emotion out of trading (as much as that’s possible). And Jason’s weekly briefings offer simple, informative answers to readers’ questions about any and all aspects of the trading world. Well done here.

Overall grade: B

Part two of the Report Card

That’s it for today. If you made it this far in one sitting…well done. You’ll know why I decided to split this up into two parts.

I hope you find this report useful. As always, we’re happy to receive your feedback so we can continue to improve our services. Please email any comments to: cs@portphillippublishing.com.au and include ‘Report Card’ in the subject line so I’m sure to receive it.

Next week I’ll share the results for the remaining six advisory services.

Cheers,

Bernd