A few weeks ago, I wrote a series of two articles on the yet-to-be-unveiled Obama stimulus package for the economy, arguing that things pointed in the direction of massive infrastructure spending with a green twist. I argued that this would benefit a certain categories of rail-related stocks and electric grid stocks. How am I doing relative to the market as a whole, which has had several positive trading days for the past while on the back of the eventual stimulus plan?
Railway Stocks
I discussed four railway stocks in an article published on October 18. On October 17, the Dow closed at 8,852.22 and the S&P 500 at 940.55. Last Friday, December 12, they respectively closed at 8,629.68 and 879.73 for losses of 2.51% and 6.47% over that period. My stocks performed as follows:
| Railway Stocks: Oct. 17 to Dec. 12 (Closing pr.) | |||
| Company | Oct. 17 | Dec. 12 | Δ % |
| Koppers Holdings | 20.28 | 21.99 | 8.43 |
| LB Foster | 22.89 | 31.68 | 38.40 |
| Stella Jones | 20.18 | 13.25 | (34.34) |
| Global Railway Indust. | 1.00 | 0.75 | (25.00) |
Not bad. Stella Jones and Global Railways are Canadian companies and their primary listings are on the TSX, so they are not directly comparable to Koppers Holdings and LB Fosters which trade primarily on US exchanges. Nevertheless, I chose to include both Canadian companies and they both underperformed pretty badly, so my railway recommendations were good as far as the US went but mediocre overall.
Electric Grid Stocks
I discussed ten electric grid stocks on November 2. The last trading day before that was October 31. On that day, the Dow closed at 9,336.93 and the S&P 500 at 968.75. Last Friday, they respectively closed at at 8,629.68 and 879.73 for losses of 7.57% and 9.19% over that period. My grid stocks performed as follows:
| Grid Stocks: Oct. 31 to Dec. 12 (Closing pr.) | |||
| Company | Oct. 31 | Dec. 12 | Δ % |
| ABB Group | 13.15 | 13.80 | 4.94 |
| Allegheny Technologies | 26.54 | 24.05 | (9.38) |
| Composite Tech | 0.29 | 0.39 | 34.48 |
| General Cable | 17.08 | 16.97 | (0.64) |
| MasTec Inc. | 8.72 | 8.78 | 0.69 |
| Quanta Services | 19.76 | 18.13 | (8.25) |
| Resin Systems | 0.15 | 0.26 | 73.33 |
| Schneider Electric | 50.75 | 71.00 | 39.90 |
| Siemens | 60.15 | 63.92 | 6.27 |
| Valmont Industries | 54.78 | 57.46 | 4.89 |
A little better. Only one of my picks, Allegheny Tech, underperformed both benchmark indexes. If you ignore the two penny stocks (Composite Tech and Resin Systems), which most folks aren’t touching at the moment, my picks performed overall decently, with five in positive territory, one that underperformed both indexes, one that underperformed only the Dow and one that’s in negative territory but still outperformed the Dow and the S&P 500.
What’s Next?
Of course none of the stimulus money has been spent or even approved yet, so at this stage in the game all of this remains speculation. Although I did not recommend any these stocks specifically, my thematic choices appear to be performing decently and may thus provide decent sub-sets for picking individual plays on the stimulus plan. I will reassess both sets of stocks once the Obama administration is in power and the stimulus strategy is being implemented.
DISCLOSURE: Charles Morand is long ABB.
DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own
risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
You can’t pick and choose your returns. What about your call to buy Evergreen at $8?
As they say in the CFA program, “It’s ALL or nothing when displaying investment returns!”
Actually, the Evergreen call was mine, not Charles’s (who wrote this article) and none of these posts are compliant with Global Investment Performance Standards (GIPS(R)), which only apply to managed accounts, nor have we ever made any such claim. Charles and I do not disclose the performance of our accounts, we only talk about what might have happend if people followed our advice.
Regarding my Eveergreen Solar call, I said “There are a lot of “ifs,” but Evergreen seems relatively well placed for the coming solar storm. With the stock price back below $8, I expect we’re much closer to a bottom than we are to the recent peak.” on September 8.
ESLR was not releatively well-placed to deal with the financial crisis- the storm I was referring to in that article was the silicon supply glut. They were exposed to the Lehman bankruptcy, and so the financial crisis trumped the supply glut.
I make mistakes. In this case, I did too much industry analysis, and not enough macroeconomic analysis.
Despite this, ESLR is down 64.0% since Sep 9 while TAN (a solar ETF) is down 66.4% over the same period. So, my call that ESLR was relatively well placed was actually a good one (much to my shock, given all that has happened.) In terms of my comment about being nearer the bottom than the high, I failed to predict the magnitude of the current crisis. For me, this involved losing a lot of money. I also learned a lot from it, and I hope to share what I learned with readers.
In other words, read the disclaimer.
pick and choose:
I’m not sure where you see “picking and choosing” in this article. The tables I included feature all of the stocks I initially discussed with their performances.
The two grid penny stocks I decided to ignore in my discussion (but that are still shown in the table), Composite Tech and Resin Systems, returned 34.48% and 73.33% over the measurement period. Including them would actually improve my record, not weaken it. I just decided to leave them out of the discussion because many investors would not touch penny stocks at the moment so including them would artificially inflate my list’s performance. I call this being conservative, not picking and choosing.
If you read the two articles on which this one is based, you will note that I make it explicit that these are only macro-level lists and that further research would be needed to pick out individual stocks. In this article, I’m merely comparing these lists to the market as a whole.
My sense is that you did not actually read the article carefully before making your comment. If I’m wrong in assuming this, please provide further detail on where you see picking and choosing and I will try my best to address your concerns. If I’m right, please ensure that you read articles in their entirety and that you understand them well before publicly insinuating that we are dishonest in reporting our results.