Reprinted from MarketWatch
Cabot’s formidable performance best in 2007—Generated 74.1% annual return
By Peter Brimelow, MarketWatch, December 30, 2007
NEW YORK (MarketWatch)—Cabot’s China & Emerging Markets Report (CCEMR), edited by Paul Goodwin, is our 2007 Investment Letter of Year.
I select the Investment Letter of The Year according to a strict scientific principle: I ignore the Hulbert Financial Digest performance data and pick whoever I feel like.
But CCEMR’s performance is too formidable to be ignored. It’s the top-ranking letter over the year to date, according to the Hulbert Financial Digest: up 74.1% vs. 7.51% for the dividend-reinvested Dow Jones Wilshire 5000 through Nov. 30.
Over the past three years, CCEMR achieved a remarkable 42.52% annualized return vs. 10.68% annualized for the total return DJ Wilshire. And over the past five years, it achieved 28.28% vs., 12.85 for the DJW.
Long experience with the HFD monitoring suggests this is right at the upper limit of sustainable results.
CCEMR, of course, is benefiting from one of those investment thermals that occasionally occurs - in this case, the entry of China into the world economy. Maybe it’s luck. Maybe it’s judgment. But the returns to date have been real, and they’ve already lasted a lot longer than the Internet boom of 10 years ago.
There are a lot of raging China bulls around China bugs? I get nasty emails whenever I make a Sinoskeptical noise.
But what really impresses me about CCEMR is that editor Goodwin is clearly aware that he is in an investment thermal. He doesn’t like it and has made efforts to get out, even renaming his letter to reflect broader interests. But his system keeps pushing him back in.
As he wrote this fall: “We’re a little self-conscious about calling ourselves BRIC (Brazil, Russia India, China) investors when all of our current recommendations are based in China. For each new stock we pick, we look for the best combination of strong story, sound fundamentals and positive momentum. And since the Cabot China-Timer flashed its most recent buy signal, the stock selected has been Chinese ... every time.”
Recently, finally, CCEMR turned bearish on China. Sort of.
CCEMR’s issue dated Dec. 27 reflects Goodwin’s obvious fear that his proprietary “China-Timer,” a moving average system, is whipsawing him:
“Our China-Timer is currently bullish, but continues its end-of-year gyrations. The Halter Usx China Index. (HCX) has risen back above the 8,000 level, and now its lower (25-day) moving average has begun to trend higher—a true buy signal! But there’s no escaping the fact that the indicator has been whipping around in recent days as plenty of crosscurrents dominate the action. Thus, your best move is to respect the bullish signal, and do some selective buying in our buy-rated BRIC stocks on pullbacks. We expect the new year to provide more insight on the market’s true direction.”
CCEMR’s only new recommendation is a Brazilian steel company: Companhia Siderurgica Nacion (SID) But the CCEMR model portfolio shows five current buys, one Turkish, one Brazilian and three Chinese:
• New Oriental Education and Technology Group
• Baidu Com Inc. (BIDU:
• Suntech Power Holdings Co Ltd. (STP)
• Gafisa S A. (GFA)
• Turkcell Iletisim Hizmetleri. (TKC)
Link to article on MarketWatch.com
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