2023 NZX Stock Picking Comp

[Dassets]

Moose, exactly. I am happy to pick stocks and have done in two past comps. First year I think I was in the top 10 or 20, last year mid pack, I picked Trade Window as one a week before the start. It then doubled or more before the start of the comp last year so I knew I was in trouble on that alone. Disclosure: used to be analyst/dealer then fund manager etc so I have some experience at least. I picked a suite of off shore ETFs because I saw a recession coming here and I wanted to be short NZD. I knew it wouldn't be spectacular but I didn't have great hope for NZ and expected a recession occur this year. I also thought about the election and thought that would be very disrupting. At this point the strategy is starting to pan out. I wasn't confident about kiwi stocks functionally net short NZD and out of touch with aussi market. So I headed to ETFs

[SailorRob]

Moose, exactly. I am happy to pick stocks and have done in two past comps. First year I think I was in the top 10 or 20, last year mid pack, I picked Trade Window as one a week before the start. It then doubled or more before the start of the comp last year so I knew I was in trouble on that alone. Disclosure: used to be analyst/dealer then fund manager etc so I have some experience at least. I picked a suite of off shore ETFs because I saw a recession coming here and I wanted to be short NZD. I knew it wouldn't be spectacular but I didn't have great hope for NZ and expected a recession occur this year. I also thought about the election and thought that would be very disrupting. At this point the strategy is starting to pan out. I wasn't confident about kiwi stocks functionally net short NZD and out of touch with aussi market. So I headed to ETFs

What is your past track record in picking recessions and what was your record as a fund manager?

[Dassets]

Pretty good on both. The fund returns were class leading by quite a bit for the 4 or 5 years I was there including alot of GFC. It is on public record. On the different asset classes and geographic markets on qtrly basis I was in front of a risk adjusted bench around 2/3rds of the qtrs. In NZ equities top quartile against a lot of managers and most were just doing NZ equities whereas I had a global multi asset class mandate. That last stuff wasn't all disclosed publicly I think. Funds size was in the hundreds. Recessions a bit more of a track record because I could do that on the sell side too. But I am not like Liam Dann who has picked 15 of the last 3 recessions. Started at a broker in 1991 so that ages me.

[SailorRob]

Pretty good on both. The fund returns were class leading by quite a bit for the 4 or 5 years I was there including alot of GFC. It is on public record. On the different asset classes and geographic markets on qtrly basis I was in front of a risk adjusted bench around 2/3rds of the qtrs. In NZ equities top quartile against a lot of managers and most were just doing NZ equities whereas I had a global multi asset class mandate. That last stuff wasn't all disclosed publicly I think. Funds size was in the hundreds. Recessions a bit more of a track record because I could do that on the sell side too. But I am not like Liam Dann who has picked 15 of the last 3 recessions. Started at a broker in 1991 so that ages me.

I had never heard of anyone in the world who had a track record of being able to predict recessions in a statistically significant way, neither has Buffett, that doesn't not mean they don't exist.

But even if they could, for example someone who called the covid recession perfectly, good luck to trading around that, they would have had their face torn off. I'm not one who considers volatility 'risk' and adjustments around it seem very academic.

Given these skills though, you should have been able to handily beat the returns provided by being invested in a ultra low cost index fund over this very long period and have a extremely large net worth to show for it.

To me all the academic nonsense is just that, the 'class leading' the 'risk adjusted' the 'quarters' the 'multi asset'. Over a long period of time you can either beat a low cost index fund after fees or you can't. If you can't then there is no way of explaining it with a Greek alphabet.

I don't mean to be rude but very few of those pros can deliver any value to an investor over a simple cheap index fund. Having read what you wrote about recession predicting and short NZD, I have a super high confidence that you have not personally beaten the returns offered by bring permanently invested in a simple index fund from the 1990's OR any 8 year period at all.

[Ferg]

I had never heard of anyone in the world who had a track record of being able to predict recessions in a statistically significant way, neither has Buffett, that doesn't not mean they don't exist.

I can't speak for Dassets but my thoughts......I'm sure you are right no-one can pick them all - but if you are close enough to the right numbers you can sense something is up. For example, mid 2000s there was a lot of private equity money being thrown around and I was self employed in that arena as a consultant. My forward order book had been full for a decade, and suddenly forward orders dried up (although I still had plenty of work to complete). I was nervous so I convinced a client to take me on as an employee, and then the GFC hit. Some might say luck, but the indicator was there for me and I acted upon it. People often say you cannot predict the future; although we can make predictions. Some might get it right, some might not. We don't need to get all of them right but getting one right can make a massive financial difference, as can getting one wrong. The GFC was a great property buying opportunity (we doubled down), as was the Covid crash (thanks very much!). I have read a number of your posts and agree that times of bad sentiment present great buying opportunities, especially where the sentiment is divorced from the financials. We live in interesting times.

[SailorRob]

I can't speak for Dassets but my thoughts......I'm sure you are right no-one can pick them all - but if you are close enough to the right numbers you can sense something is up. For example, mid 2000s there was a lot of private equity money being thrown around and I was self employed in that arena as a consultant. My forward order book had been full for a decade, and suddenly forward orders dried up (although I still had plenty of work to complete). I was nervous so I convinced a client to take me on as an employee, and then the GFC hit. Some might say luck, but the indicator was there for me and I acted upon it. People often say you cannot predict the future; although we can make predictions. Some might get it right, some might not. We don't need to get all of them right but getting one right can make a massive financial difference, as can getting one wrong. The GFC was a great property buying opportunity (we doubled down), as was the Covid crash (thanks very much!). I have read a number of your posts and agree that times of bad sentiment present great buying opportunities, especially where the sentiment is divorced from the financials. We live in interesting times.

Yeah I agree with your thinking. It's not just a matter of picking them all, it's being able to trade around them. Plenty have picked them all, but the ones they picked that didn't eventuate killed them. With your GFC example, imagine if you were fully invested how you would have actually acted and when you would have 'got out' and doubted yourself while the music continued and then when the crash began, when you would have got back in, vs if you had just done nothing, maybe you would have done better maybe not. But I agree with what you're saying.

The 2021 craze was so completely obvious to the point when reading Zweigs chapters in 'The Intelligent Investor' it was hard to differentiate from the Dot com. But to be able to trade around it is a different story.

It only takes getting it right once as you say, but imagine your smugness having perfectly predicted the Covid crash, gone to 100% cash in Feb... next thing you know you're left for dead.

The point of my reply to Dassets was I too often see former or current pro's talking technical like that and sounding uber sophisticated which can easily lead the naïve, and I have just one question for them, have you produced returns that have bettered a low cost index fund for many many years. And the answer is always no.

Property buying was great in the GFC in hindsight yes, but many places in NZ had not done anything until 2016 and that's a long time to wait to be proven right by a once in 100 year set of events that eventuated afterwards. I'll never forget staying at a lodge around Taupo in 2015 and the guy had come out from the UK and bought a bunch of properties here, he wasn't old but told me he would be happy if he got his money back before he died. Now that will be long forgotten but the grueling decade was tough for him.

[Ferg]

Ouch - holding investment property in Taupo for a decade would test anyone's mettle. To your point I don't think you will find any fund manager that can beat an index for decades at a time....but I think my anecdote shows that (through a combination of luck and keeping your eyes and ears open) is that one can make superior returns over a relatively shorter timeframe. Is that repeatable? Probably not. But it doesn't stop us from trying! It could be Dassets had a similar experience over a similar timeframe. I hear what you are saying about former fundies and/or charlatans (of which there are plenty) but I wonder if you are reading more into Dassets posts than they are saying? Dassets is not the sort of person to toot their own horn and declare all follow....not at all. I viewed their post as sharing an anecdote (just like mine) explaining their picks and background, as opposed to any sort of declaration of superiority or investment advice etc.

Cheers

[SailorRob]

Ouch - holding investment property in Taupo for a decade would test anyone's mettle. To your point I don't think you will find any fund manager that can beat an index for decades at a time....but I think my anecdote shows that (through a combination of luck and keeping your eyes and ears open) is that one can make superior returns over a relatively shorter timeframe. Is that repeatable? Probably not. But it doesn't stop us from trying! It could be Dassets had a similar experience over a similar timeframe. I hear what you are saying about former fundies and/or charlatans (of which there are plenty) but I wonder if you are reading more into Dassets posts than they are saying? Dassets is not the sort of person to toot his own horn and declare all follow him....not at all. I viewed his post as sharing an anecdote (just like mine) explaining their NZX picks and their background, as opposed to any sort of declaration of superiority or investment advice etc.

Cheers

Correct, he definitely wasn't doing that and he is no charlatan nor claiming to be anything, I just worry about others thinking that this is the way to behave as I may once have thought. I guess the whole one year nature of the comp leads to this type of positioning having a good chance of working. If everyone is long NZ and you're offshore then in a given set of circumstances you will win.


No, there are many managers who have beaten the index over decades, and many more who have since beginning in the 90's, but it takes a lot of work to find and follow them and that is a huge part of my process.

[Tomtom]

Would I be correct in thinking that last year there was a greater performance divergence than this year?

[nztx]

We have some interesting runners in the 2023 competition

Try these for size - the link in last update:

Jacinda Ardern
Grant Robertson

and a few other curious nics too

all well down Peetter's list though