Author Topic: End of Year Financial Window Dressing + a market mini-Case Study  (Read 2150 times)

Mother Fussbudget

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End of Year Financial Window Dressing + a market mini-Case Study
« on: December 09, 2015, 01:26:19 PM »
In the investment industry, there's a LOT of noise this time of year that's truly "Window Dressing":

A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Read more: Window Dressing Definition | Investopedia
But in these days of "self-managed" accounts that make (personal) portfolio managers of us all, it goes BEYOND the buying and selling of investments to 'make your portfolio look better'.  It extends to the DATA industry trying to sell tools to "help you make better investments".

A couple of examples:  Every year at this time, Barron's - the venerable weekly investment newsletter owned by the Wall Street Journal - puts out a series of articles on topics like:   "Year in Review", "Top Stocks for the Coming Year", "Barron's Roundtable/Portfolio Manager Picks", etc. 
Other financial products such as "Investors Business Daily", etc. offer services on a trial basis (ex: to try to lure in subscribers.

I subscribed to Investor's Business Daily when they were in print form. They do a great job with the 'big data', and showing stock inflection points, etc.  I liked seeing their detailed charts, and analysis on a daily basis, *at the time* it made me *FEEL* like a well-informed investor.  Sometimes I think I'd like that level of detail on a regular basis... but then I think about it over the next few days, do more research, and eventually come to the same conclusion (below) year-after-year.

The Round-Table Fund managers is an interesting exercise.  Several old-school fund managers get out their crystal balls, and give predictions on the coming year.  Often they're exactly right on some investments.  Often they're exactly wrong on some investments.  The net-net usually underperforms the S&P500 index.

When you take the long-view, these one-off-window-dressing attempts rarely fare better than the market as a whole.
I was thinking about this long and hard this morning - a more than annual thing, unfortunately - and here's my thinking as a holiday gift to you MMM'er's.

Compared Results - "Barron's Top 10 Stock Picks for 2014"and "Barron's Top 10 Stock Picks for 2015", vs Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and "Vanguard S&P 500 Index Fund" (VFINX)

Table 1: 2014 top 10 picks12/6/201312/26/2014Change(%)
Barrick Gold / ABX$15.40$10.58-31.3%
Canadian Natl Resources / CNQ$32.09$31.16-2.9
Citigroup / C$51.49$54.535.9%
Deere / D$85.32$90.245.8%
General Motors / GM$40.17$33.73-16.0%
Intel / INTC$24.82$37.5551.3%
MetLife / MET$51.67$54.876.2%
Nestle / NSRGY$73.24$73.710.6%
Simon Property Grp / SPG$143.62$184.6328.6%
US Airways / LCC$22.32$51.96132.8%
S&P 5001,805.092,088.7715.7%
Vanguard S&P500 / VFINX$167.05$192.5915.3%
Vanguard Tot Stock / VTSAX$45.70$52.2714.4%


Table 2: 2015 top 10 picks12/26/201412/3/2015Change(%)
Alphabet/ GOOGL$541.52$768.2041.9%
American Airlines / AAL$51.96$43.27-16.7%
Bank of America / BAC$17.98$17.30-3.8%
Boeing / BA$131.63$145.5610.6%
Fluor / FLR$60.53$48.31-20.2%
General Motors / GM$33.73$35.475.2%
Gilead Sciences / GILD$93.79$101.388.1%
Macy's / M$64.05$38.98-39.1%
Micron Tech / MU$35.00$15.61-55.4%
Royal Caribbean / RCL$82.27$91.5011.2%
S&P 5002,088.772,050.03-1.9%
Vanguard S&P500 / VFINX$192.59$189.83-1.4%
Vanguard Tot Stock / VTSAX$52.27$51.33-1.4%

Things to notice: 
The Top 10 Picks BEAT the market - both in GAINS in 2014, and in LOSSES in 2015.
VTSAX had lower GAINS in 2014 and lower LOSSES in 2015.
VFINX (Vanguard S&P 500 Index Fund) had the best results for the years in this mini-case study.  NOTE:  you can't actually *buy* the S&P 500 Index, but you *CAN* buy VFINX. 

IF you invested $10,000...
Table 312/6/201312/26/201412/3/2015Change (%)
Top-10 Stock Picks$10,000.00$11,809.16$11,120.4211.2%
S&P 500$10,000.00$11,571.56$11,356.9413.6%
Vanguard S&P500 / VFINX$10,000.00$11,528.88$11,363.6613.6%
Vanguard Tot Stock / VTSAX$10,000.00$11,437.64$11,231.9512.3%


*MY* Conclusion:
Proof once again that investing in no-load market tracking index funds beats the "market experts" - here with data for the past two years.

How should YOU invest?
YOU decide. 
As for *ME*, I'm going to keep doing what I'm doing, and spend a LOT less time this year watching the stock market, and the news.

Happy Holidays!
Mother Fussbudget and the No-Fuss-Budget

NOTE:  the data for these years may not be typical, blah blah, blah.
NOTE:  Fidelity investors (of which I'm also one) can purchase similar funds FUSEX ( which is fun to write!) and FSTVX.
NOTE:  I used Bloomberg & Google Finance for these numbers, and they may not be 100% accurate. 
NOTE:  I'm not *YOUR* financial advisor, I'm MY OWN financial advisor (and I have a FOOL for a client ;-)
« Last Edit: December 09, 2015, 01:30:42 PM by Mother Fussbudget »


  • Bristles
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Re: End of Year Financial Window Dressing + a market mini-Case Study
« Reply #1 on: December 09, 2015, 01:59:30 PM »
There's one guy who, as an experiment, takes the 10 most "loved" stocks by analysts at the beginning of the year and the 10 most "hated" stocks by analysts and builds a theoretical portfolio out of each. The "hated" tends to beat the "loved" pretty often, and I think has outpaced the SP500 over the past 8 years too. Kind of like a dogs of dow strategy. Pretty funny what happens when you outsource your thinking

Mother Fussbudget

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Re: End of Year Financial Window Dressing + a market mini-Case Study
« Reply #2 on: December 09, 2015, 04:00:26 PM »
LOL!  What a fun way to think about stocks - thanks for sharing! 

They're right - the 'unloved' stocks beat the 'loved' stocks AND the S&P500 in 2015.  It's a little strange that VFINX beats the S&P500 over the same period, but that's what I see.

Results to-date (2015) using the stocks from  that article are much like the rest of the market in 2015: 

Purchase=1/20/2015 (date of the article) thru TODAY (12/9/2015):
1)  "Unloved" stocks  +1.8%
2)  "Loved" stocks -3.9%
3)  S&P500 +1.2%
4)  VFINX +1.9%  (and I even used the higher 1/21/15 price for VFINX $187.56;  1/20 price is unavailable)
5)  VTSAX +1.2%

BUT... in reality the real returns on the UNLOVED 'basket of stocks' (AND the "Top 10 Stock Picks" in OP) would be LOWER than shown when you include the cost of purchase/sale COMMISSIONS. The ETF's have zero commission at their respective companies.  AND... you wouldn't have to calculate how much to put into each stock, buy exactly the right number of shares, etc. 
Put another way... the mental investing overhead / 'headache' factor is zero for ETF's, and greater-than-zero for any other "basket of individual stocks".


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Re: End of Year Financial Window Dressing + a market mini-Case Study
« Reply #3 on: December 10, 2015, 08:17:38 AM »
Along those lines, part of me really wants to put together a hypothetical portfolio and do everything Jim Cramer recommends for a year, or six months, or whatever.