By Scott Rubin
Barron's Jim McTague recently wrote an article highlighting GOP presidential contender Ron Paul's investing strategy. Not surprisingly, the Texas Congressman has whipped the markets with his stock picks, which consist primarily of buying precious metals miners. McTague hilariously contends that Paul follows a "stopped clock" investment strategy which "finally seems to be paying off." While he certainly is a long-term investor who rarely buys or sells, the idea that Paul's strategy is all of a sudden paying off is ridiculous.
The fact is that Paul has predicted nearly all of the major economic developments in recent years, and as such has killed the major market averages with his approach. Is McTague aware that gold has been in a bull market for the last 10 years and that Paul predicted the housing collapse, the plunging dollar, and most obviously, the rise of precious metals?
In his most recent financial disclosure, Paul had between $1.6 million to $3.5 million in gold mining stocks. He also had stakes in three bear market funds, which profit from declining stock prices. The GOP candidate has held positions in major gold miners such as Goldcorp (NYSE:GG), Agnico Eagle Mines (NYSE:AEM), and Barrick Gold (NYSE:ABX) since 1994. He also owned significant stakes in silver miners such as Mag Silver (NYSE:MAG), Pan American Silver (NASDAQ:PAAS) and Silver Wheaton (NYSE:SLW).
According to McTague, Paul's portfolio is "is a financial planner's nightmare" due to his heavy exposure to precious metals. What he forgets to mention, however, is that Paul's predictions have been prescient, and based on his track record, he would likely school just about any financial adviser on the economy and economic history. In fact, many citizens probably wish Paul had been their financial adviser for the last 10 years, during which the S&P 500 has lost around 1.50%, including nearly 10% over the last five years.
Peter Schiff, writing for theStreet.com, noted earlier this week the misleading tone of McTague's article. Schiff wrote:
And while the reporter, Barron's Washington bureau chief Jim McTague, grudgingly recognized how these "stopped clock" investments had made strong gains over the last few years, he glaringly under-reported the long-term success and wisdom of the congressman's strategy.
According to Schiff, the average 10-year returns of the eight stocks listed in Paul's top 10 holdings (the two other stocks do not have 10-year track records) are above 600% versus a loss for the S&P of 3% over the same time period.
Nice "stopped clock" strategy, right? In reality, it suggests that not only is Paul an honest and principled politician with a rock solid knowledge of economic history and theory, but he is also a master investor with a track record that would make many of the Street's top hedge funds envious. Just don't expect Barron's to acknowledge it.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.