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Baptized into the world of business and travel at a young age I’ve subsequently lived in multiple countries, traveled to many more and built myself a small fortune investing in businesses and markets that I spend an extraordinary amount of time doing due diligence on. People sometimes ask me... More
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  • Tales Of A Track Record 0 comments
    Jan 10, 2013 5:23 PM

    Now that we've said goodbye to 2012 we thought it appropriate to reflect. Specifically, we want to go back and review the trades and speculations we picked to outperform in 2012 and beyond.

    Chris and I are speculators first and foremost. We trade, but we make a few longer-term investments from time-to-time as well. I want to point out that we disclose our winners AND our losers. Nobody is perfect, and although reading our opinions costs you nothing, we figure you deserve the straight scoop, regardless!

    To our faithful readers we ask that you please take us to task on this. If you see something that seems out of sorts, or you think the results we report are not correct, please, let us know! We are harnessing the collective intelligence of the "crowd" to hold us accountable.

    So, let's get to it…

    In our post The Best Trades and Investments 2012 we talked about a few ideas that we thought made sense.

    Best of 2012 Ideas:

    • Short Yen
    • Long PIIGS Debt
    • Long leaps on senior gold producers
    • Long oil
    • Short Chinese real estate
    • Long Mongolia
    • Long Biotech
    • Long Technology

    I'll go into more detail on specific trades later on, but let's summarize these ideas briefly.

    • Our short Yen position worked out nicely, getting an added boost when Japan's version of "Gentle Ben" Bernanke, Shinzo Abe came back into power. We expect this trade to continue appreciating in 2013.
    • Going long Eurozone debt, primarily that of the PIIGS, turned out to be an excellent speculation! Irish government bonds returned 29%, The bonds of Greece racked up near 100% gains, while Portuguese debt clocked in at about 56%. We don't see this continuing, so going into 2013 we'd be cautious.
    • Gold has suffered this year, plain and simple. Our long-dated calls (leaps) are definitely cheaper now than they were when we made the non-specific recommendation, asserting then that they were "cheap". We stand behind the trade, even more so now.
    • Commodities in general suffered in 2012 and oil was no exception. Our call to go long oil proved premature. Part of our rationale was what we thought to be an inevitable crisis brewing in the Middle East. That hasn't happened (yet). We still believe longer term, oil moves higher.
    • Shorting Chinese real estate was our worst call by far. If you used our idea to short TAO you are down about 55%… Ouch, and sorry! We still think that China's RE market is a bug in search of a windshield, but the timing is tough. We will leave this one alone for now.
    • Mongolia, our favourite frontier market turned in a dismal overall performance in 2012, down almost 20%. However, our recent call to get long Mongolia again on December 11th, with the MSETOP at 16,867, has already gained 7%. The index stands at 18,123 today. This is an annualized ROI of 94%. Not to mention, when you look at the 3-year cumulative return (we got hot on Mongolia in 2010), being long has been the best strategy. Stay long, stay strong Mongolia… Ignore the hiccups!
    • Biotechnology did well last year. We continue to believe that long term it's a solid place for risk capital. People get old, they get sick and they die. As long as this reality holds true, the biotech industry will continue to try and find the magic bullet(s). We might as well make some money on their efforts!
    • Technology in general was a break-even proposition for most of this year. There were some individual stand-outs, but our recommendation was general. However, if you could have shorted Facebook at $28.00 on May 17th, 2012 when I mentioned it in my post Facebook - Maybe Next Time, by September 1st you saw the stock at $18.00, a relatively quick gain of about 36%!

    So, as you can see, we ain't perfect, but overall we tend to get more right than wrong. If you did your asset allocation properly, most of our recommendations would have increased your net worth.

    But, let's get even more granular. Let's take a microscope to our trades over the past few years while we've been penning these missives. We want to get it all out there for you (and us).

    Trades that worked:

    • August 2010. We recommended Mongolian equities with the MSE at 10,000. By 2011 the MSE hit 30,000, a gain of ~200% (Despite a down 2012, the MSE is still over 18,000, or an 80%+ gain from our initial call).
    • August 30th, 2010. We said we were long silver @ $17.50 (in reality we've been long since $7′ish). At the peak in April of 2011 silver hit $48.00, a gain of ~174%. We're still up over 65% today.
    • August 30th, 2010. We said we were long gold @ $1235 (Again, in reality we've been long since $650′ish). At the peak in April of 2011 gold hit $1900, a GAIN of ~54%. Today we're still in the black by about 35%.
    • September of 2010. Chris recommended the IDX (Market Vectors Indonesian Index fund). It stood at about $17. Today it trades at $28.55, and in July 2012 was as high as $34, a gain of 100% in less than 2 years.
    • Early 2011. We participated in the private placement of Mongolia Growth Group (YAK) at $0.60. The stock hit a high of $6.00, producing a massive gain of 900%! I actually put my own mother in the stock. She loves me even more now. We subsequently participated in the next two private placement rounds, one at $1.32 and the other at $3.90. Suffice it to say we made money on every round. (Note: YAK has just been uplisted to the TSX Venture Exchange. Congrats Kuppy! The stock has rallied on the news, and we think it's likely a buy here again. Chris bought more a couple weeks ago when we recommended getting long Mongolia in general. He wishes he bought more!).
    • March of 2011. We talked about silver's epic rise and suggested perhaps to take a small contrarian short position. If you did this via the SLV you'd have put the trade on around $34.50 or better. As of today SLV trades around $30, a gain of approximately 16%. By the way, we'd close this position NOW.
    • July 2011. We discussed the Philippine market around the 3,400 level. Today that index sits at 6,100, a nice gain of about 80%!
    • August of 2011. We interviewed Eric Muschinski, who recommended Zenyatta, a graphite play. The stock was at $0.18, and today it sits at $1.00. That's a gain of 455%! (Not all Eric's picks did that well… see below).
    • August 24th, 2011. I recommended Sandstorm Gold at a split adjusted $9.73. Here again, I owned it lower at the time, but that was the formal recommendation. As of today the stock sits at $12.09 (It's been as high as $15.00), a gain of 24%.
    • November 1, 2011. Chris said to go long gold versus the Yen at the equivalent of $13.25 (see chart below). Today that index sits at $14.57, a gain of 10%. We'd put this trade on now if we didn't have it going already. We think this has a long way to run!

    Gold Versus Yen

    • November 1, 2011. Short the Yen. You know how we feel about this trade. We even interviewed Tres Knippa, a well-known Chicago floor trader for his take in, A Guide to Profiting From the Coming Japanese Financial Tsunami. You could have simply sold the Yen in a forex account, which was trading at about 129 on November 1, 2011. Today it's around 114, a gain of about 12%. For those seeking more of a thrill ride, you could have bought Pro Shares Ultra Short Yen (NYSEARCA:YCS) around $42. Today it's $52.00, a gain of 24%.
    • January 2012. Our recommendation to go long biotech, tracking the $BTK (Amex biotech index), would have positioned you at a level of 1150 at the time. Today that index sits at 1635, a gain of 42%.
    • January 2012. Going long technology, tracking the $NDXT (Nasdaq 100 technology index) led to a breakeven to slightly positive result as of today. Nothing to write home about.
    • July 3rd, 2012. I recommended Canaco (CAN.V) at $0.35. Today the stock is at $0.40, a gain of about 14%. I also recommended Keegan (KGN) at $3.00. Today it's $4.13, a gain of 38%. I was and still am positive on both companies because of their large cash hoards. Both can still be bought here.
    • December 27th, 2012. In his post, The End of The World… So, Why Are We Buying NOW in Mongolia? Chris went off-topic to mention his long trade in Herbalife (NYSE:HLF) at $28.73. As of today the stock is over $40.00, a gain of about 40% in less than 10 trading days. Annualized that kind of trading would return you over 1,000%. Nice one Chris!

    Trades that didn't:

    • December 1, 2011. If you took our recommendation and went long oil, tracking the $WTIC @ $100, today you'd be down 7%, with the index at $93.22.
    • August 9th, 2011. Stock picking guru Eric Muschinski, the guy who recommended Zenyatta, didn't get Sniper (SIP.V) right (yet). He picked the stock at $0.16. Several readers we know bought the private placement at $0.10, a loss of 38%. The good news is that they got a warrant at $0.15 as well. We will be interviewing the CEO, Scott Baxter shortly herein. We still think Sniper has potential, so we are watching this one closely and aren't ready to concede victory!
    • August 9th, 2011. Eric also recommended Timberline Resources (NYSEMKT:TLR) at $0.30. As of today the stock is at $0.24, a loss of about 20%.
    • December 1, 2011. Chris's Chinese real estate short, taken as a position in Guggenheim China Real Estate (NYSEARCA:TAO) at $15.40, has resulted in a loss of 55%, with the stock sitting at $23.94 today.
    • January 2012. As mentioned above, the snafu with our recommendation to buy senior gold producer, long-dated calls…

    So what about 2013?

    I'd like to point out that picking stocks is NOT our strong suit. We're not too bad at it, obviously, but we are, first and foremost, private equity investors. We prefer to dabble in the frontier markets, and the performance rankings below should be all the evidence you will need to understand our bias…

    Best performing stock markets as of Dec. 28, 2012:

    1. Venezuela 302%
    2. Turkey 53%
    3. Egypt 49%
    4. Pakistan 49%
    5. Kenya 39%

    As Chris pointed out in his post A Case for Frontier Markets, this is where the growth is, and will continue to be.

    You can bet that we'll have plenty to say about opportunities in places like Mongolia (absent from the list above for 2012), Myanmar, Cambodia, Laos, Venezuela, Mozambique and more in the coming weeks and months, so stay tuned.

    That's the good news. The bad news for individual investors is that many of these small frontier markets lack the listings and the liquidity to really take meaningful positions. It's like having a Ferrari with no engine.

    Private equity is one solution, and to that end we travel to where the action is every few months to check out opportunities first-hand. We did it in Ulaanbaatar, Mongolia last July. If you couldn't make it, you can see what all the fuss was about with our Mongolia: Boots on the Ground investor package. We think it's the best primer on Mongolia available anywhere, at any price.

    We'll be hosting another Meet Up in Phnom Penh, Cambodia towards the end of April. It will be a very limited event so that we can spend as much time as possible with everyone. There will also be a special guest that, frankly will blow you away! We can't spill the beans just yet, but trust us.

    These Meet Ups naturally lead to us uncovering all kinds of intriguing, special situations. Most investors will never see what we see. We understand that not everyone has the ability to take off and explore these markets first-hand. So, to that end we offer a member's only subscription alert service called "CPAN", the Capex Private Alliance Network.

    We launched the service in August of last year, and so far we've alerted our members to six opportunities. Two have already listed publicly, with the first up 400% at its peak, and it's still very, very early stage. We have high hopes for all six of our current portfolio companies, and we have a half dozen more that we're doing our due diligence on.

    Most of the opportunities are in frontier markets, but not all. We've alerted our members to a couple of high-tech deals as well. We don't discriminate based on domicile when we see something we like.

    The thing that really makes CPAN different is that these are deals we are doing ourselves, with our own personal capital. We participate in every deal we discuss. We're self-directed investors, this is how we put food on our tables.

    There's some good news and some bad news regarding CPAN. First the good… We have only a few spots left. You can grab one if this kind of speculation turns you on. However, there are only a few spots left, and you must be an accredited investor to participate in private equity.

    While you don't have to be accredited to be a member of CPAN, as this is simply a newsletter alert service, the issuers and their legal counsel won't let you participate in their placements if you are not accredited. We don't make the rules, but we all have to follow them.

    Chris and I will be sending out an email with more details in the next week. That email will give more details and provide information about a conference call we'll be hosting to discuss CPAN. On that call we'll answer any questions prospective members might have.

    We expect that we'll sell out on the call. If you're interested in participating just click here to give us a bit more information.

    - Mark

    "Goodness is the only investment that never fails." - Henry David Thoreau

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