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James Hodges is a Value Investing practitioner who has been independently studying the art form since 1992. He specializes in NCAV small cap situations with a catalyst.
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  • Delusions of Grandeur in regards to the Covestor Investment Return 8 comments
    Dec 22, 2009 1:33 AM

    Oftentimes I've witnessed, on a plethora of investment message boards, the prideful touting of various posters annual/aggregate returns in relationship to the markets; on occasion including myself. Covestor has become a vehicle for investors to provide a basis for their boasting with intangible evidence, again, myself included. Therefore, I decided to use my self as an example with this experiment to show that, to a large degree (IMO 100%), what is stated as the 'Covestor Return Since Inception' does not represent the 'Actual Investment Return Since Inception'.

    The main reason for this inaccuracy is that Covestor does not weigh the Aggregate Return based off of how much capital was invested into the portfolio, rather, it weighs the Aggregate Return based off of total account value appreciation/depreciation over time, as well as other factors, completely disregarding any invested capital employed. This is a fundamental flaw in rudimentary accounting and the reason why Covestor reports a 161,770.99% Return since November 2007 for one particular Covestor Member (If that were true, $100.00 invested on November of 2007 would be worth $161,870.99 today and according to that users profile, he only has one '$' sign which represents that he has less than $50,000 in his account).

    I'll use my Covestor linked Brokerage Account as my example. I have four Brokerage Accounts - one in which I set into service a few days ago. From the four accounts I own I chose one of them to link to Covestor.

    This account was started on November of 2007 with a meager $500 capital investment. my Annual reporting period for this account will always be in November. The total Invested capital for the fiscal years are as follows:

    November 2007: $500.00 (Starting Capital Structure)

    November 2008: $4,133.79

    November 2009: $1,449.72

    As of November of 2008, my Covestor Brokerage Account had a Portfolio Value of $1,627.47. OUCH!!! During that period, I invested $4,633.79 and lost $3,006.32 of that capital; an annual return (loss) of (64.88%). Without making any excuses and without the need of doing so - recessions are clearly difficult periods.

    For the following period, I invested an additional $1,449.72 of capital into the business. This now brings the Total Invested Capital as of 2009 to $6,083.51.

    As of November of 2009, my Covestor Brokerage Account had a Portfolio Value of $23,922.26. With Total Invested Capital now being $6,083.51, my Actual Annual Return for the period ending Nov. 2009 was 293.23%.

    2008 Annual Return (loss): (64.88%)

    2009 Annual Return (loss): 293.23%

    Therefore, my Aggregate Return (Return Since Inception) is the difference between the two reporting periods; 228.35%. My Averaged Annual Return therefore is 98.30%:

    My Covestor account states that my Return Since Inception is 658.21% and 877.84% with Cash included. Obviously this data is incorrect as is the case with nearly every (I believe all) portfolio's linked and especially 'not' linked to the Covestor platform.

    Although 658% & 877% are much prettier numbers and ones that 'have' given me Delusions of Grandeur in the past as well as seeing other Covestor members often suffer from this ill repute, it is not the correct number nor is its method for arrival a correct process in determining the Aggregate and Annual Return.

    Therefore, it is clearly possible that someone being listed on the Covestor Rankings in position #100 to have an 'Actual' Aggregate and Annual Return of a much higher percentile than the individual who is ranked #1; because #100 may have only invested a small amount of his capital once and never added to it again. #1, on the other hand, may have invested capital into his portfolio on a regular basis and in large quantity.

    I encourage all to investigate their own portfolio's and arrive at the proper and correct returns. You may find a number that you are more than happy with, such as I have, without the need of hyperbole.

    "You don't know who's swimming naked until the tide goes out" - Warren Buffett

    "I'm wearing underwear" - Jim Hodges

    All the best,

    Jim

    * As of 12/22/09, my Annual Averaged Return is: 115.39%




    Disclosure: No Position
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Comments (8)
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  • Timothy Sykes
    , contributor
    Comments (147) | Send Message
     
    zzzz, why don't you link to my profile instead of being a typical coward/introverted value investor calling me names behind my back? why dont you include covestor's new "cash+equities" chart to see EXACTLY how my strategy is up 130%+ in 2009.

     

    PS my account is now over $100,000--for some reason covestor hasnt updated the $ sign...why dont you ask them for a comment BEFORe you write an inaccurate article
    22 Dec 2009, 02:10 AM Reply Like
  • jup
    , contributor
    Comments (3) | Send Message
     
    what's really funny about your skepticism James is if you would just follow his trades or if you had followed them real time on his blog since 2007 you would see that he is legit. This is coming from a former skeptic/reformed value investor myself who has followed them since 2007. Bottom line. Sykes beat your returns in 2008. Actually he creamed them and every other bagholder.
    22 Dec 2009, 04:50 AM Reply Like
  • Perryblacher
    , contributor
    Comment (1) | Send Message
     
    Hi Jim

     

    We actually show for most members both the return including cash and without cash - there should be a tab on your factsheet. The main return shown is a time weighted return, exlcuding cash which reports as the institutions do. This is as someone following your trade signals will want to follow you with a fixed sum and not necessarily add or remove cash as you do. I appreciate this shows the return someone follwing you fully invested would achieve and not the return you yourself may have realized.

     

    Understand the post - well said and hope we can continue to improve how we report for you

     

    With best wishes
    Perry Blacher (CEO Covestor)
    22 Dec 2009, 06:07 AM Reply Like
  • Value Investor Today
    , contributor
    Comments (47) | Send Message
     
    Author’s reply » Thanks for your passive/aggressive post Timothy.

     

    On Dec 22 02:10 AM Timothy Sykes wrote:

     

    > zzzz, why don't you link to my profile instead of being a typical
    > coward/introverted value investor calling me names behind my back?
    > why dont you include covestor's new "cash+equities" chart to see
    > EXACTLY how my strategy is up 130%+ in 2009.
    >
    > PS my account is now over $100,000--for some reason covestor hasnt
    > updated the $ sign...why dont you ask them for a comment BEFORe you
    > write an inaccurate article...oh wait, this is SA, why should we
    > expect any quality whatsoever
    22 Dec 2009, 11:26 AM Reply Like
  • Value Investor Today
    , contributor
    Comments (47) | Send Message
     
    Author’s reply » I measure my performance, as all intelligent investors do, by way of Aggregate Returns. Measuring them on a daily, weekly, monthly, or annually rate is of very little merit to me or most investors.

     

    On Dec 22 04:50 AM jup wrote:

     

    > what's really funny about your skepticism James is if you would just
    > follow his trades or if you had followed them real time on his blog
    > since 2007 you would see that he is legit. This is coming from a
    > former skeptic/reformed value investor myself who has followed them
    > since 2007. Bottom line. Sykes beat your returns in 2008. Actually
    > he creamed them and every other bagholder.
    22 Dec 2009, 11:29 AM Reply Like
  • Value Investor Today
    , contributor
    Comments (47) | Send Message
     
    Author’s reply » As always Perry, thanks for you information.

     

    On Dec 22 06:07 AM Perryblacher wrote:

     

    > Hi Jim
    >
    > We actually show for most members both the return including cash
    > and without cash - there should be a tab on your factsheet. The main
    > return shown is a time weighted return, exlcuding cash which reports
    > as the institutions do. This is as someone following your trade signals
    > will want to follow you with a fixed sum and not necessarily add
    > or remove cash as you do. I appreciate this shows the return someone
    > follwing you fully invested would achieve and not the return you
    > yourself may have realized.
    >
    > Understand the post - well said and hope we can continue to improve
    > how we report for you
    >
    > With best wishes
    > Perry Blacher (CEO Covestor)
    22 Dec 2009, 11:31 AM Reply Like
  • Value Investor Today
    , contributor
    Comments (47) | Send Message
     
    Author’s reply » Isn't that the pot calling the kettle black? LOL. Don't worry Timothy, there is nothing about you that warrants a stalking although I've heard you may wear them once in a while.

     

    On Dec 22 02:17 AM Timothy Sykes wrote:

     

    > LOL its Jim Hodges, the guy who totalllly cyber stalks me, check
    > out Jimmy boy's ignorance, some people don't even deserve free speech,
    > they ruin it for everyone else!
    >
    > www.timothysykes.com/2.../
    22 Dec 2009, 11:33 AM Reply Like
  • Hedgephone
    , contributor
    Comments (1264) | Send Message
     
    Tim is an old friend of mine... But he rips on value investing in favor of shorting stocks that no one with any real money can locate shares to trade... Obviously the kid is very bright, but calling value investors cowards is shill tactic Tim when what you do is obviously value investing... shorting overvalued fraud stocks is value investing bro... So stop being such a self hating value investor and embrace that in the stock market what you do is actually value investing and move on with it! Wish you would short some larger cap names bro so a guy like me could make some cash... Hope all is well... BTW I made a venture cap investment in 2003 for 800K that I sold some up 800% or so and I do not have to brag about it, the money is good enough on its own! SO if making money is cowardice, than so be it... Shorting pump and dumps is dyed in the wool value investing if you ask me though brother! Hope all is well..
    5 Sep 2010, 01:33 AM Reply Like
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