HOW HAVE THE LISTED INVESTMENT COMPANIES PERFORMED FOR THE START OF 2020?
Written by: Robert and Russell Markham
I have written in the past about Listed Investment Companies (LICs) and how the LICs performed relative to the top VST stocks (check out the weekly Essay back on the 30th of August 2019). The Australian market has got off to a very good start in 2020 despite the bushfires and, recently, the Coronavirus. In fact, Australian stocks have been the best performing stocks in the world according to Bloomberg! (https://www.bloomberg.com/news/articles/2020-01-16/australian-stocks-lead-world-even-amid-wildfire-profit-concerns).
With that in mind, how have the LICs performed relative to the top VST stocks for the start of 2020? As we saw last year, LICs significantly underperformed the Top VST stocks. With the tremendous tailwind behind us in the share market for the start of 2020, have LICs turned the corner? Although market conditions are declining, with the MTI starting to hit lower highs in recent days, let us not forget the significant run the market has had for the month of January.
Let’s investigate just like we did in August last year. First step, click on the Viewers tab. Then click on Go to WatchList Viewer icon or you can click on WatchList Viewer on the left of the screen. You will now see all the Groups that house all the different WatchLists. Click on the Group called Special WatchLists and open the LICs WatchList. As of 4th February, I see 96 LICs listed. Set the date back to the start of the year, 2 January 2020 (per the date box at the top of the screen). QuickTest all 96 LICs (to the right of the QuickTest button at the top of the screen, click on the dropdown key and select QuickTest All). I get an average return of -0.68% versus the market return of 5.21% (per VVC/AU which tracks the average of all the stocks we track in VectorVest). Looks like not too much has changed since August last year.
Click on the % Price Change column to return the best performing LICs. Wow! 8IH.AX has returned 75% and AIB.AX at 20% as of 4th February. However, notice up the top of the QuickTest windows, it notes 31 Winners and 58 Losers and 7 Even. So, 58 out of 96 LICs lost money = 60%! 60% of LICs lost money from 2 January to 4 February. That is a lousy figure considering the rampaging market. How is it that 60% of the Listed Investment Companies lost money? These are companies run by professionals, who invest money on behalf of the investors to make money!
In fairness, you would never have bought all the LICs. How about this, let’s QuickTest the top 10 LICs since 2 January 2020 to 4 February. I get 0.74%. A bit better and if I QuickTest the Top 20, I get -0.45%. Back into the negative numbers again. You may be reading this and wondering why this is the case. Your guess is as good as mine. There are all sorts of reasons no doubt. The fact remains that a good majority of the financial professionals as represented by the LICs on average have not beaten the market in 2020 so far. At the end of the day, as an investor, your key goal is to make money. And nobody cares more for your money than you do. No doubt, that is the very reason you have turned to VectorVest, so you can take control, so you do not have to rely on others who let you down. You are in control to get better returns.
Ok, so we have checked in on the LICs; what about VectorVest? Let’s do this, there were 96 LICs listed so let’s QuickTest the top 96 VST stocks as of 2 January 2020 through 4 February. Ensure you are comparing the same time periods as you did for the LICs you just QuickTested. Close the QuickTest window and then click on Stock Viewer per the top left of your screen. Ensure the date is set to be 2 January 2020 and then QuickTest the Top 96 VST stocks. To do so, click on the dropdown arrow just to the right of the QuickTest button and from there you can then ensure you QuickTest the Top 96. Run the QuickTest on the top 96. I get 2.57%. Notice in the QuickTest window, 56 are Winners and 40 are Losers. The winners are 58% of the total. So, you had just on a 60% chance of making money with the top 96 VST stocks since 2 January this year. That’s good odds, but they get better.
You never would have bought that many stocks…would you? Let’s test the Top 10 VST and 20 VST stocks, just like we did with the LICs. The top 10 VST stocks returned 4.93% (70% being winners)! The Top 20 returned 6.20% (65% being winners)! Those are great odds and great returns for such a short period of time.
Well, I gave it 5 months and ran the analysis again. VST has once again, hands down, beat the LICs. You have all the tools at your fingertips to be your own high performing fund manager with VectorVest!