Investing Update | January 2, 2012
Latin America could be a stock picker's paradise in 2012 - especially for dividend and value investors. It could make a real difference in your retirement or investment plans.
Why do I say that?
For most investors, the year 2011 can best be described as generally a disaster for Latin American stock markets. The region’s major stock market indices collapsed into bear markets in the second half of the year and ended well short of their respective 2010 closing values. The indices ended the year with losses ranging from 3.8% for Mexico to a painful 30.1% for Argentina.
And poor equity market returns may not be the only issue keeping investors on the sidelines as I mentioned last week. So blind, unbridled optimism is not appropriate for the region or equities markets as the year 2012 makes its debut.
But take a longer term view.
Even the disastrous year that just ended wasn’t enough to erase prior gains that have rewarded longer-term investors in Latin America with compound annual percentage gains comfortably in the double digits over the past three years.
For example, our own LSI Growth portfolio surged 95% and the LSI Dividend portfolio doubled to $200,004 since inception in October of 2008. In the same period the S&P 500 gained 38% which means our stock portfolios grew 3 times faster than the U.S. market during the last three years. That's a real, documented difference!
And while the 2011 results were flat, the LSI stock model portfolios again insulated investors from the double-digit percentage setbacks suffered by the major Latin American stock market indices. The Growth portfolio ended the year with a total-return of 3.91%, beating a similarly computed return of 2.09% for the S&P 500. The Dividend portfolio stayed in positive territory for most of 2011 and then pulled back on profit-taking to end with 1.24% lower for the year.
But investing in general ETFs has not been so profitable. Our ETF model portfolio declined by 29%, only slightly better than the negative 30% market return of Argentina’s Merval index. Great trades on sugar (+29%) and Peru (+37%) were offset by poorly-timed trades on oil (-27%) and silver (-14%). The last two were aggravated by the use of the Ultra, leveraged fund versions which work well in a momentum market - but this is no longer a momentum market where you can ride the funds to great results.
I wish I could say just go slow and steady with your picks and avoid leverage to get the greatest returns. But, as I've been saying, don’t expect the new year to any less challenging than the one just (thankfully!!!) ended. So be sure to check regularly for changes in stocks selected and allocations of the model portfolios.
Read more in the attached weekly update and ...
Happy trading this week!
Rudy
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