You can breathe now: 2012 has passed, and the world didn’t end. And in fact, 2012 proved to be an excellent year for Sizemore Capital investors. I am proud to announce that all of our model portfolios ended the year positive, and three of the four matched or outperformed the S&P 500 Index (SPX). In another year dominated by political risk and policy-driven “risk on / risk off” volatility, that is something to celebrate.
Our newly-launched Dividend Growth Portfolio (started March 29) returned 5.3% (net of fees) vs. 1.6% for the S&P 500 in 2012. And this brings me to an important point about 2012: virtually all of the returns for most investors happened in the first quarter. Stripping out the monster run that U.S. stocks enjoyed from January to March of last year, the major stock market averages barely broke even.
In my opinion, investors should take heed of this fact, because history may be repeating itself in 2013. Optimism over the Fiscal Cliff resolution lit a fire under the world’s equity markets in the first day of trading in January. But unfortunately, I believe we still have a long year of political wrangling in front of us, with all of the uncertainty and market volatility this promises.
Sizemore Capital continues to take an “income first” approach in this environment. I expect to see the market rise in 2013, but I also expect it to be choppy and trendless for long stretches of time. And in a sideways market, I believe you can only make money in one of two ways: First off, there is generating current income from dividends and interest. The other option is actively trading, buying low and selling high. I intend to employ both strategies in 2013, but I consider income to be the more reliable of the two.
Sizemore Capital takes an international approach to investing, and this was a mixed bag for us in 2012. I proved to be too early in aggressively buying Europe in the first and second quarters of the year. This hurt Sizemore Capital’s portfolio returns in the first half of the year, though it contributed to their strong performance in the second half of the year, particularly for the Sizemore Investment Letter Portfolio.
At time of writing, I continue to believe that the best values in the world at current prices are in European blue chips with strong business exposure to emerging market consumers and in emerging market equities themselves. I consider these areas to be the proverbial “low-hanging fruit,” and these will likely be a focus for Sizemore Capital through at least the first quarter of 2013.
Performance discussed is net of advisory fees, and includes reinvestment of dividends or other earnings. Past performance is no guarantee of future results.
Certain investments discussed are held in client accounts as of December 31, 2012. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
Any index comparisons provided in the blogs are for informational purposes only and should not be used as the basis for making an investment decision. There are significant differences between client accounts and the indices referenced including, but not limited to, risk profile, liquidity, volatility and asset composition. The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry, among other factors.
Certain investments discussed in this presentation are for illustrative purposes only and there is no assurance that any manager will make any investments with the same or similar characteristics as any investments presented. The investments are presented for discussion purposes only and are not a reliable indicator of the performance or investment profile of any composite or client account. Further, the reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions made by model managers in the future will be profitable.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.