Investor Faceoff: When Murray met Lesley

Lesley and Murray buffeted, but still ahead

By Paul Brent
Globe Investor Magazine Online, Aug. 14, 2008

The summer months have been tough on investors generally and the same can be said for our Investor Faceoff contestants through the months of June and July.

The duo - retired journalist Murray Soupcoff, and 24-year old financial consultant Lesley Scorgie - have managed to more or less tread water during the past two months, not bad considering the state of the markets. Mr. Soupcoff's $100,000 virtual portfolio is down only a few hundred dollars since the end of May, closing out July still more than $24,000 up since the contest started last fall.

Click here to view Lesley's portfolio
Click here to view Murray's portfolio

Ms. Scorgie, hurt by one small-capitalization stock in particular, saw her investments fall by about $16,000 in the past two months. The small-cap market has been a tough place to be this year and her biggest loss was on a small-cap, DHX Media Ltd. (DHX-TSX) falling about one third over the last two months. Over all, her investments are up still up more than $4,000 or over 4 per cent since the contest started.

Ms. Scorgie has approached the markets with the weary resignation of a parent accompanying her children on a summer roller-coaster: "Like many investors throughout the past two months, I've watched the value of my portfolio buckle under the pressure of recent market downturns," she said. "Rather than reacting to these changes, I decided to ride them out and anticipate the value of my portfolio will strengthen as we head into the fall."

She did deviate from that white-knuckle strategy with the acquisition of 125 shares of energy producer Nexen Inc. (NXY-TSX) on June 19 at $40.69 a share, which turned out to be near the 52-week high for the stock.

"I made a blundering error by adding NXY at the top of its peak in June and to offset those losses, added more of the stock near the end of July at a much more palatable price." On July 29, Ms. Scorgie purchased another 150 shares at $31.44. "I do believe the company has great potential going forward."

Mr. Soupcoff, who has led the Faceoff contest since it began last fall by successfully riding the commodity boom, has watched his bread and butter sectors of gold, agriculture and energy cool recently. "Over all, it's been a discouraging two months for commodity investors like myself."

"In my own personal portfolio, I did take a lot of profits in energy during the early summer because the price of oil futures seemed way too high at the beginning of July," he explained. "However, as I did in my Globe portfolio, I personally held onto my oil-sands holdings even as the price of oil futures continued to sink, because I still believe the global demand for oil is going to continue to rise in the next few years - despite the demand destruction occurring in North America- and I believe the global supply of oil will continue to fall as the world runs out of inexpensive oil."

The retired journalist is still a big believer in agriculture stocks. "Everyone's got to eat," he likes to say, but he has diverged from his real-life holdings in the contest. "In my personal portfolio, I have continued my 'buy and hold' orientation with regard to agricultural stocks, because I believe that two to five years from now most agricultural stocks will have surpassed the peak highs of spring 2008," he said. "However, I exited some of my more profitable agricultural and other commodity stocks in my [Faceoff] portfolio while still ahead in order to raise cash for the [Faceoff] portfolio and preserve equity profit and capital for the contest's end.

"I still believe that financial stocks are in for a rocky time for the next few years [since the negative effects of the subprime mess have not quite ended.] However, a definite short-term sector rotation back into financial stocks is now under way. So I did buy some TD Bank stock, in order to generate some possible short-term profits until the contest ends."

Generally the more active trader of the two contestants, Mr. Soupcoff was busy in June and July.

On June 4, he sold 100 units of SPDR Gold Trust (GLD-NYSE), netting $8,665 and sold 100 iShares units (XGD-TSX), for a total of $7,827. He made the sales after U.S. moves to boost the greenback hurt gold prices. He was holding $42,669 in cash at the time in anticipation of further volatility.

On June 26, he picked up SPDR Gold Trust again, paying $9,061 for 100 shares. "Gold broke out on the day and appears ready to continue the rise into September," he explained.

Mr. Soupcoff was in a selling mode on July 7 as the markets swooned. He again sold those 100 units of SPDR $9,123, dumped 150 shares of Chesapeake Energy (CHK-TSX) at $64.34 each for $9,651 and sold 400 shares of AgFeed Industries (FEED-Nasdaq) at $11.70 for $4,680 and raising his cash hoard to $57,092. "In a plunging market, I'm trying to preserve capital as best as possible as our contest nears its end," he said simply.

The next day, he made another defensive trade, he sold 300 shares of Agrium (AGU-TSX) at $97.80, netting $29,340 and raising his cash holdings to $86,432.

On July 14, seeing an uptick in commodities, he bought 50 shares of Agrium for $5,250 and 150 shares of Barrick Gold Corp. (ABX-TSX) at $50.43 for $7,564, dropping his cash total down to $73,618.

He reversed himself two days later, selling those 50 shares of Agrium for $4,976, bringing his cash holdings up to $78,594.

On July 18, he dipped his toe into financial stocks, buying 150 shares of Toronto-Dominion Bank (TD-TSX) at $58.53 for $8,780. "I don't think the trouble for North American banks is over yet," he said, "but I believe the recent upswing in the price of Canadian banks will continue for a while yet."

Finally, on July 29, he dumped his 150 Barrick shares at $43.50, netting $6,525.

Ms. Scorgie, who has held financials throughout the contest and bought more Bank of Montreal this summer, is thinking differently. "I'm keeping my eye on BMO as it's performed well and I may sell the position to protect some of my profits," she said. "[Manulife Financial] hasn't performed since I added it to my portfolio in the fall of 07 and I may consider getting rid of that position as well. Experts say in markets like this, 'cash is king' - I may listen to their advice so when another good buying opportunity arises, I'll be in a better position to participate."

Special to The Globe and Mail