Investor Faceoff: When Murray met Lesley

Soupcoff emerges as the winner

By Paul Brent
Globe Investor Magazine Online, Oct. 20, 2008

When Globe Investor's Faceoff contest kicked off in the fall of 2007, it was billed as an East versus West, Boomer vs. Gen Y sort of battle. Now, having completed the contest and survived one of the toughest 12-month periods for investors in living memory, both Lesley Scorgie and Murray Soupcoff ended up beating the markets and, hopefully, ended up as wiser investors.

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

"Over all, I'm happy to have participated," said Ms. Scorgie, 25, a Calgary-based financial consultant and author of Rich by Thirty. "Though the contest ended on one of the worst possible days [Sept. 17, 2008] my long-term, bigger name strategy worked fairly well."

At the end of the Investor Faceoff contest, Ms. Scorgie's $100,000 faux portfolio was down 6 per cent by simple price appreciation, but just down 2.5 per cent including dividends. That's still a good performance given the terrible performance of global markets over that span. The S&P/TSX composite index lost 12 per cent over the contest's period including dividends.

Still, it was not good enough to claim Faceoff bragging rights. Those went to Mr. Soupcoff, 65, the retired journalist turned amateur investor who has turned his investigative eye to the markets. Mr. Soupcoff ended up 15 per cent, spending most of the past year successfully riding the commodity boom with a host of stocks and exchange-traded funds.

"My over-emphasis in the Globe portfolio on `stuff in the ground' - commodities like agriculture, gold and energy - was quite profitable until July," he concluded. "During that month, the Fed pulled a stunner by starting to bail out U.S. banks in a dramatic way, thus forcing big pension and hedge funds to cover their shorts on previously crippled U.S. financial equities. The big funds could only do that by cashing in their previously 'long' investments in commodities to raise the cash needed to cover their shorts."

The summer turmoil kicked the legs out from under Mr. Soupcoff's commodity-heavy strategy: "The only course of action in the Globe portfolio was to conserve capital by taking remaining profits and ultimately cashing out all the holdings in the light of plummeting commodity prices," he said. "I probably should have done that earlier, as well as being a bit more diversified in other sectors, to ride out the storm to the end - if that were possible and I'm not sure it was."

Looking back over the past year, Ms. Scorgie voiced some regrets. "If I could do it again, I may not have put so much energy stock in my portfolio. But, I still believe these companies like Nexen and Penn West have great longer term value. So personally, I still own and will continue to buy energy stocks such as these. Prices have been badly beaten up and are relatively cheap right now, presenting some unique buying opportunities for some investors."

While Ms. Scorgie's energy holdings failed to provide gains for her, major hits to her portfolio came from speculative plays such as an early $20,000 bet on DHX Media (DHX-TSX) worth $11,400 at the close of the contest. "I lost quite a bit of money on DHX and GMP" (GMP.UN-TSX). Lesson learned from these purchases? Stick to my strategy - larger names with histories of solid and stable returns."

Ms. Scorgie also bet on blue-chip financials such as Royal Bank of Canada (RBC-TSX) and Manulife Financial Corp. (MFC-TSX) during the year and has made them a part of her personal investing strategy. "I bought (bank stocks) low and sold high, a number of times. Though the sector has had a rough year, there were multiple opportunities to purchase bank stocks at cheap and undervalued prices. I believe that Canadian bank stocks are still a safe investment even though the U.S. banks are struggling right now."

Mr. Soupcoff has adopted an increasingly defensive stance to his real-life portfolio, mindful of further turmoil south of the border. At the close of the contest and prior to the Treasury Department's $700-billion (U.S.) bailout for Wall Street he said: "The last shoe hadn't dropped in the U.S. banking sector/financial crisis. So according to my long-term scenario, some time in 2008 or 2009, the other shoe would drop in the financial sector, the Fed would throw more taxpayer money at the problem, and a drop in the dollar and rise in inflation would begin anew."

That scenario, perhaps not surprisingly, has him looking at some old favourites. "It in turn would renew the commodity boom and boost the prices of agriculture, gold and energy stocks once again," he said.

Special to The Globe and Mail