ANOTHER YEAR OF OUTPERFORMANCE AT 'SEXTON READS THE CHARTS'!
29th November 2021
The average gain for all of the share recommendations made in the past 12 months, being the second year of operation for SEXTON READS THE CHARTS (SRTC), was 18% (outperforming the market index gain of 13.5%).
This follows on from the performance in our first year, which achieved an average gain per recommendation of 16% (outperforming the market index gain of 11.7%).
It is still early days here at SRTC, and there is a 25% probability that these two consecutive years of outperformance are entirely random.
If stocks were selected entirely at random, without using any methodology whatsoever, the percentage chance that the ensuing portfolio will outperform the market index in any one year, is 50%. However, the chance of a randomly selected portfolio outperforming the index again for a second consecutive year, falls to 25% (0.5 x 0.5).
Multiply the 25% by 0.5, to get 12.5%. That is the probability that a randomly selected portfolio of shares will outperform the market index, three years running. 6.25% is the probability that it will outperform for four consecutive years, and 3.125% is the probability of outperforming for five consecutive years.
The above stats make an underlying assumption that the level of risk one is accepting in attempting to outperform the market index, is no greater that the risk inherent in investing in the index itself (by means of an Exchange Traded Fund).
For example, if someone invests in only one stock, and it outperforms the market index for five consecutive years, that does not signify that the investor is particularly talented. What has actually happened here, it that the investor has taken a huge risk, by investing in only one stock. And when one takes a huge risk, either one of things will happen. You will either outperform or under perform the market index, very often by a significant margin. What are the chances of that? 50%, is the answer, because you have selected only one stock.
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I have set out the detailed breakdown of the performance of all of the stocks recommended in the past year on the attached schedule - CLICK HERE.
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Of the 41 stocks recommended, there are only three notable under-performers, Flutter, Grafton & Antofagasta.
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Flutter & Antofagasta have both fallen below the levels identified in my most recent technical reviews, as providing evidence of a breakdown of the upward trend (of €125 & £14 respectively), so I recommend that these be sold.
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The best six performers were ASML Holdings (Dutch semiconductor maker) + 90.4%, Segro (UK warehousing for e-commerce) + 55.9%, Microsoft + 55%, Croda International (UK chemicals & food ingredients maker) + 54.6%, Spirax-Sarco (UK steam products for manufacturing processes) + 33.7% and L'Oreal (cosmetics) + 31%.
These may be overextended in the short term, due to their big gains recently, but are a good place to start for any new subscriber looking to start a portfolio. Accumulate them gradually on bouts of weakness in the market.
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In the 25 years that I plied my trade as a stockbroker, I found that one usually fared much better by selecting the top performers from the previous year. "But they are too high!" ... the clients would often protest...
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Well, that's what they said 10 years ago about Apple & Amazon and look at where they are today!
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The favourite strategy of many clients was to buy the stocks that had fallen the most in the previous year, thinking they were "cheap".
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Take it from me.....IT... DOES...NOT ...WORK!
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Of the probably hundred plus 'bombed out' stocks that I bought for clients, on their instructions, from 1993 to 2019, I can recall only one that experienced a dramatic recovery.
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In fact, it subsequently crashed for a second time, and this was amazingly followed by another equally dramatic recovery...
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I'll send a bottle of champagne to the first subscriber to email me the name of that stock:-
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Email me at; sexton_patrick@hotmail.com