High-performance Value Investing | Results | IntelligentValue.com

   





 

 

 

 

 

 


INTELLIGENTVALUE RESULTS

 

PART 2: PERFORMANCE DETAILS

 

For those with an interest in the discrete elements of our results, on this page we will delve into those details.  We provide tables showing the performance statistics for ease of viewing.  We also show linkable performance graphs that match the data in those tables for each year.   These charts display drawdowns and also show periods where we limit exposure to the market, as dictated by our Intelligent Market Risk Analysis™ (IMRA) system, by moving to cash.  

SUMMARY: Although IntelligentValue came to life in September 2004, we launched both of our current portfolios (DEEP VALUE and RELATIVE VALUE) on March 9, 2009.   On that day, we announced to our subscribers that our Intelligent Market Risk Analysis™ system was signaling the abatement of risk and the beginning of a new bull rally following the generational market crash.  Prior-to and during the crash, the IntelligentValue Portfolio performed exceptionally well and we were one of only a few investment advisories that made money during that very challenging period (see chart).  

IntelligentValue is different that many other services hat provide a model portfolio:

1) IntelligentValue has been publishing every week since September 2004, and the results you see are real, not backtests.
2) Accuracy is critically important to us: 
2a) We adjust our prices on purchases and sales to the opening market-order price on Monday mornings.  This is same price you receive if you follow our purchase suggestions.
2b) All transactions include commissions of $8/trade each way as well as dividends paid for our stocks that
3) We have reasonable minimum liquidity requirements for our small-cap DEEP VALUE Portfolio stocks.  The mid/large-cap RELATIVE VALUE stocks are not a concern.
4) We carefully control the number of members we have, and close the sign-up page if we see the start of a slippage issue.

TABLES:  The first column shows the year.  The second column shows our return for each year and the third column shows the return for the benchmark.  The benchmark is the Russell 2000 for the DEEP VALUE Portfolio and the Russell 1000 for the RELATIVE VALUE Portfolio.   Our portfolios provided a superior outperformance (4th column) to the benchmarks every year.  The fourth columnshows the maximum drawdown each year and the last column shows the average drawdown.

GRAPHS:  We have also provided graphs of the portfolio performance for each year.  To open each graph in a new window, click on the year in the left column.  The graphs show the equity curve (top section), the drawdowns (middle section), and the percent of cash invested (bottom section).  Periods when the portfolio was in cash is determined by our Intelligent Market Risk Analysis™ (IMRA) system


 

Our DEEP VALUE Portfolio identifies companies that are selling at a significant discount to their intrinsic value.  The discount is frequently the result of investor disenchantment with a firm's industry or perhaps a particular company that has recently had an earnings miss or another underperformance announcement.   Often investors over-react to these situations, and we achieve exceptional profits by identifying the discrepancy between price and value.

The chart below shows details of our DEEP VALUE Portfolio performance for each calendar year. The DEEP VALUE Portfolio choses its constituents from small-cap stocks (with minumum liquidity requirements), so we use the Russell 2000 as a benchmark.  The liquidity requirements are a market cap above $200 million, with an average of at least $3 million of the stock changing hands daily (price times volume).

DV 2009 DV 2010 DV 2011 DV 2012 DV 2013 DV 2014
Performance table for the DEEP VALUE Portfolio.  Click the year to open its chart.


RELATIVE VALUE PORTFOLIO RESULTS  


For the RELATIVE VALUE Portfolio, we are scouring the mid/large-cap ($1B+) universe of stocks, represented by the S&P 400 and S&P 500, for undervalued opportunities.   In this portfolio, we are not looking for stocks that are beaten down in price, but rather, quality companies that are selling at a relative discount to their peers. 

GRAPHS:  We have also provided graphs of the portfolio performance for each year.  To open each graph in a new window, click on the year in the left column.  The graphs show the equity curve (top section), the drawdowns (middle section), and the percent of cash invested (bottom section).  Periods when the portfolio was in cash is determined by our Intelligent Market Risk Analysis™ (IMRA) system

RELATIVE VALUE RV 2009 RV 2010 RV 2011 RV 2012 RV 2014
Performance table for the RELATIVE VALUE Portfolio.  Click the year to open its chart.


PERFORMANCE


The performance of our model portfolios in 2014 was not very exciting for long-time IntelligentValue members.  After all, our DEEP VALUE Portfolio only gained 30%, while the RELATIVE VALUE Portfolio garnered a performance of just 13%.  These returns are pathetic when compared to the previous two year's returns.   Our small-cap DEEP VALUE Portfolio gained 261% in 2013 and 112% in 2012 while our large-cap RELATIVE VALUE Portfolio showed a return of 108% and 78% for those two years.

Did our value investing approach lose its touch?  Are the glory days behind us?  No, we do not believe that is the case.  The 2014 performance is not so sad if you consider the 2014 portfolio returns relative to their benchmarks.  The DEEP VALUE Portfolio's benchmark (the Russell 2000) gained just 5% for 2014.  For this reason, in 2014 IntelligentValue's DEEP VALUE Portfolio earned six times (600%) the return of the benchmark small-cap index.

The performance of the DEEP VALUE portfolio continues our history of beating the market by multiples of its return, not just a handful of percentage points.   For example, in 2013 the DEEP VALUE portfolio returned 261%; a multiple of about eight times (816%) the Russell 2000's 32% return.  With a return of 112% the previous year (2012), the DEEP VALUE portfolio produced ten times (1018%) the benchmark's 11% return.

Our mid/large-cap RELATIVE VALUE Portfolio cannot be left out of the high-performance Derby, either.  While it slightly beat its benchmark (Russell 1000) last year, in 2013 the RELATIVE VALUE Portfolio returned four times (400%) the performance of its benchmark. In 2012, it returned 7.09 times (709%) the benchmark's return. 

Notice in the charts below that in 2011, when the benchmarks for both portfolios each lost -6% for the year, our value-based portfolios returned a positive 36% and 35% return.  Since launching IV in 2004, we have never had a losing year and have always beaten the benchmarks handily. 

We will not even mention the astronomical returns in 2009, when the market was a value investor's paradise.  We calculated the average return for the portfolios (in notes below charts) excluding that phenomenal year, because years when 'Mr. Market' goes favorably psychotic to that degree are rare.

DRAWDOWNS

We also included a column showing the Max Drawdown for each year as well as the Average Drawdown for each portfolio.  We find that the Max Drawdown (MD) is not a good measure of volatility because MD in our portfolios it is usually a one-time pullback that lasts for a few days.  The Average Drawdown is a better measure of a portfolio's persistent downside volatility. 

However, if you peruse both the Max Drawdown and Average Drawdown columns for each portfolio, you should not see anything that alarms you.  The largest drawdown for either portfolio is a mere 22% for the RELATIVE VALUE Portfolio in the volatile year of 2009.  Remember that Buffett said “Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market.” 

However, because our Intelligent Market Risk Analysis™ system helps mitigate performance-destroying drawdowns and maximize returns, we do not even reach half of his 50% threshold with our worst drawdown.  For this reason, you should come nowhere close to becoming "panic-stricken." 

The mean of those average drawdowns for our DEEP VALUE Portfolio is 4.62% and for the RELATIVE VALUE Portfolio, the mean of the average drawdown is 3.17% since launch.  Most investors should be able to live with those levels, but we've come across a few who consider it too much. 

Note: We used a different portfolio-tracking company (FinancialContent.com) from 2004 to 2009.  However, here is a chart of our performance during the financial meltdown from 2007 to 2009 (IntelligentValue return shown in yellow and S&P 500 as red line):


IntelligentValue's portfolio performance during the bear market, Oct. 2007 - Mar 2009

For the bear market from October 9, 2007 to March 6, 2009, the S&P 500 lost -56.81%. However, our primary value-based portfolio produced a return of +22.81%, beating the market by a substantial 79.62%.  This return was accomplished by using cash as a hedge against losses at key times.  These times were determined by our proven Intelligent Market Risk Analysis™ system.  IntelligentValue has never had a money-losing year since our launch in 2004 and has beaten the averages by a substantial amount every year.

SLIPPAGE


Many prospective subscribers are concerned about slippage (the movement in the price of stocks based on our recommendation), especially in the small-cap stocks in our DEEP VALUE Portfolio.  The mid/large-cap stocks in our RELATIVE VALUE Portfolio are never a concern because of their size, but very few of our stocks in either portfolio have a slippage problem. 

Slippage is the change in price that can occur after we make a recommendation on the weekend. It is the difference between Friday's close and the opening price on Monday.  If we have too many subscribers putting too much money into a stock, the result can be a significant difference in the price when the stock closed on Friday and the open on Monday. 

In automated systems that use the Friday close as the purchase or sale price of a stock, this slippage eats away at an investor's returns compared to the backtest of the portfolio.  We are cognizant of this issue, and take steps to make sure it does not affect our returns.  We address these concerns as follows:

1) IntelligentValue has been publishing every week since September 2004, and the results you see are real, not backtests.
2) We adjust our prices on purchases and sales to the opening market-order price on Monday mornings.  This is same price you receive if you follow our purchase suggestions.
3) We have reasonable minimum liquidity requirements for our small-cap DEEP VALUE Portfolio stocks.  The mid/large-cap RELATIVE VALUE stocks are not a concern.
4) We carefully control the number of members we have, and close the sign-up page if we see the start of a slippage issue.
5) If slippage does become a problem, we will increase the liquidity requirements on our stocks, increase the number of stocks, and/or reduce the number of members

SLIPPAGE STATISTICS

DEEP VALUE
• PURCHASE: The average price of a stock when we recommended to purchase it is $14.61.  The average opening price is $14.63, for an average slippage on purchases of 0.13%.

• SALE: The average price of a stock when we recommended to sell it is $17.36.  The average opening price is $17.56, for an average slippage on sales of 0.03%.

RELATIVE VALUE
• PURCHASE: The average price of a stock when we recommended to purchase it is $33.93.  The average opening price is $33.98, for an average slippage on purchases of 0.16%.

• SALE: The average price of a stock when we recommended to sell it is $37.73.  The average opening price is $37.67, for an average slippage on sales of 0.03%.

Our DEEP VALUE Portfolio, which utilizes the small-cap stocks where most subscribers are concerned about slippage, has an 80% winner ratio and an average return of about 40%.  We would not be concerned even if slippage rises to 1% or even 2% if we are able to get a 40% return of 80% of our picks.  However, slippage is nowhere close to that level.  If it becomes a consistent problem where slippage is affecting returns, we will take action to alleviate the issue.

We will be adding to this page with additional details in the near future.  However, if you have any questions, please contact us with a Support Ticket.  Thank you.

 

IntelligentValue.com has never had a money-losing year since our founding in 2004, and we have consistently beaten the market by a wide margin every year.  Isn't it time you put the power and consistent success of value investing to work for you?

IntelligentValue Can Produce Positive Returns Even During During Selloffs

I am glad I signed up for the IntelligentValue service!  As of today almost three months (after joining), in a downtrending market I am up 36 percent in my portfolio! That doesn't include broker commission, but that is a heck of a return... especially when my grandfather told me he was happy with returns of 2 percent in the 40's. Keep up the good work, I appreciate it.

- Lou S. Cape Cod, MA

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