Thursday, December 27, 2012

Fortune Investor's Guide 2013 - Epic Fail (Again!)

12 months ago I wrote about the Fortune (Magazine) Investors Guide to 2012, I criticized their use of Gold (pictures of coins) throughout the magazine without actually giving the metal any worthwhile coverage. After an 11 year bull market outperforming almost all other asset classes, this is the brief mention that Gold received last year:
"Despite good days here and there, things in the U.S. aren't all that wonderful. At a time when things are so uncertain here, the standard advice is to seek safety, and to protect yourself against inflation and the almost certain future declines of the dollar.
One traditional "safe" investment is bonds, especially Treasury bonds. Another haven in foreign stocks or foreign company mutual funds, and for the more venturesome and sophisticated - foreign currencies. Then there are commodities and "hard assets" such as Gold, Silver, copper, oil and diamonds, that will presumably hold their value if the dollar's decline continues and inflation rises.

None of those options - bonds, foreign stocks and currencies, and commodities - feel even remotely safe these days."
Followed by:
"And commodities - well, when you see Gold being marketed everywhere, the game's pretty much over. If you had a time machine and could buy commodities at what they fetched 3 years ago, they'd be a great investment. At today's prices not so much".
Front cover of Fortune Investor's Guide 2012:

Gold coins: Front cover of Fortune Investor's Guide 2012

Well they've managed a repeat performance for the 2013 Fortune Magazine Investors Guide... here is the front cover and a page from inside the magazine (not the only page with Gold represented inside the magazine):

Gold bars: Front cover of Fortune Investor's Guide 2013

Gold coins & bars: Inside Fortune Investor's Guide 2013

The note from the editor (Andy Serwer) in the first few pages of the magazine starts as following:
"What does it mean to be a contrarian? That's easy, right? It means doing something most people don't. So you'd think a contrarian wouldn't be a big believer in Apple's stock, because everyone loves Apple stock. Although... aren't most people kind of wary of Apple? (Borne out of the fact that Apple's P/E is 13, which is lower than GE's). So maybe being bullish on Apple after the stock is up some 7,800% over the past decade is contrarian after all."
Later in the magazine there is a large article on Apple called "Why you're right to be obsessed with Apple stock", which you can read here. Mainly it discusses fluke incidents where investors have gone all in on Apple and come out well ahead. Below are some exerpts:
Just thinking about Terry and Jeanne Gregory's portfolio can be a little scary. Retirees now living in Honolulu, the Gregorys have basically their entire life savings -- about $2.5 million -- invested in just one stock: Apple Inc.

The Gregorys' love affair with Apple (AAPL) flouts every bit of investment advice doled out by magazines like this one and by mainstream investment strategists. No investor -- especially a retiree whose portfolio should be geared toward income and wealth preservation, not growth and risk taking -- should have all his money invested in just one stock. Right?
Later some targets are discussed by a couple of those interviewed:
Zaky thinks it's "obvious" Apple will hit $2,000 a share and then plateau, with the company continuing to enjoy recurring (though not substantially growing) earnings from the sale of new iPhones and iPads. Presumably, Apple $2,000 would be almost as good for Zaky's business as his own Apple-only portfolio. Apart from his asset-management business, Zaky has 750 subscribers to his online Apple newsletter, which costs $2,400 a year.

But nothing is really obvious when it comes to the future of technology. Sacconaghi, who has an $800 12-month price target for Apple, does believe that Apple's iCloud, iTunes, and App Store customer base reduces the risk that existing users will migrate to a competing technology: "It means more buyers will be repeat purchasers, which makes it more difficult for sales to suddenly fall."
This is what Zaky had to say on his site Bullish Cross back in October this year:
Today, Apple has reached one of those very rare buy points. However, unlike our previous five recommendations, we do not necessarily believe that Apple has bottomed right here at $630 a share. We just believe that Apple won’t see much lower prices from here thereby making this a unique buying opportunity. It’s better to buy at $630 and accept a small potential drawdown than to miss the entire move. We do not believe Apple will see levels below $615 a share. Thus, anything between $615 and $630 is an extraordinary buying opportunity. Between $630 and $650, you have a great entry level.

At $630 a share, Apple’s stock has the potential to rally over 60% over the coming 12-month period. And that’s assuming Apple merely continues to trade at the same depressed valuation it has been trading at over the last several quarters now. If Apple’s valuation were to somehow improve, we can see Apple reach $1000 a share much sooner than many expect – perhaps even as early as next July.
Time will tell whether Zaky continues getting it right on Apple, but if the Fortune article is accurate on 750 subscribers at $2,400 ($1.8m gross per year) it probably doesn't matter that much to Zaky whether he is right or wrong on long term targets, he is already making a fortune on the journey regardless.

After a thorough read through the magazine and then a second brief check I couldn't find any mention of Gold. Clearly whoever is putting this magazine together thinks that wealth is synonymous with Gold, that much is clear from its regular use within the magazines images, but apparently it's not worth covering in the content. Interestingly I found when performing an image search that Gold has been used on a majority of the Fortune Investors Guide's for the past 10 years: 


Gold bars: Front cover of Fortune Investor's Guide 2003

Gold egg: Front cover of Fortune Investor's Guide 2004

Gold bars: Front cover of Fortune Investor's Guide 2006

Gold coins: Front cover of Fortune Investor's Guide 2008

Gold coins: Front cover of Fortune Investor's Guide 2009

Gold coins: Front cover of Fortune Investor's Guide 2011

How long will it take for the average investor to catch onto this trend and join the ride?

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BB.

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5 comments:

  1. It's a slow ride for the average commoner to get on-board, but i think it is happenning.

    For example, my father now buys regularly, and has allocated $50K to buy, and has already spent ~$6K. Oh, and Dad "bought the dip" - his first purchase without my lead...i'm very proud ;)

    Gold was discussed by my brother, father and cousins at a recent family Christmas get-together.

    My 2c

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    Replies
    1. Interesting, thanks for the input. I have very few family members involved in investing so hard to make those sorts of comparisons. Hope you gave him some tips on what to look for in order to exit/sell ;)

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    2. Yes, we have discussed in detail getting in, out, and all of the risks involved - especially the ones involving the inherent volatility, and not losing sleep!!

      For the large part, however, he just said, "I will do what you do, so keep me informed!"

      No pressure...

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  2. The dummies guide to help the savvy investor to make money in a troubled market (filled with newbie dummies)

    ReplyDelete