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He's Crushed the Stock Market for 13 Straight YearsBy
Tuesday, January 18, 2011
Dan Loeb has done the unthinkable... He's beaten the market for 13 straight years.
If you had invested $100,000 with Dan's Third Point hedge fund in mid-1995, it would be worth nearly $2.4 million today. That's a 22.5% compound annual gain, versus a 7% gain in the same period.
And Dan has delivered this performance without taking big risks...
He has only underperformed the stock market one year – 1998. And recently, Absolute Return magazine named Dan's fund the best in its category for delivering the best risk-adjusted returns over the last 12 months.
So what's Dan doing with his money now? Let's take a look...
As of the end of 2010, Dan liked gold...
"Loeb had about six percent of Third Point's assets in bullion in November, the biggest gold bet he's ever made," according to the latest issue of Bloomberg Markets magazine.
"He started buying in September, when the metal was trading at $1,250 an ounce, spurred by a U.S. government report saying Washington can't sustain the deficits it's been running."
At the end of December, according to published papers from Loeb, gold was still his top holding. Loeb's fund returned 41.5% in 2010.
Many investors look at how much gold has risen and think, "I missed it." They think, "It's already soared. It's too risky to buy this high."
But just because something has gone up doesn't mean it can't go up a lot more.
And if you're buying gold today, you're buying near the same level Dan Loeb bought.
Dan has delivered incredible performance. He's consistently found low-risk, high-return ideas.
As of the end of December, this hedge fund manager with an astounding track record has gold as his top holding.
If Loeb is right about this investment – and he usually is – you sure haven't missed it in gold...
Good investing,
Steve
Further Reading:
Steve covered the "it can always go higher idea" in another recent essay. "If something is a great value... a truly great opportunity," Steve writes, "don't worry so much about where it's been." Get the full story here: Has This Stock Gone Too High? No Way... It Can ALWAYS Go Higher.
For what we expect from gold in the years ahead, we turn to precious metals guru Chris Weber. "We clearly are in uncharted territory," he writes. "No one knows what is going to happen in the short term. But I believe that 10 straight years of gain and still keeping somewhat under the radar screen means that there is much more to come." Learn more here: The Most Astounding Gold Development I've Ever Seen.
Market NotesUPDATE: THE "BAD TO LESS BAD" DIAMOND OFFSHORE TRADE Today, we check in with the "bad to less bad" trading idea we introduced after last year's Gulf of Mexico disaster. And once again, we note how owning assets going from "bad to less bad" is the ultimate trading strategy...
Last summer, the BP Gulf of Mexico disaster destroyed the offshore oil drilling sector. Even the best companies in the space were hit with 33%-plus selloffs. As any good contrarian knows, these giant selloffs often produce terrific values.
One value we highlighted was in Diamond Offshore Drilling (DO)... a drilling company owned by the brilliant Tisch investment dynasty. DO fell from $90 per share to $57 during the disaster... then carved out a bottom in the $60 range.
As you can see from today's chart, DO used the $60 level as a "staging point" for a big "bad to less bad" rebound. As folks calmed down and realized oil companies still need to look for oil, DO shares began climbing higher... and just last week, spiked to their highest level in six months. The ultimate trading strategy strikes again...
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