What the Pros Said, Part II

A breakdown of more 'expert' commentary from last year.

SmartMoney Magazine has published an annual "Where to Invest" for the next year issue for several years. Here are the recommendations from the December 2007 issue available online (and also SmartMoney's comments in a mid-year review):

Genworth Financial (GNW)

12-17-07: SmartMoney says that Genworth was hammered by the housing slump in 2007 despite only 14% of its revenues coming from its mortgage insurance business. With the bulk of its revenue coming from selling life insurance, disability insurance, and annuities, and currently trading at 75% of book value - half of where typical life insurers trade - "the shares could easily climb to $50." 01-01-08 stock price: $25.00

06-17-08: "We're confident about ...Genworth Financial (down 9 percent) ... (Genworth has had a) significant role in the housing-market mess, but (its) share price has been unduly punished." 06-02-08 stock price: $21.75

12-31-08 stock price: $2.83

Central European Media Enterprises (CETV)

12-17-07: "The economies of countries such as Romania and Ukraine have grown at an average 5% clip or higher each year since 2002, as companies from Western European countries have built factories there to take advantage of cheaper labor and a stable, post-Communist political environment." "Investing in Central European Media is a bet on the growth of the middle class in Central and Eastern Europe." 01-01-08 stock price: $114.17

06-17-08: "Central European Media Enterprises, which operates television stations throughout the former Eastern Bloc, is down 19 percent after issuing debt to raise cash for acquisitions. Greg Kolb, analyst for Janco Partners, says he still sees the stock going to $143 because the company's core business remains healthy." 06-02-08 stock price: $104.36

12-31-08 stock price: $21.72

Bunge Ltd (BG)

12-17-07: "White Plains, N.Y.-based Bunge is one of the world's largest soybean processors, buying beans from farmers around the world and refining them into meals and oils." "...crop prices, already high, should stay high in 2008 no matter how bountiful the harvest is for farmers this year." 01-01-08 stock price: $122.10

06-17-08: "Soybean processor Bunge is up 12 percent, thanks to growing global demand for protein and vegetable oil. That demand isn't going down, either, so hold on to the stock." 06-02-08 stock price: $121.57

12-31-08 stock price: $51.77

Wolverson, Roya. “Our Portfolio Is Down, But Not Out.” SmartMoney Magazine, June 17, 2008.

Pearlman, Russell. “Where to Invest in 2008.” SmartMoney Magazine, December 17, 2007.

Stock prices from www.smartmoney.com, accessed 02-17-09.

If Bogle only looks at his investments once a year...

In order to protect myself from short-term focused financial pornography, I try not to read finance magazines directed at consumers, because I find those publications generally have a goal of selling more magazines rather than providing sound financial planning advice. But like a highway rubbernecker passing a car wreck occasionally I can't help myself. Perusing Money Magazine during one such weak moment recently I was rewarded with a good article by William Bernstein, a leader in the index investing movement and author of "The Four Pillars of Investing".

His article discussed returns after the other 40%+ stock market declines in the past century (not including the 2000-02 decline as there is not sufficient data to examine post-decline returns). His analysis showed real returns (above inflation) of 2.9% to 7.5% over the decade following the steep losses. While we can't infer anything specifically about the current decline we are in, it is more evidence that investing in stocks for the long term is the best - and only - way to keep our wealth ahead of inflation.

He goes on to talk about making regular rebalancing a routine math exercise rather than an emotional decision making process as the best means of keeping yourself 'financially fit', and he also says that John Bogle has told him that he only looks at his investment statements once a year.
Two pieces of advice we all would do well to heed.

Bernstein also includes a quote from John Maynard Keyes which couldn't be any more timely: "Selling at very low prices [is not] a remedy for having failed to sell at high ones."


Bernstein, William. "The Intelligent Investor." Money, February, 2009.