Mark McQueen of Wellington Financial is patting himself on the back for staying
long Goldman Sachs during the dark days of this summer. "Goldman
was the trade of the year," he tells us, in a prime example of the
bias that individuals always have towards their own holdings. The trade of the
year? I don’t think so: McQueen himself admits that he bought Goldman not at
its lows but rather at $222 per share, which means that he’s sitting on a nice
but unspectacular 11% gain right now. But McQueen is looking not at Goldman’s
gains from where he bought it; rather, he’s looking at the stock’s gains from
August 15 low of $164.64 per share. Since then, it’s true, the stock is up 50%.
But it’s hardly unique in that respect, as McQueen seems to think:
You would be hard pressed to find another big cap that is up more than 50%
during the past few weeks. Even the unstoppable RIM has taken most of the
year to see gains of that nature.
McQueen, it seems, would have us start with the performance of Goldman from
its lows, and then compare it to the performance since the date of the Goldman
low of high-flying tech stocks which have been gaining steadily all year.
Is there any reason why August 15 is a particularly useful start date, except
for that it makes McQueen look like a smarter investor than he actually is?
But hey, if that’s what McQueen wants us to do, let’s do it. Let’s take Apple,
a nice high-flying tech stock with a market cap a good 66% greater than Goldman’s.
On August 15, AAPL was trading at $119.90; it closed yesterday $189.95, for
a gain of 58%. Even since Goldman’s lows you would have been better off in Apple.
And what of McQueen’s own example, Research in Motion? $65.92 on August 15,
$124.51 yesterday. That’s a rise of 89%.
After McQueen saw his investment in Goldman Sachs plunge from $222 to $165,
he decided to hold on regardless, and now he’s back in the black. That’s great
for him, and I’m sure his mother is very proud of him. But he’d still be much
better off than he is today had he sold Goldman at $165 and put the proceeds
So when a fund manager starts telling you about how he managed to pull off
"the trade of the year," it’s worth taking that claim with a large
pinch of salt. Chances are the average Goldman trader did much, much better.