ACCRE continues on a winning streak, with a positive October. We benefitted from overall gains in the market — the S&P had a super return, and this spilled over both to the property sector in general and to ACCRE. As of the end of the month, a dollar invested in ACCRE at the inception (April 1, 2017) would be worth $1.64 today, for an average annual return of 24.3%. For comparison, during that same period, the average annual return for the S&P was 12.9%.
We’ll be back mid-month with other metrics, and of course our premium subscribers will receive notification of any trades. Have a great November!
So-far, so good for the month. ACCRE is up about 1.5% as of today, compared to about 0.8% for the S&P. That’s the sort of performance we like to report every month.
Mid-month is usually the time we talk about the Sharpe Ratio and other correlation statistics. As faithful readers know, a well-curated portfolio of real estate is not only a great investment, but also provides diversification. One way we measure this is with the Sharpe Ratio, which indicates the excess return (return over and above what we would have earned in T-Bills) adjusted for risk (measured by portfolio standard deviation). A higher Sharpe Ratio means we’re doing well after accounting for risk.
ACCRE’s Sharpe Ratio consistently beats the S&P, in no small part because ACCRE has far less volatility. September was no exception. ACCRE’s Sharpe Ratio was 0.06% (that’s daily excess return) compared to the S&P’s 0.02%. In other words, we’re beating the S&P by three times on a risk-adjusted basis.
One other important point — the correlation coefficient stands at 42.43% as of the end of September. This means that overall, ACCRE provides a very high degree of diversification in a broad securities portfolio.
As always, subscribers are provided monthly updates on the actual components of the ACCRE portfolio, as well as e-mail alerts when we make a trade.
As many of you know, our web site was “down” for a week. We had a glitch with some third-party software (essentially, the software got old and stopped working) and it literally took a week to get the darned problem solve. Please be aware that this had NOTHING to do with the actual trades themselves or the portfolio management, which is handled on a separate account with a FINRA-licensed (and SIPC-insured) brokerage.
Fortunately, I had a list of all of our subscribers (on a separate sheet) and sent an e-mail to each of them about our trade announcement and our September monthly update. For the rest of you readers, who might not be on our subscribers list, following is the text of the September update:
The S&P 500 had a spectacular month (up 1.72%), but that barely makes up for its dismal performance in August (down 1.81%). Conversely, ACCRE had a slight down month (-0.4%) but August was one of our best months ever (up 3.6%). As such, we continue to lead the S&P (and the S&P REIT index) in total returns since inception.
One other item caught my attention this week. News reports noted that this was the first time in a while that the S&P 500 had three consecutive “up” quarters, which is indeed great news for the market. However, with that bit of info, I wanted to compare the S&P’s performance to ACCRE’s for the past three quarters. The chart following “normalizes” both indices to 1 as of January 1, and the rest speaks for itself:
I’ve long noted that real estate returns should be examined with a long-term horizon. The chart notes that for most of the year, ACCRE tracked the S&P nicely, albeit with considerably less volatility. However, starting about mid-summer, we really took off compared to the S&P. I suggested this may be a flight to safety, and indeed the real shift occurred when the S&P suffered its summer melt-down. That said, ACCRE ends the first three quarters of the year up 23%, while the S&P is up 18.6% for that same period.
I will almost certainly be making some portfolio shifts this month. As always, subscribers will be informed when I make such trades, and the new portfolio makeup after those trades are made. Y’all have a great October!
I wanted to focus once again on the diversification ACCRE provides in a well-managed portfolio. As previously, we measure this with the Sharpe Ratio (the average daily excess returns) and the correlation with the S&P. Both of these metrics continue to be solid — ACCRE’s Sharpe Ratio is 0.07% compared to the S&P’s 0.02%. This is the average daily return over and above what you would have earned had you simply invested in the T-bill rate, divided by the standard deviation. It means that not only are ACCRE’s returns superior to the S&P, but we also do that without taking on excess risk. By the way, the correlation with the S&P continues to be great — 43.2%.
This month, I wanted to look at ACCRE from another perspective. Like most of you, I have other investments, and like most of you should be, I’m concerned. One simple way of looking at this is to compare these investments to their 200 day moving averages and 50 day moving averages. Conventional wisdom suggests that when these two cross or diverge, we have buying or selling signals. (The charting logic is somewhat more complex than this, but I’m over-simplifying on purpose.)
For comparison sake, I’ve normalized both ACCRE and the S&P =1 as of the date we started (April 1, 2017) and graphed both together. As you can see, ACCRE really “took off” after early 2018. More to the point, ACCRE has a solidly up-trending 200 day moving average (the black dotted line) while the S&P is somewhat flat-lined right now (the solid black line). However, for both, the 50-day moving averages (the thinner dotted and solid lines) are both in “bull” territory right now. Note that the crossing of the S&P’s 50- and 200- day averages back in the Winter gave an unambiguous selling signal. However, the corresponding “buy” signal for the S&P this past Spring actually lagged the market. For ACCRE, the signals have been positive throughout, although the peak and trough in the 50-day average for ACCRE last summer and this past Spring were very useful indicators.
We’re not really chartists here at ACCRE, and the old Wall Street adage of “never try to catch a falling knife” is very useful in these situations. However, in hindsight, these signals tell us a lot about what our more fundamental analysis has shown to be true and useful.
Sorry for the delay, folks. We’ve made a few changes to the way we measure our data, and frankly September has been a terrifically busy month! Now, on with the good news.
ACCRE had a stellar August, particularly compared to the S&P. We turned in a very solid 3.6% monthly return, which means that a dollar invested in ACCRE at the inception is now worth $1.63. The S&P, in turn, had a crummy month, both in terms of returns and volatility. The S&P ended August with a negative 1.81% return. If you had invested that same dollar in the S&P back when we started ACCRE (and many of you did!), it would only be worth $1.24 today.
We have changed our REIT benchmark. We were previously using the monthly NAREIT index, computed by the Financial Times folks. Unfortunately, this index was only reported monthly, and was usually a bit lagged. For that reason, we’ve switched to using the S&P REIT index, which is reported on a daily basis. We’ve gone back to the inception of ACCRE and re-computed REIT benchmark returns accordingly. Note that the S&P REIT benchmark is an “all in” index, including both dividends and price gains.
We’ll report volatility and Sharpe Index data later in the month.