Well, it’s been a busy few weeks on every front. The Corona Virus has a very real impact on our stock market for a lot of reasons — I’ll talk more about this tomorrow on my main blog, johnakilpatrick.com.
In the meantime, though, ACCRE held it’s own quite nicely in the wake of terribly choppy waters. As shown below, we lost 1.83% net in February, which of course all happened in the last few trading days. This took our cumulative pricing down from $1.68 to $1.65. In other words, a dollar invested in ACCRE on day one, nearly 3 years ago, would be worth $1.65 at the end of February. In contrast, if that same dollar had been invested in the S&P, it would now be worth $1.25, down from $1.37 a month ago. The non-curated S&P property index fund would now be worth $1.18, down from $1.28 a month ago.
For technical reasons, our graphics aren’t loading today. I hope to update this blog later today with the “$ Invested” chart. In the meantime, I’m happy to report that ACCRE is rebounding nicely in these first few trading days of March, and we’re continuing to monitor our holdings closely. Of course, if we make any portfolio adjustments, subscribers will be informed immediately.
This was one of those months when the diversification benefit of ACCRE only partially attenuated the problems with the S&P. As you may know, the S&P 500 was really on a tear until the last week of January, then for a variety of macro reasons, simply fell out of bed. ACCRE was similarly doing quite well, and also fell, although not quite as badly. Net returns for the month for the S&P were -0.16%, and for ACCRE -0.13%.
Peeking ahead, I can tell you that ACCRE has washed away all the negative ink thus far in February, and if trends continue should hit a new all-time high this month. I’ll keep you posted!
This is the point in the month when I usually discuss comparative metrics — particularly overall correlations with the S&P and the Sharpe Ratio (a measure of return versus risk). Both are getting to be old stories. ACCRE has a Sharpe Ratio of 6.2, compared to the S&P of 3.5 (lifetime since the beginning of the ACCRE fund). No brainer — ACCRE dominates the S&P in terms of risk-adjusted return. As we also know, ACCRE beats the S&P in total absolute return as well, over the life of the fund, and has a lifetime correlation of only 41% (this adding diversification to an overall portfolio). Good stuff. ACCRE does exactly what we want.
Now, on to the fun stuff. I’m a fundamentalist, which is to say, I look at actual stock performance and company fundamentals. However, like most market watchers, I’m not immune to some of the trading statistics. One thing I look at occasionally are 50-day and 200-day moving averages, for ACCRE, the underlying stocks, and the S&P as a whole. After all, there are other traders out there, too, and what they think about these stocks is not unimportant. The results are interesting.
Here, for example, is a chart of ACCRE and the S&P normalized from the first of the year (in other words, a dollar invested on January 1). For the first 10 months of the year, more or less, ACCRE dominated the S&P. That changed around the first of November, and now the S&P has performed somewhat better. Both ACCRE and the S&P have solidly up-trending 200 day moving averages. However, ACCRE’s 50-day moving average has flattened a bit — and even trended downward — since November. Indeed, this picks up the fairly lackluster performance of REITs overall starting in the middle of the 3rd quarter. Of course, if I was a persnickety chartist, I’d say this doesn’t matter yet, and wouldn’t worry unless and until the 50-day line got close to the 200-day line, and we’re nowhere near that. Case in point, the December performance was stellar, and indeed took us back up into record territory. Given the lack of correlation with the S&P, this was really all about real estate rather than simply a market halo effect. Preliminary January results seem to bear out a continuation of this trend.
Anyway, that’s it until the first of February. See y’all then!
Well, we ended December on a high note — but that was true for investments in general. Our ACCRE fund hit an all-time high — a dollar invested in ACCRE at the inception is now worth $1.68. In case you’re curious, this works out to an average annualized rate of return of about 21.5%. By comparison, a dollar invested in the S&P during that same period is now worth $1.37, and if that same dollar went into the S&P U.S. Property Index, it would be worth $1.28.
As usual, we’ll be back mid-month with comparative metrics. Of course, if and as we make portfolio changes, our subscribers will be informed immediately.
Sigh… late, but not forgotten! Just like my Christmas shopping. We hope everyone is having a great holiday season, and looking forward to a super new year.
As usual, our mid-month report will deal with Sharpe Ratios and S&P correlation. The S&P had a fantastic November, from an excess-return perspective. The S&P 500 Sharpe Ratio increased from 0.0265 to 0.0313. That may not seem like much of a gain, but these are daily excess returns, divided by the standard deviation. The S&P standard deviation fell just a bit and excess returns (the average daily return minus the return that would have been earned in the short-term T-bill) jumped by nearly 20%. If you follow any sort of technical trading scheme, November had a real impact in your 50-day (and shorter) moving averages.
I point all this out just to note that the S&P has been surprisingly hard to beat the past few months. Will the broad index keep this up? Well, that remains to be seen.
As noted in our previous report, ACCRE had a solid but not spectacular November. On a risk-adjusted basis, ACCRE continues to out-shine the S&P with a Sharpe Ratio of 0.0606 since inception. Intriguingly, ACCRE’s correlation with the S&P continues to decline, falling to 15.57% in November. This really suggests that the market is increasingly looking at real estate as something very different from the market as a whole.
Notably, moving averages on portfolios are not like those on individual stocks. Traders are price takers for stocks, and so when a stock moves relative to its MA, the trader has to make a “buy-sell-short” decision. With a portfolio, however, we can make adjustments on a more granular level. We made several trades this past week, and our subscribers received an alert with the new portfolio make-up during the trading day.
Best wishes to you all, and we’ll be back right after the first of the year.