februari 06, 2009

Do the opposite of what the sovereign wealth funds do! - Part III

More or less exactly one year ago (Jan 31, 2008) I listed three reasons for why I would short the stocks the sovereign wealth funds (SWF) invested in at the time. In a follow-up blog (about half a year ago on June 18, 2008) I showed how the strategy of shorting SWF-stocks would have paid of handsomely.

Now, the other day, I read in WSJ that many of the middle eastern sovereign wealth funds (which make up a major part of all SWFs) are starting to look at opportunities at home and in emerging markets such as India. If we should follow my advice of using these SWFs as contrarian indicators we should avoid middle eastern stocks! OK, that sounds fine with me!

The article also mentions how the total value of all Gulf wealth funds has declined with about 34% over the last 12 months (my approximate calculations). In other words, the profits of those who did the opposite to the SWFs is around +34%... And that in a world where the global stock markets have offered the investor a return of around -25%!