Hold Me Accountable: How Did My Buy And Sell Recommendations Do In 2022?

It always bothers me how often you see pundits recommending this and that buy as a sure thing without any information about how their past picks have performed. So it seems only right that I should give those of you who follow my writings an update on how the advice I have given over this past year has held up. Note that all statistics in this article are given as of December 28, 2022, which is when I researched and wrote this article.

If you click on my Seeking Alpha Profile you can see how the stocks and ETFs I have covered have performed after I wrote about them. This is useful. Unfortunately, it does not reflect the nuance that my articles often describe. Seeking Alpha, in line with most investment services, requires that I choose “Buy,” “Hold,” and “Sell” for any main ticker I write about. But these ratings do not reflect the actual advice I have given.

That’s because I often write about investments that I think are overvalued at the time I am writing, but that would be great buys were their prices to meet certain criteria I lay out in the article. My feelings about those investments are don’t sell but keep an eye out to buy if the investment’s price corrects to some stated target.

I often write about the classic “buy and hold” broad market retirement-oriented investments including the SPDR S&P 500 ETF Trust (SPY), the Vanguard S&P 500 ETF (VOO), or the Vanguard Total Stock Market ETF (VTI). My feeling about those investments is that once you have bought shares in them you should never sell them until you need the money in retirement. The only exception to this is if you are investing in a taxable account and have a tax loss harvesting opportunity. But because that is my attitude, I flag these investments as Holds, even though I expect them to decline, possibly a lot. My thinking is that history, and my own experience as a naive investor trying to time the market, has been that when the market turns up after a decline it can do so very quickly, punishing those who sold out of large positions.

That means that I often write articles about SPY, VOO, or VTI where the entire article makes the point that this is not a good time to buy them for reasons given in the article. But if you look at the graph that Seeking Alpha provides along with that article, it isn’t clear that I warned the reader about the coming decline they can expect in that investment’s share price.

Here, for example, is a list of the articles I have written about SPY. As you can see, all are flagged as holds, but if you read the articles you will see that in most of these articles, I have pointed out the significant issues with valuation that have resulted in the performance of SPY in the months after I wrote about it. My only article recommending that retirement investors avoid SPY completely was the one published in February that pointed out that its expense ratio was considerably higher than other S&P 500 ETFs. But even there if an investor already owned it, there was no reason to sell it except if tax loss harvesting.

SPY Price, My Hold Recommendations and the Actual Articles

Investors who followed my advice to hold their existing investment in SPY, VOO, VTI, and similar ETFs while not buying more until their valuations improved, might not have done as well in the short term as those who jump in and out of these investments. But I believe firmly that they are likely to do a lot better over time as it is so difficult to know when to buy back in after selling them.

However, there was one huge exception to this — an article that has proven to have hit the nail on the head. That article was The Market Has Already Protected You From Inflation With 48% Gains Over 2 Years, Take Profits Now. Investors who took the advice I gave in this article, which was published on December 16, 2021, saved themselves from a world of hurt.

VOO History After My One Sell Recommendation

I Only Issued One Buy Recommendation for a Stock

SNA

That stock was Snap-on Inc (SNA), a company that has an enviable long-term history of holding up in good times and bad.

I recommended it in this article, which was published on February 4, 2022. Is Now A Good Time To Invest In Value Stocks? Consider Snap-On And Comcast. That article’s only strong recommendation was to invest in Snap-on. Though Comcast (CMCSA) featured in the article’s title, I gave good reasons for suggesting that though Comcast looked like a great value buy, there were reasons to be cautious. I concluded “I am going to be keeping it on my radar for if the market resumes a downward course, but unless the price drops further while its growth prospects remain unchanged, it is not a screaming buy.”

Very few Seeking Alpha members saw that article because of the way that Seeking Alpha only notifies readers of articles about stocks that are already in your portfolio. That’s a shame. As you can see, investors who put their money into Snap-On did very well.

Snap-On Performance Since My Buy Recommendation

Comcast, it turned out, saw its price plummet, with its total return falling 28.49% since I published that article. For what it is worth, it still looks like it could be a fine value play for those willing to wait, though I am not recommending it. If you are interested, wait for its January 2023 earnings call to see if the earnings and forward guidance match what analysts are currently expecting.

My Recommendations for Fixed Income Investments Followed the Ukraine Invasion Black Swan

The Russian invasion of Ukraine began on February 24, 2022 and is still ongoing, more than 10 months later. It has made a huge difference in the investing climate, ensuring that inflation would be far more long lasting than originally believed.

Those who cast scorn on Federal Reserve Chairman Jerome Powell’s June 22, 2021 statement that inflation was temporary have to ask themselves, did they see this invasion coming? Were they already aware of the huge impact it would have on the price of energy, fertilizer, grain, and all the other products whose supply lines were complicated by the need for democratic nations to sanction this criminal land-grab? Don’t let your need to score political points blind you to just how much that invasion has changed the investing environment — and may continue to affect it throughout the next year.

A Winning Recommendation to Income Investors Switch to Fixed Income Investments From Stocks

I issued that recommendation in a tickerless article published on September 23, 2022 that has become the most read of any investing article I have ever published. That article was Don’t Be A Fool: Pause Stock Purchases And Load Up On Treasuries.

U.S. investors who followed that advice were able to lock down government guaranteed CD yields approaching 5% over the next month, some extending as long as five years. Those who invested in shorter maturities have been able to take advantage of rising money market fund yields. These highly liquid funds that present no significant risk of lost principal have seen their yields rise over the past few months. Investors now can get 4.26% in the Schwab Value Advantage Money Fund Investor Shares (SWVXX).

Yes, the share prices of dividend stocks and ETFs have risen since I published that article, but that is only useful to those who sell out at what they hope is the stock or ETF’s high. If we have the recession that so many are forecasting this coming year and earnings take a major hit, the prices of those dividend stocks and ETFs will fall. Quite a few may cut or pause dividends, but those CDs and Treasuries you bought in October and November will continue to pay that government backed 4+%. And you can sell your money market fund holdings and use the principal you protected to buy dividend stocks at much better prices, valuations, and yields.

If yields matter to you, it’s worth noting that though the share prices of the dividend ETFS have risen since I published that article, their dividends continue to not be competitive with the best fixed income offerings.

For example, the Schwab U.S. Dividend Equity ETF (SCHD) currently has a dividend yield of only 3.38%. Even figuring in the higher tax rate on fixed income you would pay in a taxable account, investing in a money market fund right now you will still come out ahead. You could do even better if you buy Treasuries. Today’s auction of the 5-year Treasury Note (US5Y) settled at 3.973%.

I don’t know about you, but if we do see a significant recession, or, for that matter, if the Fed pauses its rate increases, you will be very happy to have a completely safe yield of almost 4% to provide you income, without the worries about what is happening to the money you invested you have to have with stocks in a recession or longer period of stagflation.

I repeated my advice to invest in fixed income on November 2, at a time when investors had convinced themselves that the Fed was going to make its much-desired Pivot away from raising rates. That article was No Pause. Rates Will Keep Going Up: Powell Was Unusually Direct At His Press Conference. That advice has continued to reward those who followed it.

I Made One Losing Bond-Related Buy Recommendation

TMV

On October 28, 2022 I recommended that the Direxion Daily 20+ Year Treasury Bear 3x Shares ETF (TMV) could be a very profitable investment if the Fed’s guidance came in much higher than what investors were hoping for. It did, but investors continued to hold on to their belief that the Fed would soon be forced to pause their rate increases and possibly even begin taking action to lower rates. As a result this triple leveraged ETF has suffered major losses.

TMV Performance Since My Buy Recommendation

Here again, there is some nuance in the article that isn’t captured by the “buy” recommendation. Several times I pointed out that investing in a triple leveraged ETF was a gamble. I also qualified who I thought might benefit from buying in, stating,

Investing in TMV may look like an out and out gamble, and if you don’t hold bonds or CDs, it is … But investing in it makes sense if you … have a significant holding in bonds with a longer duration — like those held in BND or BIV or other longer duration bond ETFs like the iShares Core 10+ Year USD Bond ETF (ILTB) or the Vanguard Long-Term Bond ETF (BLV) … A small amount [of TMV] can take some of the pain out of the ongoing impact of rising interest rates which as many investors learned for the first time this year, can cause their “safe” bond allocation to lose almost as much as a speculative stock.

Given that longer rates have begun to rise again, it is possible that those who bought TMV might make up some of their losses over the next few months if they hold, but it certainly did not turn out to be a profitable investment for those who bought when I recommended it. I lost some money in it too, though I sold out when that loss hit my stop.

I Issued 11 Sell Recommendations. How Did They Do?

Recommendations that Paid Off

I already described the usefulness of my sell recommendation for VOO issued on December 21, 2021, a year ago. Now let’s look at the rest.

VGT

I issued 12 sell recommendations, starting with the advice to sell the Vanguard Information Technology ETF (VGT) which I published on February 23, 2022. That was a good call. It’s down 18.81% since then, almost double the S&P 500’s 10.21% loss since then.

VNQ

In April, I published an article advising investors to dump the Vanguard Real Estate ETF (VNQ). That too was very good advice. It has since achieved a total return of -22%. Note the minus sign! And that total return includes the whole year’s worth of dividends.

QYLD and RYLD

On April 21 I advised investors to sell the Global X NASDAQ 100 Covered Call ETF (NASDAQ:QYLD) and the Global X Russell 2000 Covered Call ETF (RYLD) which were popular with income investors at the time. Since then QYLD’s total return has been -16.42% (note the minus sign!) which includes its dividends. RYLD’s total return has been -12.58%. In that article I suggested that if you had to buy one of these. RYLD would be a better choice but I flagged them both as sells, writing:

Don’t let the high distributions fool you. Both QYLD and RYLD give dividend investors less return in the good times and can deliver stinging losses in bad. They are both young ETFs that have done decently over a short time stretch but can’t guarantee safe returns for income investors if the bull market stalls or ends.

Again, good advice.

TQQQ

Similarly, investors who heeded my warnings in an article published on May 6, 2022 to sell ProShares UltraPro QQQ (NASDAQ:TQQQ) were spared the devastating loss of 53.42% of their investment. No one should have needed this warning, given the ridiculous overvaluation of the stocks making up half of the Invesco QQQ ETF Trust’s (QQQ) value at the time, but apparently some people’s greed is greater than their common sense.

QQQ

Along the same lines, in an article published on May 31, 2022 I recommended investors sell QQQ. Those who did avoided a total return loss of 14.98%. I issued another sell recommendation for QQQ on September 21, 2022 almost six months later after QQQ’s share price had dropped over 20% from its high. Investors who heeded that warning saved themselves from the subsequent 9.78% loss suffered by those who held.

Valuation matters — eventually — and as we can see stupid valuations turned out to matter a lot.

Recommendations That Were Mediocre But Not Bad

VPU

On August 4, 2022 I issued a sell recommendation for the Vanguard Utilities ETF (VPU) arguing that it would not protect investors in an environment of sustained inflation, based on how they did in the previous 1970s inflationary period. I also pointed out that VPU’s yield was the lowest it had ever been making it that much less appealing to income investors and suggested only buying it when rates rose to a more competitive level.

Since then VPU’s total return has been a loss of 2.91%, which of course includes its dividends. That was better than the performance of the S&P 500 over the same period, as it dropped 8.61%, but it was still a loss.

VPU Performance After My Sell Recommendation

Investors would have done better to invest in fixed income over that same period. At the time that article was published the 2-year Treasury Note was yielding 3.07% and the 5-year treasury was yielding 3.15%. Rising fuel costs are taking their toll on utility profits. Unless you have a very low yield on cost and significant capital gains (as I do) there was little reason to hold.

VIG

On September 7, 2022 I issued a sell recommendation for the Vanguard Dividend Appreciation ETF (VIG) in an article comparing it with VOO. Since then it has outperformed VOO, as you can see.

VIG Performance Since My Sell Recommendation

Remember that the S&P 500 change is a price change that doesn’t include its dividend. So yes, over the short term VIG did outperform VOO. As inflation persists it is likely to lose its remaining appeal. Why should investors gamble for a 2% yield on their investment when they could earn 4% or more in a fixed income investment where their principal is guaranteed?

I Made What Looks Like One Really Bad Stock-Related Recommendation But Nuance Matters

On June 22, 2022 I recommended investors dump the Energy Select Sector SPDR ETF (XLE). Since that time it has achieved a 21.12% total return. So that looks like a bad call.

There is a slight improvement if we look at what I actually wrote in the article. I did advise investors “XLE’s dividend is not competitive with a small holding of individual oil stocks.” Further on in the summary portion of that article I wrote,

Buy XLE if you want to make a short-term speculation on how the oil industry will perform. Even there, you might do better just buying XOM and CVX directly rather than this very poorly diversified ETF.

As you can see from this graph, in the short-term speculators who took my advice and sold could have made some money. XLE dropped several times below its price at the time I issued my recommendation. Obviously those who bought and held have done poorly, though given how volatile oil can be, they may make up their losses next year.

XLE Performance Since My Sell Recommendation

My advice that investing in Exxon Mobil (XOM) and Chevron (CVX) instead of XLE would be a better way to invest in oil was also good. As you can see, both have outperformed XLE since I gave that advice.

Bottom Line: My Advice Was Largely Very Helpful. But You Need to Read the Articles To Fully Profit From It

I am very careful not to issue recommendations that I am not very confident about, given that I understand that too many people invest based on what they see some pundit advise without doing their own research. As a result I tend to lay out my thinking about where I think various investments stand, what their valuations look like, how ETFs are constructed, and what they hold, rather than issue flat out buy or sells.

I’m glad to see that where I have issued recommendations to buy or sell my advice would have helped readers. Only two of my recommendations would have led to losses. But it is worth noting that this would only have been true if those who bought or sold did so without reading the articles that accompanied those recommendations. In those articles I spelled out in detail who those recommendations were aimed at and why those recommendations would make sense for them. Even my worst-looking sell recommendation, for XLE, looks a lot more reasonable in view of the advice in the article to invest in a few oil stocks rather than invest in the sector ETF.

If you like this article, ask your favorite authors to provide some detail on how their recommendations have played out. We can all learn from this exercise.

Here’s wishing all my readers a Happy New Year and safe, comfortably-held investments for 2023.