Hong Kong CFOs hoping for a fillip to their stock in 2010 and many a stock investor have one fewer prognosticator to depend on. David Webb, the corporate governance activist who has been making a widely followed 'buy' recommendation on one small-cap stock around Christmas time has decided to stop the practice.
“After 10 years, and a rather respectable track record, if we do say so ourselves, we think this is a suitable time to call an end to this before it gets out of hand,” Webb wrote on his website
Since 1999, Webb has helped lift the stock fortunes of many companies listed in Hong Kong. They include Christmas Pick 1999 Boto, which was then making Christmas trees (up 23.3% over the next year), Christmas Pick 2000 Kingmaker, which makes footwear (up 53.2%) and Christmas Pick 2001 Tungtex, a garment maker (up 56.3%). The 2008 pick, consumer electronics maker Alco, is ending the year up 166%.
All told, eight of the ten Christmas Picks made money. The exceptions are Sino Golf in 2006 (down 6.7%) and multimedia products maker Shinhint in 2007 (down 40.6%). Both companies were badly hit by the Great Recession.
If you had put $1,000 in the first pick and then rotated into the next one each year, your initial investment would have grown to $12,181 today, a compound average gain of 28% per annum. “By comparison,” writes Webb, “if you invested the same amount in the Hang Seng Index ten years ago, and reinvested the dividends, you would now have $1,866, a compound average gain of 6.4% per year.”
Webb has also written about companies that his research shows are badly managed and/or have opaque or inadequate corporate governance. “We will continue to issue warnings about listed companies which may often be considered as ‘sell’ notes by those who own them and ‘don’t buy’ notes to those who don’t,” he says. CFOs beware.