When Lesley met Murray: Portfolios take a hit

She's a Calgary-based 24-year-old consultant. He's a 64-year-old trader. We "gave" them each $100,000 in September and we'll follow them for a year to see who has the best strategy.

By Paul Brent
Globe Investor Magazine Online, Jan. 18, 2008

As with many real-world portfolios, the fantasy holdings of our Investor Faceoff contests have had a rough ride over the past few months.

Four months into the battle of youth versus experience, 24-year-old financial consultant Lesley Scorgie is a little behind Murray Soupcoff, our “retired” 64-year-old day trader and former journalist.

Mr. Soupcoff, whose $100,000 faux portfolio is ahead $1,675 as of the Jan. 11 market close, is sticking to his rocks, plants and oil sands theme. “Gold, agriculture and oil sands. That's my prescription for 2008,” he says.

Over the past month, Mr. Soupcoff has tinkered with his holdings by selling his 700 shares in Canadian gold and silver bullion fund at $11.55 for a total of $8,078 on Jan. 9 and bought 100 units of Ishares Comex Gold Trust (IAU-NYSE) at $84.90 each for $8,821, including commissions.

Mr. Soupcoff still holds a whack of cash, $18,330, in his RBC money market fund in anticipation of more bad news slamming the market.

“I still expect a downturn in the U.S. economy, a drop in U.S. dollar, and consequently an even greater flight to gold during 2008.”

That is why he purchased Ishares Comex and remains watchful on the sidelines for more opportunities in the gold sector.

His RBC money market cash hoard, at nearly a fifth of his holdings, remains “reserved for buying at new lows if the correction continues in the U.S. and in the Canadian markets as I expect it to,” says Mr. Soupcoff.

The former technology journalist, who wrote for The Globe and Mail and other publications, is sticking with his investment theme that Canada will continue to prosper in its role of breadbasket to the developing world.

“I am sticking with agriculture ETFs and stocks because this soft commodity is probably the growth story of 2008,” he argues. “No matter what happens, everyone's got to eat, and the new emerging middle classes in China and India now are changing to Western-style diets, meaning greater pressure on agriculture staples. [So there is] the need for more fertilizer, seeds and agricultural machinery to increase agricultural outputs around the world to meet this growing global demand for food.”

His agriculture-themed holdings currently account for about one-quarter of his portfolio’s value, led by Agrium Inc., which has grown to $14,020, or a gain of 40.7 per cent, from an original $10,000 investment. Small bets on Hanfeng Evergreen (a TSX-listed Chinese fertilizer company), Viterra (Saskatchewan Wheat Pool) and U.S. agribusiness ETF Market Vectors (better known as MOO) have resulted in returns of 4.4 per cent, 10.3 per cent and 36.4 per cent respectively.

Mr. Soupcoff, who in real life has made enviable returns by his early identification of the potential of Canada’s oil sands, is also sticking with his bet on Suncor Energy, which has gained 13.6 per cent to $10,628.

“Even though the price of oil will probably drop in the short term, oil sands properties with long reserve lives in politically stable areas of the world like Canada will still increase in value, and the price of oil will continue to rise in the long term, as the energy demand from Asia continues to grow,” he says. “I hope to buy more oil sands stocks if there is a short-term correction in oil in the next month or so.”

Ms. Scorgie, less active on the trading front, has more or less held her own. Her only trades of the past month were the sale of her day one holding of Polaris Mineral (PLS/TSX) for $9583.33 or a loss of $416.67. She subsequently purchased 115 shares of EnCana Corp. (ECA/TSX) on Jan. 10 for $7,918.

“I got rid of Polaris because I’m not sure it is going to turn,” she said. “EnCana is heavily weighted towards natural gas which seems to be on a bit of an upward trend. It’s a solid name.”

As well, the much-feared Alberta oil and gas royalty review has not proven to be as scary as dreaded by investors, she observed.

Portfolio winners for Ms. Scorgie to date have been steel fabricator ADF Group (DRX/TSX), which has appreciated more than 50 per cent or $5,092.17 on the original $10,000 investment. Her biggest loser to date is molybdenum producer Thompson Creek (TCM/TSX), a day-one purchase that was an early winner but has recently shrunk by nearly one-third, or $4,170.56, from an initial value of $15,000.

Ms. Scorgie is philosophical about her Faceoff performance so far.

“It wasn’t a great year for a lot of people. Yet I think it’s a great opportunity to start buying. I’m a bit of a contrarian. When people start selling, I go looking for deals. “

Special to The Globe and Mail