Author Topic: MAGA has been terrible for investors! Discuss.  (Read 500 times)

Read the Footnotes

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MAGA has been terrible for investors! Discuss.
« on: February 12, 2019, 08:32:59 AM »
Point Bridge GOP Stock Tracker ETF (MAGA) has trailed the S&P 500 significantly since exception. How do you explain MAGA's under-performance relative to the broader market?

http://www.investpolitically.com/wp-content/uploads/2019/02/MAGA-Fact-Sheet.pdf

https://preview.tinyurl.com/y3vlo9ds

To start, I suggest a few investment and portfolio management related topics for discussion:

•   Is two years sufficient time to evaluate success or failure for MAGA?
•   These ETF’s are primarily a source of fee revenue for the managers. How could anyone expect to outperform the market with 148 positions spread across many sectors? Further how could anyone expect to underperform so drastically given a diverse mix of 148 different positions?
•   These ETF’s are primarily a source of fee revenue for the managers of the fund. Why didn’t I think of that? Why didn’t a single one of us think of founding a MAGA fund?
•   What would be the correct method of evaluating manager skill at selecting industries or individual securities for inclusion in MAGA?
•   Could you do better than theses managers? What would you have done then? What would you do now?
•   Why would we even discuss this? The COB&F should be full of bottom up value investors and this strategy is doomed to fail because:
     1.   There is little proof that macro theme-based strategies have a good probability of success.
     2.   The strategy is dependent on forecasting the future, which value investors are smart enough to avoid.

Another topic for discussion would be to examine to whether most people and most investors underestimate how difficult making predictions might be when Trump is involved:

•   Like many real estate investors, entrepreneurs or business people, Donald Trump’s management style might primarily be improvisatory or reactive. What would be the impact on the ability to make predictions of the impact on the market?
•   Trump is believed to try to keep opponents off guard by being unpredictable. This a valid negotiation technique, although it Is best applied when you don’t value the relationship. Can we expect this behavior would make forecasting harder?
•   Can you suggest more ways that the impact of Trump might be more difficult to predict?

My apologies if I inappropriately posted something relating to investing on COB&F or in the Politics section.

If at all possible, please try to formulate your response like a rational investment analyst. Or if that’s not possible, like a comedian.


Gregmal

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Re: MAGA has been terrible for investors! Discuss.
« Reply #1 on: February 12, 2019, 08:44:38 AM »
IDK. I think any "product" needs to be met with skepticism as you rightly point out. These "theme vehicles" are not made for the benefit of investors, they are made to benefit the sponsor.

In terms of MAGA, I've had great luck with what I consider to be the ultimate Trump stocks, CLF and MSB. But that's just me...

Trump to me is easy to predict. He's a 2 year old. He needs big, mega victories to tout. So while his critics lie and say he s done nothing, that is not the case. He's done a lot of good things. But has he done as many super, duper, extraordinary great things as he advertises? Not even close. All of his "accomplishments" thus far, have been great short term buy the rumor sell the news situations.

Read the Footnotes

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Re: MAGA has been terrible for investors! Discuss.
« Reply #2 on: February 12, 2019, 11:28:03 AM »
IDK. I think any "product" needs to be met with skepticism as you rightly point out. These "theme vehicles" are not made for the benefit of investors, they are made to benefit the sponsor.

You bring up some good points here. I am sure the sponsors would say they did not make any representations of anything other than offering a vehicle for investors to express an opinion. On the other hand, their marketing materials seem excellent at leading investors to independently make a decision to have and to express that opinion.

Further, this ETF is supposedly a passive, index-tracking vehicle. On the other hand, the sponsors manage the index which the ETF track. At least that is my understanding from a quick look. Good performance of the index would likely lead to greater asset flows to the ETF, but it is debatable what incentives really exist in this situation.

In terms of MAGA, I've had great luck with what I consider to be the ultimate Trump stocks, CLF and MSB. But that's just me...

This post seems well reasoned, and dispassionate. I would guess that ability would improve your odds at doing well.

Have CLF and MSB been discussed here? If not, would you be willing to share more here or open a thread in the ideas section? I would be interested to hear even if it were just a postmortem of your thoughts on a successful past opportunity.

Trump to me is easy to predict. He's a 2 year old. He needs big, mega victories to tout. So while his critics lie and say he s done nothing, that is not the case. He's done a lot of good things. But has he done as many super, duper, extraordinary great things as he advertises? Not even close. All of his "accomplishments" thus far, have been great short term buy the rumor sell the news situations.

You a raise another good point. Your focussed bets might stand a better chance at producing results than the broad based MAGA. I would guess that focussing on what could be identified as the biggest, most important themes would have a higher chance of success. For example, only betting on what you believed would be the administration's focus within the first 100 days. If you had bet big on changes to the tax code, that might have worked out very well. If you placed equal weighted bets on every promise that someone thought Trump might have made on the campaign trail, that likely would have worked out very badly, as it probably would for most politicians.
« Last Edit: February 12, 2019, 11:29:45 AM by Read the Footnotes »

Spekulatius

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Re: MAGA has been terrible for investors! Discuss.
« Reply #3 on: February 12, 2019, 08:12:48 PM »
So what is Trump working on right now?

1) Some rumors of FNMA/FRE recap. This does not seem his primary focus right now.
2) Border security - “The Wall”
3) Trade Deal with China (this one is the most likely to drive stock prices)
4) Pulling back  US military from Syria, possibly other locations
5) Keep the economy going, low interest rates etc. at least until the next elections
6) Infrastructure bill ? (More an idea that Dems would probably go along with)
To be a realist, one has to believe in miracles.

Gregmal

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Re: MAGA has been terrible for investors! Discuss.
« Reply #4 on: February 12, 2019, 08:33:35 PM »
I've touched on both briefly in various investment threads, but for the best background on CLF and MSB, check out some the work of Nat Stewart and James Duade on Seeking Alpha.

CLF has an Outsiders type CEO who was brought in after an activist reshaped the company. Fought off BK, sold off pretty much everything but NA opps. To give you an idea how bad ass Lorenco is, a few years back, on the verge of BK, he announced a massive stock buyback. When the debt then plummeted he did not buy any shares but instead bought back the debt at pennies on the dollar. This may be the markets most misunderstood company. Gets thrown in with global I/O producers but its highly focused and well organized/managed. Huge tax loss carry forward offsetting taxes for a long time. Cash flow monster.

Mesabi, MSB, very simply, is a royalty trust created the 60's for a bunch of rich kids. It owns and leases CLF's most valuable/economic I/O mining lands. No management, no overhead, just collects royalties. Expect $3-$4 per share in annual distributions for the foreseeable future.

 Neither of these two are probably worth threads. I've notice here that the good ideas(the ones that make money) get ignored.

Spekulatius

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Re: MAGA has been terrible for investors! Discuss.
« Reply #5 on: February 13, 2019, 05:13:10 PM »
I've touched on both briefly in various investment threads, but for the best background on CLF and MSB, check out some the work of Nat Stewart and James Duade on Seeking Alpha.

CLF has an Outsiders type CEO who was brought in after an activist reshaped the company. Fought off BK, sold off pretty much everything but NA opps. To give you an idea how bad ass Lorenco is, a few years back, on the verge of BK, he announced a massive stock buyback. When the debt then plummeted he did not buy any shares but instead bought back the debt at pennies on the dollar. This may be the markets most misunderstood company. Gets thrown in with global I/O producers but its highly focused and well organized/managed. Huge tax loss carry forward offsetting taxes for a long time. Cash flow monster.

Mesabi, MSB, very simply, is a royalty trust created the 60's for a bunch of rich kids. It owns and leases CLF's most valuable/economic I/O mining lands. No management, no overhead, just collects royalties. Expect $3-$4 per share in annual distributions for the foreseeable future.

 Neither of these two are probably worth threads. I've notice here that the good ideas(the ones that make money) get ignored.

CLF and MSB are a bet on iron ore prices and CLF may be a bet on management as well rather than on MAGA. Steel stocks for example have a very mixed record since Trump become POTUS, with some winners (Nucor) and losers (X). Overall a bet on steel would have underperformed  the market probably.
To be a realist, one has to believe in miracles.

Gregmal

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Re: MAGA has been terrible for investors! Discuss.
« Reply #6 on: February 13, 2019, 06:49:20 PM »
I've touched on both briefly in various investment threads, but for the best background on CLF and MSB, check out some the work of Nat Stewart and James Duade on Seeking Alpha.

CLF has an Outsiders type CEO who was brought in after an activist reshaped the company. Fought off BK, sold off pretty much everything but NA opps. To give you an idea how bad ass Lorenco is, a few years back, on the verge of BK, he announced a massive stock buyback. When the debt then plummeted he did not buy any shares but instead bought back the debt at pennies on the dollar. This may be the markets most misunderstood company. Gets thrown in with global I/O producers but its highly focused and well organized/managed. Huge tax loss carry forward offsetting taxes for a long time. Cash flow monster.

Mesabi, MSB, very simply, is a royalty trust created the 60's for a bunch of rich kids. It owns and leases CLF's most valuable/economic I/O mining lands. No management, no overhead, just collects royalties. Expect $3-$4 per share in annual distributions for the foreseeable future.

 Neither of these two are probably worth threads. I've notice here that the good ideas(the ones that make money) get ignored.

CLF and MSB are a bet on iron ore prices and CLF may be a bet on management as well rather than on MAGA. Steel stocks for example have a very mixed record since Trump become POTUS, with some winners (Nucor) and losers (X). Overall a bet on steel would have underperformed  the market probably.

Yes and no. Of course it s a big driver. But also, having steel tariffs and constant talk of infrastructure projects and old economy renaissance was a very nice tailwind. Sure, some steel stocks have done better than others. The week after the election AKS, X, CLF etc all went bananas. But many of the steel companies are straight turds. CLF used to be part of the group in terms of reputation, and quality. It seems to finally be getting some credit, but IMO is still heavily misunderstood. It still gets grouped with global producers. U.S. Iron Ore pellets are often incorrectly compared with seaborne iron ore fines. It's unique and yes, I agree stock selection is important; but hey, that's why guys like us dont buy index funds... MSB is just plain underfollowed and misunderstood. There are floors built into the contracts and a general structure that IMO nearly guarantees $3 annually for the foreseeable future. CLF is increasing capacity with the HBI plant. Bodes well for future CLF earnings and future MSB distributions.