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Sprott


frog03
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Most of us agree that Buffett is THE MAN.

 

Watsa is really good too but I am surprised Eric Sprott gets so little mention here.  His track record is certainly as good as Prem and like Prem he saw all the overleverage and its likely consequences.  Also Allan Jacobs has Sprott has an outstanding LT record.  But very little mention here despite the high number of Canadian posters.

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I think it may be because Sprott needs a longer track record.  Other than his Canadian Equity fund, most of the funds were started this decade. 

 

Also, for someone who had a pretty good idea of what was happening, his funds had an awful year in 2008 like everyone else, except for a couple his hedge funds.  The small-cap hedge fund lost 50%!  The Sprott Growth fund was down 63%!  His oldest fund, the Canadian Equity fund, was down 43%.  That's quite a different result than Prem.  Cheers! 

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Sanjeev, it is totally unfair to use only one year for Prem vs. Eric! If I am not mistaken Fairfax stock price has not moved much over the last 11 years (OK, there have been some dividends).  Sprott Canadian Equity has made 18% a year in these 11 years...  I am not saying Eric is better than Prem, simply that he is definitely in the same league.

 

By the way, I recommend the stock market superstars book that came out a couple months ago.  Great read.

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I agree -- you definitely cannot go by one or two years of performance to judge.

 

Take the 73 + 74 period:

Bill Ruane (Sequoia) was down 44%

Charlie Munger was down 73%

Rick Guerin (Pacific Partners) was down 90%

 

Yet, these individuals all had successful long term track records --- better than most you can find.  Walter Schloss was only down about 15% in that period -- did it make him any better?  No -- but he was in an elite group that included the other 3 .... and a select few others including WEB, Peter Cundill, etc.

 

I can't say much about Sprott as I also do not follow him either.  But I can say that in 2008 Tim McElvaine was down about 50% and in 2007 he barely broke even. The market got very out of whack in it's pricing of things in 2008 --- Prem did very well in timing the fall.  But if you think the market had wrong valuations on the way up --- it is more than likely it had a lot wrong on the way down too.  Judging an individuals record as being superior for a short time such as a huge fall is just as wrong as judging an individuals short term record after a huge bubble. 

 

UCP / DD 

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A few points to add:

 

1) Eric Sprott runs only the Sprott Hedge Fund, Hedge Fund II, Bull/Bear RSP Fund (all three basically the same), the Canadian Equity Fund and the Energy Fund. The Growth Fund is run by Peter Hodson and the Small Cap Funds by Allen Jacobs. The individual managers have discretion over their funds although they may hold similar positions because they share a common analyst pool.

 

2) To assess Eric Sprott's performance, it's only fair to use the Hedge Fund because that's the fund that gives him the most discretion and thus reflects his true views. The Canadian Equity Fund and Energy Fund are basically long only funds and offer him only very limited ability to take short positions. The Energy Fund is also a sectoral fund which further limits his flexibility. The Hedge Fund basically holds the same long positions as the Cdn Equity Fund with the addition of an overlay of short positions.

 

3) The Hedge, Hedge II and the Bull/Bear Funds returned -4%, +6% and +8% respectively in 2008.

 

4) We should really compare these results to Watsa's hedged equity portfolio return in 2008. Most of Watsa's gains in 2008 came from CDS which the Sprott Funds are probably precluded from trading.

 

5) Eric Sprott's impressive documented long term track record as quoted by Frog are net of substantial fees (2+20%?) (vs Watsa's numbers which are gross). Sprott's returns before fees must be north of 30%!

 

6) Sprott's views on the economy, gold, commodities, financials are well documented in his monthly newsletters. He, as much as Watsa, foresaw this financial meltdown. He also got the gold and commodities trends right; he was also right on energy until the past six months but only time will tell whether he was right about the secular energy story which may not be over yet. The long only funds did not allow him to fully reflect these views.

 

7) The Sprott Hedge funds returned about 23% net in 2007 - I doubt that Watsa's 2007 hedged equity returns were anywhere close.

 

In the final analysis, this is not an "either or" choice. Both of them are super-investors in their own right, imho. I am quite happy to have my money with them for the long run.

 

I hold FFH and XHM.A (through which you get exposure to the Sprott Hedge Fund at a discount; unfortunately(?), you also get some exposure to Dynamic's Rohit Sehgal's and Front Street's funds). I also have a small position in SII - hoping to get it cheaper.

 

 

 

 

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Guest Broxburnboy

My own personal favorite at Sprott is JF Tardiff and his Opportunities Hedge Fund.

Over the past 1.5 years I have been rebalancing my mutual fund portfolio from

classic value funds (Like McElvaine) growth funds (like Norrep) to hedged plays

like Sprott Opportunities and FFH. Both Prem and Tardiff got it right, although

Prem performed better, Tardiff is still in the black and currently is deeply hedged

with equity shorts and precious metal longs.

 

I also believe that the macroeconomic paradigm that hosted successful traditional

value investing is over. Most of the "value" funds will not come back. I believe that

the continued instability of financial instruments, the unreliability of credit (on both sides),

the devaluation of the US buck and the realignment of global economic power creates

an environment that requires macro thinking and the ability to trade long and short.

 

The Sprott group and FFH should continue to perform.

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