Back in November I talked about trying out Premium Investing Services before committing your limited capital. One of the services I tried out was Morningstar’s Opportunistic Investor. I have explored the service and initially I thought it was worth the money. They describe themselves as a service that, ”seeks to uncover investment opportunities in no-moat stocks, deep cyclicals, arbitrage opportunities, spin-offs, bankruptcy reorganizations, and other special situations. We typically look for upside potential that is many times the downside risk, and prefer stocks with identifiable catalysts to unlock value. We will constantly adjust our portfolio to maintain the best possible risk-reward ratio.” In objective terms this sounds like they are operating right out the Joel Greenblatt school as described in his book, You Can Be Stock Market Genius.

Unfortunately, the reality of the service is not as good as the concept. I think it turned out to be a poor investment  of $79.50 which is the discounted price I paid for the service for a year.

While the concept has promise, their track record was not great, or as they themselves said in their year end summation, “There is no avoiding this point: on the surface, our performance was poor in 2009. For the full year (we bought our first stock on Jan. 23), we returned about 12.1%. This vastly lags the overall S&P 500 total return of 26.5%.” I agree. For an Opportunistic Investor 2009 was a great year.  And 12.1% is not a great performance in any year yet alone a year with so many opportunities as 2009. Interestingly, they complain that the biggest drag on their returns was their, “… cash position, which averaged around 60%-70% of the total portfolio for most of the year, and currently sits at about 50%.” I often hold large cash positions while I am looking for stellar opportunities. I am not sure that I buy the argument.

Ultimately, though it is the quality of the analysis and why they are taking positions that seems somehow unsatisfying. The editor’s don’t feel confident in their choices, almost like they have to pick something, so this is the choice this month. Not because it is a fat pitch, that is worth swinging at.

Disclaimer: I have paid for Opportunistic Investor and have no other financial relationship with Morningstar. I have an affiliate relationship with Amazon. If you are considering buying a book from them, please use my link, so I get my $.04. If you add up all the pennies I have made, well it doesn’t amount to anything actually.

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