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The SweetSpot Investment Letter
November 9, 2007
Subject: bright spot
Greetings,
The market has been ugly lately so now seems like a good time to share a secret about our future prospects: They're
bright!
SweetSpot investors believe that the least-loved sectors each year will outperform the market over the following
three years. This belief is backed up by both our actual experience and back-test results. By basing our past picks on Fidelity
data, however, we made a leap of faith that Fidelity customers would mimic the overall market, sector by sector, year after
year. No more. This year we made our first trade based on the data for all funds in all sectors. We no longer need to have
faith that our data reflects the market -- our data is the market (are the market?).
After all of this
week's carnage, our 2007-'09 SweetSpot trade is up 20.2% year-to-date. Our first-ever HotHands trade is up 18.3%. Meanwhile,
the market is up 4.1%. So what if we're a little poorer today than we were a week ago?
We shouldn't read too much
into less than one year of one trade. Still, these numbers may mean something. Maybe we can expect our new approach to perform
even better than the old one. Now that we're making our picks based on the behavior of all investors and not just those who
sign up with Fidelity, it should do better. And if it does, wouldn't that be something?....
Cheers,
Neil
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