It’s that time of the year again. The turkey is ordered, Mariah is playing on repeat, and the second box of Quality Street has already been opened. So, it is time for the annual tradition of announcing the performance of the Santa Baby Index (Trademark pending).
Everyone keeps asking me: “when are you posting about the SB index?”, well, when I say everyone, I mean only a couple of people. OK, OK, nobody has asked me about it, but like all good family traditions we are going to go ahead with it, whether people like it or not.
In case you have no idea what the Santa Babay Index is, you can find the original article below, but in a nutshell, it is a basket of financial assets based on the requested gifts in the famous Christmas song.
After two mediocre years, the SB Index returned a much more respectable 14.03% over the last 12 months, largely driven by the exposure to platinum and mining companies. This is similar to story to Five Horizons’ own portfolios, where our allocation to precious metals and commodities have added significant returns for our clients this year.
While 2024 was a tough year to make a difference, as we said “Many, many hours committed to research and analysis, trying to identify mispriced and undervalued opportunities and you may as well bought the 10 biggest companies in the world and gone back to bed! Anyway, these things don’t last forever” Thankfully, they didn’t, and 2025 saw the return of active management.
With no new Gavin and Stacy Christmas special to look forward to this year, we will be watching repeats instead, and in the spirit of enjoying old material please enjoy our previous two articles (again) we are off to enjoy a well-deserved break and hope we get the same opportunity to outperform next year.
Merry Christmas to you all
Santa Baby Index 2024 – The Sequel
Cooking Christmas dinner is a military operation. It requires planning, logistical knowhow and a strict timetable. I have three rules:
- Prep as much as possible the day before
- Allow an hour window in the timetable to go to the pub
- Don’t keep asking me when it will be ready, I am four drinks in!
So, in the spirit of both tradition and efficiency, I have dusted off our article from last year and updated the figures.
Despite a stella year from many asset classes the Santa Baby Index has only delivered marginally more in 2024 than it achieved the year before. The annual return in 2024 was a rather unimpressive 3.5%, albeit slightly ahead of the 2.9% return in 2023. All that work creating an index and Ertha Kitt could have just put the money in the bank. This feels similar to the year I spent hours roasting chicken wings and making a stock from scratch on Christmas Eve, and after all that effort may as well have used instant gravy. This is how active managers have felt over the last year or so. Many, many hours committed to research and analysis, trying to identify mispriced and undervalued opportunities and you may as well bought the 10 biggest companies in the world and gone back to bed! Anyway, these things don’t last forever
Santa Baby Index 2023 – The Origin Story
As we reach the end of an eventful year, and we near the best meal of the year (Boxing Day cold meats with bubble and squeak) I wanted to touch base with you lovely people one last time.
Historically, the end of year newsletter is used for predictions about what will happen in the markets next year. We’re not going to do that. Firstly, there are enough other people making predictions. Secondly, most of them will be wrong. Thirdly, and most importantly, our job is not to predict the future but to understand the present, and look for anomalies. What is happening that shouldn’t be, and what is not happening that should be?
So, let’s instead talk about Christmas songs, which are impossible to avoid this time of year. My daughter used to start playing Christmas music in the house in September, but after the threat of legal proceedings she now doesn’t break out the Bublé until December.
Everyone has their favourite song. Mine is ‘Driving home for Christmas’, but actually there is another song which caught my ear recently.
‘Santa Baby’ has been covered by many artists including Taylor Swift, Kylie Minogue, Ariana Grande, Gwen Stefani, even Miss Piggy! The Madonna version is particularly horrifying. So lets stick to the 1953 original by Eartha Kitt. I can’t believe there would be anyone reading this who has not heard this song, but just in case, the song is a list of nice gifts she wants Santa to hurry down the chimney to bring her, as she has been an “angel all year”.
In a cost of living crisis some of these requests look a little extravagant to say the least. So, this year perhaps we could use our portfolio management skills to help Santa create a basket of investments to match the gift requests.
Firstly, she wants Santa to “slip a Sable under the tree”. I have been reliably informed (by Google) that a sable is a small weasel-like animal, that mostly lives in Russia. Ms Kitt is not requesting a pet. She wants a coat made from the animals fur. Russia? Killing animals? This has escalated quickly! Let us instead buy the shares of a few high end fashion companies that sell ‘fur’ coats. Over the last few years Burberry, Prada and Canada Goose have all have publicly committed to stop using animal fur in their products, and Santa prefers to invest sustainably. Despite the backlash against ESG investing in certain parts of the political sphere the trend for companies doing the right thing continues to move in the right direction, which is good to see.
Next up on the list is a ”’54 convertible too, light blue”. One of the most popular convertible cars of this era was a Chevy Bel Air. Chevrolet are owned by General Motors so we can add their shares to the portfolio. We don’t invest in classic cars, but as a proxy of second hand car demand we can also buy the shares of Autotrader Group.
Wanting “a yacht” which is “not a lot” is the next item on the list. Some of the prices for even fairly modest yachts are eye watering, so not sure about ‘not a lot’, but a small investment in shares of a handful of yacht builders is well within Santa’s means. Additionally, sticking with the shipping theme, we could invest in an Exchange Traded Fund (ETF) which tracks a global shipping Index. This was a great investment during the pandemic as the knock-on effect of supply chain bottle necks pushed up the costs of shipping goods around the world.
The next gift request is the “deed to a platinum mine”. A key investment tenet is to diversify your holdings to reduce risk, so it would be better to buy a fund which invests in global mining companies rather than a single mine. Also, we can buy fund which tracks the platinum price so will give us a purer exposure to the precious metal.
She also wants Santa to fill her “stocking with a duplex, and cheques”. A Manhattan duplex is an apartment that spans two floors in a building, but getting exposure to residential property through investment funds is difficult. Instead we can easily buy a fund investing in US listed real estate companies and Real Estate Investment Trusts (REITS). ‘Cheques’ is a nice and simple one, and who doesn’t love cash as a present, we can just add short term US Treasury bills to the portfolio. For anyone under 25 reading this- a ‘cheque’ is a paper version of an electronic bank transfer.
With requests of “some decorations bought at Tiffany’s” and “a ring” we can use the same investment. I love it when a plan comes together. Tiffany and Co was acquired by the French conglomerate LVMH in 2021 for a cool US$15.8bn. LVMH is the world’s biggest luxury brands business and has a vast stable of brands across fashion, jewellery, perfumes, wines and spirits. In fact, it would very difficult for Santa to fulfil any present list without using one of their products.
