Every year around this time board members pony up some mythical cash and bet it on a favorite stock, one that's sure to polish the bettor's image as a knowledgeable investor. Results for the year just ended prove that beating the Dow isn't as easy as it looks. For example, last year only 7 out of 46 (15%) contestants made money. And the average loss was 25%. Ironically, the guy who finished first in 2010 finished last in 2011. Sic transit gloria.How do you explain such embarrassing results when the average METARite comes off as an informed, prudent investor? My guess: METARites are too influenced by the handful of posters who dominate board thinking. These naysayers would find a fly in a barrel of ointment. But that’s nothing new. Board sentiment has always been bearish despite the denials of those with the loudest voices. I don’t know what it will take to change the tone of the board but perhaps a less global perspective would be helpful. Heck, it’s hard enough to get one’s head around what’s happening statewide or regionally without attempting to understand the implications of a softening Euro economy, the national debate on the evils of overspending, or the political gridlock in Washington. Plus, it seems pretentious to try. If 85% of the board can’t make money in a rising market how much faith can a reader have in the macro thinking of those who post here regularly, especially the 10 or so who can’t resist commenting on just about everything?But I digress. My pick for 2012 is AAPL. My reasoning is simple. The company continues to grow at an amazing rate (30+%) despite the maturity of its products. It took IBM more than 100 years to break $100 billion in sales. AAPL did it in 33, with 2011 sales of $108B. In 2012 AAPL will become the largest computer/consumer electronics company in the world with estimated revenues of $138B and earnings of $35 a share. With a current P/E of 15 the stock could be worth $525 in 2012, a 28% increase over today’s price of $410. Time will tell.On a macro level I expect an acceleration of interest in healthy eating. The leader in this segment is Whole Foods Market (WFM) which enjoyed a 40% run up last year. With a P/E of 35 the company’s stock may have gotten ahead of itself but it continues to add stores to increase sales and profits. I like WFM for another reason; it is building a brand image in the likeness of AAPL and SBUX. WFM is one of those businesses that consumers are drawn to for reasons they don’t fully understand.I spent some time in Palo Alto over the Christmas holiday. I had lunch in a “lifestyle” restaurant known as LYFE Kitchen started by the former CEO of McDonald’s, Mike Roberts. "It's going to be great-tasting, satiating, familiar foods with no [genetically modified foods], no additives, nothing processed and everything under 600 calories. There will be no butter, cream, high fructose corn syrup or fried food, and very little salt and as many ingredients as possible from local suppliers," Roberts said. The Palo Alto location is the first of an expected 250 scheduled for opening over the next 3-5 years. Watch for one in your neighborhood.Happy New Year to all.Andy
Andy,My perusal of the data on Gapminder.org has me wondering where the growth will be. It doesn't appear that it will come from the traditional means, i.e. population growth, rather through wealth growth.With that in mind, your two picks, Apple and Whole Foods, fit nicely into that Macro View. While I hold no Apple, your pitch as well as my MACRO musing have me leaning toward it as potential holding.Cheers and ThanksQazulight
How do you explain such embarrassing results when the average METARite comes off as an informed, prudent investor? My guess: METARites are too influenced by the handful of posters who dominate board thinking.MY guess: the contest design favors long shots over sensible investing. Being second wins you exactly as much as being last. (Being first at least gets bragging rights.)Any one-pick, fixed-holding-period, not-real-money contest has this problem, although if there were meaningful prizes there might be an advantage to being second or third... still, though, just barely missing the bottom prize-winning spot is no better than being dead last. If you aim for a nice safe secure middle of the pack, you almost certainly lose; if you take a long shot, you probably lose but stand a plausible chance of winning.This is entirely different from our real-life situation, where the goal is to make money and we don't care if someone else makes even more money (unless we are... um... sorry, getting political).
My guess: METARites are too influenced by the handful of posters who dominate board thinking.Andy, you do stereotype us don't you? My "picks" have very little to do with my investing style. They just fit the contest rules. FWIW, I follow the postings on this board to get a better perspective of the macroeconomic trends people are following.I follow the asset allocation model of investing. I haven't finished totaling up how I did this year, but I reckon my portfolio is around 50% individual bonds. The rest is in mutual funds, w/ a smattering of ETFs, like SDY, used as "parking places".PM
Androcles,I also see the lack of success with the past contests. I floated my idea early, but got little comment.... However, when no one else got anything going, I figured "what the heck", and put my contest up. The idea is to test the theory that by swinging for the fences, people pick stocks they would not own going for the garland. I figured to try to convince people to NOT do that would fail....so instead, let them swing for the fences, but also choose what they view as a safe, solid stock. If warrl is right, then the "speculative" portion of the contest should underperform, but the solid picks should outperform. My honest prediction is that we will still fail to beat the S+P, but would love to be proven wrong.To be honest, I read this board because there are so many excellent articles that get posted here that I otherwise would miss. That does not mean I agree with everyone else's conclusions based on the same data. Usually, there is not much personal opinion posted about investment strategy (and too much about polarizing issues!). The current contest very well may sink or swim based on precious metals. I knew, starting this contest, that we would be heavy in the heavy stuff. However, it is even more than I expected!You state your pick is APPL. This year's contest requires choosing two stocks or other liquid, quoted equity. One is intended to be from the more speculative side of one's portfolio (or imagination), the other a solid, stodgy make money in all environments choice. Rules state you MUST choose two, and they can not be the same one. Is whole foods your second choice? Do you view one as more speculative than the other (higher risk/reward)? Let me know and I will add you to the contest.PolymerMom: My "picks" have very little to do with my investing style. They just fit the contest rules.Mutual Funds and ETF's have regular quotes, so you certainly could choose one of your usual investments. For me, anyway, the idea is not to pick something "that fits the rules", but to pick investments you would own anyway. I do not define "speculative", "swing for the fences", etc.... Thus, your choice should be something that fits that definition for you. It's hard to "swing for the fences" in a game you never play! I own one of my choices, and am waiting for what I feel is the right moment to move into the second, so they are not just choices chosen for a game, but part of my real investment strategy. Anyway, just my ideas.Perma-Bears on METAR? Oh my! Well, probably true. Keep in mind (as I have reminded Harmy at times about China): "news" usually means "bad news". Just because most of the posts are to negative stories, or events, does not mean that the poster is a perma-bear. I actually turned mildly bullish early Dec....which proved a might too early, but seems to be the right call now. I do not expect to stay "bullish" for all of 2012, and in fact have been taking some profits of late, getting those small gains. I am not sure what my next move will be other than the triple-short Japanese bond ETN I have in the contest.Cheers,Doug
<< These naysayers would find a fly in a barrel of ointment. But that’s nothing new. Board sentiment has always been bearish despite the denials of those with the loudest voices. I don’t know what it will take to change the tone of the board but perhaps a less global perspective would be helpful >>Cheers and happy New Year, Andy. I hope 2012 is good to you.I'd suggest that the results in the stock picking contest are what they are, as Warri says, simply because it's a game, using pretend money, and because there is only one winner. Swinging for the fences makes perfect sense when you're playing Monopoly.I wouldn't read any more into it than that.I do wish - and I say this in all sincerity - that you could find it in yourself to contribute to the board without the condescension and deprecating attitude that you feel compelled to include in every post. Heck, my wife disagrees with me on all manner of things, and yet I still think she's a fine lady. It's okay to not see eye to eye on everything.Back in the real world, I hope you're right about Apple. Not because I own their stock - I don't. But I love the company and I love their products. My worry with them is two-fold: the stock has already had an incredibly good run (and I figure I'd be late to the party if I bought in now); and I wonder what the post-Steve Jobs future holds. He was, IMHO, one of the extremely rare true visionaries in business - one of the very few executives who truly deserve outsize compensation - and I wonder how Apple will fare after the pipeline of products he touched has run its course. I wish them well.And a healthy fast-food alternative to the current preservative-laced, high-fat, high-sugar, high-sodium fare would certainly be welcome. My wife and I - squarely among the baby boomer cohort - have often remarked on the curiosity that no such option exists. Yet.As for the markets, I've long said that consistently picking individual stocks is a very tough game, one from which few emerge as winners over the long haul. You're absolutely right - beating the DOW is very, very difficult.My own personal sentiment - more than one person has called me a doomsayer - stems from the belief that, simply, we are in a secular bear cycle in equities and we have reached one of those inflection points that comes every few generations. That informs the choices I have made. That too shall pass. Then we can get back to another bull cycle - which I'll be the first to say are a lot more fun.In the meantime, my real world portfolio was up 10% in 2011. That's quite modest, of course, especially coming on the heels of the 23% rise in 2010. But if that's what the bearish sentiment gets you, I'm happy to accept it.Wishing you, and everyone here, the best in 2012...
And a happy new year to you, Andy.
In a stock-picking contest, the lucky guy wins and looks good, even if everything is completely random. It's just the high tail on the curve.
Board sentiment has always been bearish despite the denials of those with the loudest voices. Well, to the defense of the board bears, we have been in a bear market for the last 10 or so years...
I'd suggest that the results in the stock picking contest are what they are, as Warri says, simply because it's a game, using pretend money, and because there is only one winner. Swinging for the fences makes perfect sense when you're playing Monopoly.Or in a home-run contest.Safe singles may contribute more to the team's long-run success, but they don't win home-run contests.
Every year around this time board members pony up some mythical cash and bet it on a favorite stock, one that's sure to polish the bettor's image as a knowledgeable investor. Results for the year just ended prove that beating the Dow isn't as easy as it looks. For example, last year only 7 out of 46 (15%) contestants made money. And the average loss was 25%. Ironically, the guy who finished first in 2010 finished last in 2011. Sic transit gloria.About 3 months in, I was in 1st place - wound up near the bottom (down 50%)I think in these type contests most here swing for the fences - I know I did - although I do have a holding in my pick, my portfolio is mostly boring dividend paying equities with a big chunk of gold and PM miners.
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