Back in the cold, cold winter, there was a stock picking contest. I made my picks, knowing full well that I would dominate said contest, with many hot ladies throwing themselves at my feet, unable to control themselves in the face of such awesomeness. Because I’m a gentleman, I would totally respect them all in the morning.
Too bad I don’t actually live in a dreamworld. That would be cool.
In reality, my picks have been more ugly than my results when I send redheads flowers. Only one of my picks is up, and the other three are down quite a bit. If I would have bought the S&P 500, I would have crushed my results.
While I realize these stock picking contests are just a crap shoot, I’m beginning to re-think my investment philosophies. While I won’t abandon contrarian investing completely, I’m thinking of having the majority of my portfolio indexed. If there’s a sector that has been beaten down (like U.S. housing or the dry shipping stocks) I’ll add it to the portfolio. I’m tired of taking company specific risk. I’m doing a ton of work looking for individual stocks, work that isn’t paying off with any increased profits.
This doesn’t mean the contrarian investing posts will end, nor will the stock analyses. Don’t expect a whole ton of them though. Rather, you can expect more posts like last week’s look at BMO’s covered call bank ETF.
I’m thinking the allocation will be 50% equities, 30% debt, and the remaining 20% allocated to beaten down sectors that I feel can come back. I spent easily 40 hours analyzing all the shipping stocks in an attempt to find the best one. I’d be happy to spend that time if I knew I could outperform the market consistently. I’m beginning to not think I can, at least at the knowledge level I’m at.
This change won’t happen overnight. I’ll continue to hold the stocks I currently hold, staying patient with them. Hopefully those stocks do well. I may take the opportunity to sell some dogs, including stock #2 in the stock picking contest. Any new money I put to work in the market though, will be indexed. I spend way too much time trying to pick individual stocks. It’s time to dedicate that time towards other things.
Anyway, onto the contest picks.
1. Nokia (down 16.5%)
Nokia has struggled, missing their numbers in February. The stock was actually up until that happened. Now, analysts are concerned Nokia has fallen further behind their competitors in the smartphone market. Margins are starting to be compressed in basic handsets, where Nokia dominates.
If you believe the cell phone market is cyclical, then Nokia is a screaming buy. If you believe that technological innovation is what matters in this space, then Nokia may never come back.
2. Duoyaun Printing (down 60.6%)
The market seems to think this stock is a fraud, and I’m about 90% sure I agree. Plus, the NYSE will be delisting the shares soon. I will probably sell into any significant strength. This one is volatile, so I’m hoping it pops 10% in one day so I can sell.
3. Paragon Shipping (down 16.2%)
The numbers still look good on this stock. It still makes money, although margins are declining. I still like the shipping stocks to outperform the market as the world economy continues to recover.
4. New Frontier Media (up 3.7%)
Yay! A pick that’s actually making money!
My picks are down a combined 22.4%. Ouch.
1. General Electric (up 11.8%)
2. American Tower Corporation (up 1.67%)
3. BP (up 4.03%)
4. Bank of America (up 0.68%)
Kevin’s picks are up a combined 4.55%.
1. ARISE Technologies (down 4.57%)
2. Royal Bank (up 16.23%)
3. Unilever (down 0.68%)
4. Exchange Income (up 22.82%)
Steve is the clear winner, with his mini portfolio up 8.45%. Nice work Steve. Maybe you should start blogging about stocks.
Readers, how do you feel about my about face to indexing? Are you horrified? Let me know in the comments.