Long-term readers probably remember back when I used to do a stock picking contest, a competition that pitted the best personal finance and investing blogs out there (along with Financial Uproar) in a supreme battle to crown the world’s best investor. And then I got lazy and abandoned the whole exercise. This is my life in a nutshell, actually. I’m not sure how I manage to feed and clothe myself.
Paul from Asset-Based Life picked the bad boy up and immediately did more than I ever could have with the contest. He did a fantastic job running it in 2018 before adding a whole new element to the contest this year. Rather than just picking four stocks (my rules) or three (his version), he’d use an online simulator to tabulate the results.
Here’s a link to the 2019 version on Asset-Based Life.
This fancy new tool offered much more than just saving Paul some spreadsheet action. It enabled the contest to add things like portfolios with far more than three stocks in them, active trading, betting against stocks, keeping capital in cash, and an easily accessible leaderboard where I can witness my INEVITABLE VICTORY on a daily basis.
See what I mean? In just over a year of hosting the contest ol’ Pauly made it a million times better than I ever could have.
After my disappointing finish last year (I still beat the dog!), I was excited to reassert my dominance this year. Let’s take a closer look at my picks.
Before we get to the picks themselves, let me explain my strategy.
You can’t buy the kind of dividend stocks that I’ve been mostly buying lately for something like this. These blue-chips just won’t surge enough to win the contest. An 8-10% annual return (that minimizes volatility) is just fine in real life, but it’s not going to win a competition like this one. You need to be Hitler invading Soviet Union bold. You either take over the world or die in a Russian winter trying.
FINALLY, AN OPERATION BARBAROSSA REFERENCE ON FINANCIAL UPROAR.
Many people embrace this strategy by buying the sexiest growth stock in some new industry. Two separate people won my contests by choosing pot stocks before they were cool, for instance.
I’m a crummy growth investor, so I try a different approach. I’m looking at deep value stocks. Rather than focusing on companies trading at a big discount to book value like I’ve done before, I decided to buy stocks that trade at low price-to-cash flow yields.
Without further adieu, here’s my portfolio (and weightings) for the contest as it stands as I write this, January 10th:
- TransAlta (TSX:TA): 5.06%
- American Hotel Properties (TSX:HOT.UN): 5.19%
- Polaris Infrastructure (TSX:PIF): 4.36%
- Corus Entertainment (TSX:CJR.B): 5.14%
- Molson Coors (TSX:TPX.A)(NYSE:TAP): 6.06%
- Artis REIT (TSX:AX.UN): 5.82%
- Altagas (TSX:ALA): 5.20%
- Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY): 16.82%
- Dollarama (TSX:DOL): 5.04%
- Cash: 41.67%
(Disclosure: Long TSX:PIF, TSX:CJR.B, TSX:TPX.A, TSX:AX.UN, TSX:ALA, TSX:BPY.UN in real life)
Primarily I plan to trash talk all opponents until they cry and drop out of the contest in embarrassment. If that doesn’t work then here’s my Plan B.
All of these stocks (except for Dollarama, which is my vain attempt at GARP investing) have one thing in common. They all trade at ridiculously low price-to-free cash flow metrics. Corus has a $1.1 billion market cap and generated more than $300M in free cash flow last year. TransAlta is similarly cheap. Brookfield isn’t quite as inexpensive, but it trades at 8-9x estimated free cash flow for 2019 (or in the REIT world, adjusted funds from operations), which is a great price to pay for those assets. There’s a reason why I made it a way bigger pick than the rest.
Now let’s move onto the cash balance. I’m hoping there’s another leg down to this bear market so I can put that cash to work in other assets trading at low prices. I have no special insight into this, I just figure having fresh cash will set me apart from my competitors if we see another big downturn.
I may dabble a bit into shorting too if the market keeps heading higher, but I dunno. Shorting is hard and I’m terrible at it.
Let’s wrap this up
I’m currently 5th (out of 16) in the contest so far, which is a pretty solid start. Jordan from Money Maaster is off to a nice lead to start with, his portfolio is up 7.77%. Then we have Paul’s kid, his dog, and then his other kid. I’m not kidding. I’m getting my ass kicked by a couple of wiener kids and a dog.
Finally there’s me; I’m up a cool 3.83% to start. Not bad considering the 42% cash position.
I might update this soon if I put the majority of that cash to work. If not you’ll have to wait until some other random date until I update this.