2018 Stock Picking Contest

While most of the world now favors diversified index funds, a few ancient masters still practice the art of buying individual stocks. Today we’ll celebrate that legacy by kicking off the new year with our Inaugural Stock Picking Contest.

The rules are simple: pick three stocks from a major North American exchange. You can also pick ETF’s, but we will make fun of you if you do. Currencies will stay local, but if you pick an interlisted stock I’ll use the U.S. Exchange. The 2018 returns of the three picks (dividends included, but not reinvested) are averaged for a total return. If a stock has an event (acquired / merged), the return is locked on the event date.

To add a fun twist to the contest, I’ve secured entries from two contestants who’d be considered more of amateurs: my 7 y.o. son and my dog, Bamble. My dog will show what a truly random entry looks like. My son will introduce the risk that you can’t pick stocks better than a 7 year old.

I’ve linked to fellow bloggers – please check out their sites as they are putting out some really good content.

Good luck to everyone!

Financial Uproar

We must begin with Nelson of Financial Uproar, as it was the demise of his stock picking contest that inspired me to start this one.

As you would expect, Nelson’s picks are all innovative groundbreakers at the cutting edge of technology for brand new industries boring quests for value. It also appears Nelson is not terribly optimistic about the market’s near-term prospects.

• Argan Inc. AGX
• Morguard REIT MRT.UN
• Just Energy JE

DQYDJ

• Skyworks Solutions Inc SWKS
• Gilead Sciences Inc GILD
• Express Scripts ESRX

Semiconductors, biotech, and healthcare services. I’m not sure if PK from DQYDJ is going to be in first or last place, but his entry may be in for a wild ride.

Dividend Growth Investor

• Vanguard High Dividend Yield ETF VYM
• iShares 20+ Year Treasury Bond ETF TLT
• SPDR Gold Shares GLD

DGI does a lot of research on individual stocks and loves companies that pay (growing) dividends. So I was really excited to see his entry. Until I actually saw his entry.

I’m not 100% certain what to make of this. The SPDR Gold Shares aren’t even equity-related – they just try to match the performance of gold bullion. We may need to do a welfare check to make sure DGI is OK and still chasing dividends.

In any event, these picks will be a welcome contrast to some of the spicier entries, and a major market downturn could make this entry a player.

My Money Wizard

• Vanguard Total Stock Market ETF VTI
• Vanguard Growth ETF VUG
• Vanguard Total International Stock ETF VXUS

When told that the Dividend Growth Investor had put together the lamest stock picking entry ever, Mr. Money Wizard said, “Hold my beer cup of Chamomile tea.”

To make an all-ETF entry even worse, the holdings of VTI and VUG overlap a good deal. But My Money Wizard was happy to be the foil for the rest of us, and perhaps there’ll be a lesson at year’s end.

Mr. Tako Escapes

• AerCap Holdings AER
• Amgen Inc. AMGN
• LyondellBasell Industries LYB

Now this looks more like a stock picking entry. Aircraft leasing, chemicals, and healthcare, with significant exposure outside the U.S. Mr. Tako may also be a little worried about the U.S. market, but he’s clearly putting all of his chips on the table.

Mr. Smith

• ConocoPhilips COP
• Darden Restaurants DRI
• Alphabet Inc. GOOG

Mr. Smith seems to think we’re going to have a few world crises in 2018, we’re going to be glued to our Android phones googling stuff, and we’re going to eat a lot at the Olive Garden. Yeah, that’ll never happen.

Mike

• Federal Realty Trust FRT
• Alphabet GOOGL
• Paychex PAYX

A retail REIT, Alphabet, and Paychex (payroll processing). This selection seems entirely too optimistic for my tastes. But perhaps the good times will continue to roll.

Steveonomics

• Alibaba BABA
• Starbucks SBUX
• OHR Pharmaceutical OHRP

One of these does not look like the others.

Steve also appears to be a bit bullish, so if the general pessimism reflected in many of our choices fails to materialize, he may do well. OHR feels like a massive swing for the fences, but that’s certainly one way to win a stock picking contest.

My 7 y.o. Son

• Southwest Airlines LUV
• Target TGT
• Costco COST

When I asked my son if he’d like to join the contest, he was very excited. He had a few great companies in mind, but I pointed out that a great company may not be a great investment. That didn’t make much sense to him, so maybe in a few years I’ll send him to Nelson’s course on “Finding Value in the Garbage Heap”.

I’ll lay out his investment criteria, so we can all feel great if he ends up dusting us:

• Southwest Airlines – because “it’s the best airline ever” and he knows someone who works there
• Target because “they have the best selection of Legos – they know what I like”
• Costco because the have the best pizza (sold by the slice as you exit). When asked about other products carried by Costco, he reminded me that “the pizza is the most important”.

Bamble the Dog

• Motorcar Parts of America, Inc. MPAA
• Chubb Limited CB
• Eldorado Gold Corporation EGO

While we couldn’t afford a chimpanzee, I did want to include a completely random entry in the contest. My dog Bamble agreed to assist.

Bamble’s process for picking stocks consisted of combining all NYSE and NASDAQ-listed tickers in single list, sorting them randomly, and taking the top 3 names. This was done 5 times, and the final entry was decided by Bamble. He showed no hesitation and seems to like these 3 quite a bit.

And finally…

Asset-Based Life

• General Electric GE
• BP BP
• Sony SNE

There isn’t a lot of complexity or deep analysis to my picks. My entry consists of big dinosaurs that have seen better days and may make a (very) modest comeback. I was OK with the valuations and could come up with stories that made me perhaps more bullish than the market (I particularly like that everyone in the world seems to hate GE right now). I’m hoping 2018 is their year, but even if it’s not, perhaps they can weather a possible downturn better than the broader market. I wouldn’t consider any of these long-term holds for me, but we’re just doing a year-long contest, aren’t we?

(Full disclosure: I’m currently long GE and BP.)

Wrapping It Up

While some folks do seem more bullish than others, in general, these picks seem to suggest some concerns with the market (except for my son and dog – they seem remarkably neutral about things). So let\’s be careful out there.

Thanks to everyone who submitted entries. I’ll update this quarterly or so to add to the heady drama begun today. Good luck!

 

 

Horse race picture courtesy of Yenni Vance