The second annual investment contest wrapped up on December 31st with a record 16 participants. For the second straight year, more portfolios underperformed the S&P 500 than outperformed, showing how difficult it is to outperform the index.
Portfolio | 2012 Return |
---|---|
Tony | 32.32 % |
Tom | 26.74 % |
Karen | 21.59 % |
Greg W | 16.49 % |
Doc | 15.68 % |
Sarah | 15.54 % |
Ron | 13.94 % |
S&P 500 | 13.47 % |
KC | 11.97 % |
Lee | 8.59 % |
Noreen | 6.92 % |
Mike N | 6.66 % |
Susie | 5.63 % |
Mike H | 2.43 % |
Brady | -2.51 % |
Matt | -4.44 % |
Lynn | -6.86 % |
Tony won this years contest, thanks largely to his huge January 2011 gain with USG (+26%), and MGM International (+25%). Tom also deserves special mention, finishing 2nd this year after a 3rd place finish last year. Tom’s picks are likely the best over the two year period of the contest.
I caught up with Tony via email to get more insight into his strategy that led him to such a huge gain for the year. “For the first few months I picked stocks from a variety of fields, banking, housing, hi-tech, gaming. I deleted them if they had a big run up and added them back in if they had fallen. Mid year I grew tired of working at it, so I just picked 4-5 stocks from the top of my head and kept them. Last couple months of the year I had a lead so I added some mutual funds to keep a more stable portfolio that would not be affected too much by one stock.”
Tony appears to be a top down investor, identifying market sectors that he believes will outperform the market, then identifying appropriate stocks in the chosen sectors. Interestingly, when evaluating stocks to buy, Tony also uses technical analysis to choose his stocks, looking at market performance instead of finanials to make trading decisions. “(I buy a stock when) technically is it at a low point. If I feel like paying attention the technical are more important than the fundamentals. But you have to be ready to dump it after a run up.” . So take heart those of you that don’t dig into company 10k’s and 8qs, not all successful investors follow historical financials closely. But you do have to pay attention.
Tony’s favorite stock right now is USG. “just because the housing market has been so beaten up so I think there is upside. But it has already had some bit run ups so I’m not sure how much more it has.”. Tony keeps the number of stocks he watches limited, “I pretty much stick with stocks I have been watching, a very small selection.”.
Tony’s market prediction for 2013? “Big ups and downs as we have a series of financial cliffs.”. Hmm.. sounds like a tricky market for fundamental and technical investors alike.
Thanks to all who participated in 2012, and good luck to all in 2013.
I would like to know more about the process of picking stocks based on a technical analysis. What factors are you looking at? P/E ratio, Annual sales, Backlog of orders? Even though I am a CPA and know how to read a balance sheet I am not able to pin point what would be most beneficial to inspect on an annual basis. What would have tipped you off that Enron was a disaster?
Or are you just looking at the stock price history and playing a cyclical movement?
My comment is similar to Tom’s.
What are your sources? Are you online researching particular stocks? Using a newspaper? Magazines?
Here are a few more comments on my strategy.
First…this is a GAME and I treat is that way.
This is not how I treat my ‘real’ money.
I play cyclical movement only. I am not interested in PE ratios, etc…
This game is to pick the stocks that will rise the most from the 1st to the 31st.
This not a normal trading period and so I do not treat it as if it were.
If a stock drops 2% on the last day of the month I consider as a good pickup option.
If a stock rises 2% on the last day of the month I consider as a good drop option.
I have about 10 stocks/mutual funds that I have in mind to play this game.
Most are stocks I have own or have owned for real.
A few I followed based on some random article I happened to see.
MGM and USG are examples of sector stocks I read about a couple years ago and like to use to play the game. I am thinking about adding some new stocks that I have seen in other portfolios.
I am mostly interested in highly volatile stocks to play for a month at a time.
With the exception of Fidelity.com which I use for my ‘real’ research the only stock site I visit on any semi-regular basis is http://www.pugetinvestor.com/.
I have picked up a couple ideas of stocks to watch from that list and I am hoping that in the future the behind the scenes rankings will soon appear for the selected stocks in that portfolio.
Sidenote: I have actually used this site to pick a ‘real’ stock for my ‘real’ portfolio.
I have been VERY happy with Plum Creek Timber (PCL).
I plan add the VFS Rating back to Puget Investor soon. Note that you can log into Puget Investor using your vfsdaily.com userid and password, and see the vfs rating for your portfolio. You can see how accurate the rating is for your portfolio by going to http://pugetinvestor.com/ratingscorecard.aspx and select your portfolio in the top right corner.