We’re now seven months into the contest, and I still have some catching up to do. My 6% year-to-date return in General Motors (GM) isn’t anything to be embarassed about… that is, until you see Albemarle (ALB), CoreSite Realty (COR) and Nvidia Corporation (NVDA) are all up well in excess of 30%.
We still have five months to go… and a lot can happen between now and December 31. General Motors has been pushing higher since mid-May, up about 10% in just two-and-half months. And remember, we’re getting paid handsomely to wait for this investment thesis to play out via the 4.3% dividend.
Ealier this month, I wrote an update on my entry in InvestorPlace’s Best Stocks for 2017. The following is an excerpt:
I’m not particularly happy that GM’s engine is sputtering this year. But it’s important to remember that deep-value plays rarely work on the timeline you expect. It often takes time for the market to appreciate the value and award a suitable stock price…
Let’s dig deeper into General Motors’ woes. Auto sales have been particularly strong over the last couple years, leading most auto analysts to expect sales to be fairly weak this year. And thus far, that’s been the case. Just this week, GM announced that industry sales would be lower than originally thought.
But it’s not as if sales have completely fallen off a cliff. GM lowered its forecast from around 17.5 million to a little above 17 million. That’s not exactly crisis material.
Furthermore, GM stock wasn’t exactly priced for perfection. As I write this, the stock sells for an almost ridiculous 6 times expected 2017 earnings and 0.3 times sales. That’s not just cheap, that’s “going out of business” cheap. Investors are so skeptical that GM’s strong sales of the past few years are sustainable, they’ve effectively priced in a major blow-up…
When a stock is priced for perfection, it nearly always ends up disappointing. Something comes along and knocks the stock off its perch. But the exact opposite is true of stocks that have the absolute worst-case scenario priced in. If reality proved to be anything short of disaster, the stock will generally surge higher.
The following is an excerpt of a piece originally posted on InvestorPlace. You can read the full article here.
It’s bad form to gloat. Apart from making you insufferable to be around at parties, you’re temping fate… and inviting a reversal of fortune.
That said, I’m going to risk it and toot my own horn here for a moment. I’ve had a good string of successes in InvestorPlace’s annual Best Stocks contest. I took the top prize in 2011, the very first year of the contest, when my pick – credit card behemoth Visa (V) – racked up a 34% return. I followed that up in 2012 with a strong performance by Turkish mobile operator Turkcell (TKC), just barely missing the top slot with a 37% return. And I reclaimed my crown in 2013 when German luxury automaker Daimler (DDAIF) rolled to victory with a 65% return.
Alas, you can’t win them all. My 2014 pick, South African mobile operator MTN Group (MTNOY) finished in last place, losing 6%. And my 2015 pick, business development company Prospect Capital (PSEC) finished in the middle of the pack, losing a modest 4%.
Well, in 2016, I got my groove back, winning InvestorPlace’s Best Stock for 2016 contest with a 55% return in Energy Transfer Equity (ETE). Over the six years of the contest, my picks have returned an average of 30%. Not too shabby. Taking the top spot in 3 out of 6 years and coming in a close second in a fourth… I’ll take that!
Note: the returns reported here are reported by InvestorPlace for its annual Best Stocks contest and based on closing prices at year end. Results are not based on an actual traded portfolio but on the written recommendations of the contest participants. As always, past performance is no guarantee of future results.
Well, it’s over. The stock market is officially closed for 2016.
All told, it was a successful year for me. My firm increased its assets under management by a good chunk, and my returns for the year were solid. My Dividend Growth portfolio absolutely crushed the S&P 500, and I took first place in InvestorPlace’s Best Stocks for 2016 contest with a whopping 53% return in Energy Transfer Equity (ETE).
But as I enjoy this moment, I’m also reminded how fragile all of this can be. I lost two good friends and mentors this year, gentlemen who had a lot of faith in me at a time when no one else did. I will profoundly miss both of them, and I regret that I’ll never be able to repay the debt of gratitude I owe them. My practice would have never gotten off the ground without them.
So while I’m a little deflated this New Year’s Eve, I’m going to celebrate the end of a good year and look forward to the start of another one because I am all too aware that it can all come screeching to a halt tomorrow.
Happy New Year, and may 2017 be your best year yet.
It’s temping fate to celebrate early, but I’m feeling good about the Best Stocks for 2016 contest right about now:
Regardless of how the contest shakes out, I’m still long Energy Transfer Equity (ETE) and believe the stock price could easily double from these levels over the course of the next 2-3 years. I have no intention of selling.
Congratulations to all the contestants this year on a fight well fought.