Mid-Year Check-Up: How is the Investing All Star Team Doing?

I genuinely enjoy following Barron’s Roundtable every year (see “Shifting Winds”).  The venerable old rag puts together a team of 10 outspoken money managers and allows them to do the journalistic equivalent of a cage fight.  The participants are free to grill each other over their recommendations, and it can get pretty intense.  Some years, I like the recommendations on offer, and other years I don’t.  But it always leaves me with something to think about.

Well, we’re about halfway through 2013; let’s see how Barron’s some of the investing all-star team are doing so far.

I’ll start with the Bond King himself, Bill Gross.  Gross is having a rough ride in 2013; none of his recommendations are positive on the year.  The SPDR Gold Trust (GLD) is down 15%, and the Pimco Total Return ETF ($BOND), BlackRock Build America Bond Trust ($BBN) and Pimco Corporate & Income Opportunity Fund ($PTY) are down 0.2%, 5.4% and 2.6%, respectively.

He may very well be the most talented bond investor in history, but even Gross took a hit by the sudden spike in Treasury yields in May.  I consider it impressive that his flagship fund, BOND, held up as well as it did.  It is a testament to Gross’ skill as a manager.  Gross reiterated his recommendation on PTY, expecting 12-month total returns in the 15% range.

Felix Zulauf has one notable success—his correct call on the short yen / long Japanese equities trade—and two notable failures—his bet on gold and on emerging markets.  His recommendation of the WisdomTree Japan hedged equity ETF ($DXJ) was up 12.7% before he exited it, and his recommendations of the iShares MSCI Brazil ETF ($EWZ), iShares FTSE China 25 ETF ($FXI) and iShares MSCI Emerging Markets ETF ($EEM) were down 10.6%, 12.6% and 8.0%, respectively, before he closed them out.

Zulauf was not the only manager to be on the wrong side of emerging markets this year; yours truly held shares of FXI in my Covestor Tactical ETF Portfolio before selling in the first quarter.

Zulauf is now “long volatility” via VIX futures and recommends shorting Hong Kong stocks via the iShares MSCI Hong Kong ETF ($EWH) and shorting the Turkish, Mexican and Polish currencies.

Brian Rogers has had a nice run in 2013, and all of his recommendations are showing gains: PNC Financial Group ($PNC)—17.8%, Kohl’s ($KSS)—23.0%, Apache ($APA)—7.0%, Avon Products ($AVP)—51.3%, Legg Mason ($LM)—28.7% and General Electric ($GE)—11.6%.

Not a bad run.   Rogers reiterates his buy recommendations on all but Avon Products and adds a recommendation to the cruise line company Carnival ($CCL), which has had a run of terrible publicity of late.  Rogers considers it an attractive contrarian pick with a sweet 3.1% dividend.

Meryl Witmer also has a spotless record thus far.  Her three recommendations from January—Spectrum Brands Holdings ($SPB), Chicago Bridge & Iron ($CBI) and Tribune Company ($TRBAA)—are up 29.7%, 28.2% and 12.7%, respectively.  Chicago Bridge & Iron was a recent purchase by Warren Buffett’s Berkshire Hathaway ($BRK-A), putting Witmer in good company.

Witmer added German chemicals company Lanxess (Germany:LXS) to her recommendations.  Lanxess is largely a play on a rebound in the European tire market.

Disclosures: Sizemore Capital is long BOND. This article first appeared on MarketWatch.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

 

And the Roundtable Says… Part II

Last week, I wrote about the Barron’s Roundtable, commenting that its members rarely agree on anything.  I want to point out again that this is precisely why I enjoy reading the Roundtable comments every year.  Right or wrong, its members are anything if not independent, and this is what makes them valuable.

In the second installment, which was released this past weekend, the comments were…well…a little too conventional for my tastes.  It appears that the loss of the wildly eccentric Marc Faber has moderated the panel and to its detriment.

Still, there are plenty of years where the conventional proves to be more popular than the eccentric.   We shall see if 2013 is one of those years.

With that as an introduction, let us see what Abby Joseph Cohen of Goldman Sachs, Scott Black of Delphi Management, Oscar Schafer of OSS Capital Management and Brian Rogers of T Rowe Price have to say.

Cohen takes a somewhat contrary view with respect to the broader market.  While most seem to expect the market to have a great first half of the year, Cohen sees a stronger second half with a lackluster first half.

She also happens to be bullish on Asia and on American trade with Asia, recommending Expeditors International of Washington ($EXPD) and South Korean tire company Hankook Tire Worldwide.

I share Cohen’s enthusiasm for Asia, but Expeditors is too expensive for my liking and Hankook too difficult to invest in for most readers.

Moving on, I share Brian Rogers’ general market outlook—that 2013 will bring decent if not exceptional profit growth and that dividend growth will be strong—but I find his picks uninspiring.  Rogers likes PNC Financial Services Group ($PNC), also-ran retailer Kohl’s ($KSS) and cosmetics firm Avon Products ($AVP) among others.

Rogers’ one pick that might be worth a second look is energy company Apache Corp ($APA).  If gas prices rebound, Apache could have a good year.  Though considering that 20% of its production is in crisis-plagued Egypt, this stock is not for widows and orphans.

Oscar Schafer’s picks tend towards the conventional this year as well, though he had one that caught my eye—money transfer chain Western Union ($WU).  Western Union got completely obliterated 2012 on fears that its business model was failing to contend with cheaper online competition, falling from just shy of $20 to below $12.  But since November, the stock has enjoyed a nice rally.

In Schafer’s words, “Western Union’s growth is driven by global migration trends.  The typical customer for a money transfer might be a migrant worker, usually unbanked or underbanked, who is sending money back to his family in his home country.”

Western Union is an “old economy” way to play the continued rise of globalization.  And at 9 times earnings and with a dividend of nearly 4%, the company’s competition with newer economy rivals should already be factored into the share price.

Finally, we come to Scott Black.  Black chooses a “safe” pick in Qualcomm ($QCOM).  I say “safe” because Qualcomm is a convenient way to get exposure to the smartphone boom without betting on a single high-profile brand, like Apple ($AAPL) or Samsung.  There is a little bit of Qualcomm in pretty much every smartphone, so the company should do fairly well no matter who comes out on top.

I also liked Black’s recommendation of Medical Properties Trust ($MPW), a REIT that invests in hospitals and other health-related real estate.  Medical Properties yields a mouth-watering 6.1%, and Black contends that the dividend is safe, with the dividend accounting for only 75% of funds from operations.

Medical Properties has not raised its dividend since 2006—and in fact, it cut its dividend substantially during the 2008 crisis.  Still, if you believe that demand for medical facilities will increase over time, then Medical Properties is not a bad way to play that trend.

Disclosures: Sizemore Capital has no position in any security mentioned.  This article first appeared on MarketWatch.

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