And the winner of The Globe and Mail’s My One and Only stock-picking contest is ... almost everyone. But mostly Robert McWhirter, president of Selective Asset Management Inc., who picked ProMetic Life Sciences Inc., the Canadian biopharmaceutical company that rose more than 200 per cent in 2013.
“A whole bunch of good stuff happened,” Mr. McWhirter said, nicely summing up the year for both ProMetic and for stocks in general.
The contest invites investment professionals to choose a single equity with the potential for spectacular gains over the course of the calendar year. To be eligible, companies must be listed in North America and have a minimum market capitalization of $100-million for domestic securities and $1-billion (U.S.) for American stocks.
This year’s final standings capture what was a monumental year for U.S. stocks. Six of eight stocks outperformed the S&P 500 Index – no small feat considering the benchmark rose by 30 per cent.
And just as there was only one dog last year among the 30 stocks that make up the Dow Jones Industrial Average – IBM Corp. – the contest had just one losing stock. Unsurprisingly, it was a resource pick that fell short, as Cliffs Natural Resources Inc., a Cleveland-based iron ore mining company, lost 25.8 per cent on a total return basis.
“It was a leveraged play on China and the emerging market economies as well as on resources, which all took it on the chin,” said David Sherlock, a portfolio manager with Calgary-based McLean & Partners Wealth Management Ltd., who picked Cliffs.
The firm itself avoided losing money on Cliffs with a stop-loss order at about $30 – under which the company’s share price sank in February after a fourth-quarter earnings miss and dividend cut. The stock subsequently fell to $15.68 during the summer on iron ore price volatility and demand concerns. In addition to slashing its dividend, the company later suspended its $3.3-billion chromite mining project in Northern Ontario in a bid to weather the rough year.
In the second half of 2013, Cliffs’ market losses moderated, but Mr. Sherlock sees little immediate upside to the stock. “It’s a good, stable company, it’s just you’ve really got to see the economy in Asia pick up to see this stock do well,” he said.
The only other stock pick to underperform the S&P 500 was Granite REIT, which owns properties across North America and Europe, and which counts Magna International Inc. as a main tenant. The rate-sensitive REIT sector got slammed once the U.S. Federal Reserve began speaking of reducing the scale of its bond-buying stimulus program.
Instead, technology and biotech companies dominated the leaderboard. Hewlett-Packard Co. shares more than doubled in value as the company finally began to reverse its long-declining fortunes. But ProMetic bested them all with a return of 222.8 per cent.
While few investors were paying attention to the company before its rise, ProMetic’s drug development and blood filtering technology, which can both remove pathogens and recover proteins from plasma, received some high-profile support, first from Chinese biotech billionaire Li Li, then from Toronto-based private equity firm Thomvest Seed Capital Inc.
“I think all the groundwork ProMetic has laid in the last decade started to be recognized in 2013,” Mr. McWhirter said. Having bought the stock when it was at 12 cents in mid-2012 and building a stake in the company accounting for 20 per cent of his portfolio, Mr. McWhirter sold most of his holdings in ProMetic when the stock rose above the $1 mark last fall.
While the contest is a good way to test out a specific investing idea, participants caution that their picks do not amount to “buy” recommendations for average investors.
The best candidates are stocks with “negative beta and some idiosyncratic upside thesis,” Mr. Sherlock said. “Either they’re going to work fantastically, which is the name of the game, or they’re going to blow up, which I guess is also the name of the game.”
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The contestants and their picks: Final standings
|Company||Ticker||YTD Total Rtn %||Contestant|
|ProMetic Life Sciences Inc.||PLI-T||222.8%||Robert McWhirter, president, Selective Asset Mgmt. Inc.|
|Hewlett-Packard Co.||HPQ-N||113.9%||Brian Pinchuk, portfolio manager, Lorne Steinberg Wealth Mgmt. Inc.|
|Baidu Inc.||BIDU-Q||89.5%||Nelson Cheung, portfolio manager, Formula Growth Ltd.|
|Neptune Technologies and Bioressources||NTB-T||53.2%||Alex Ruus, portfolio manager, BluMont Capital Corp.|
|Alexion Pharmaceuticals Inc.||ALXN-Q||51.4%||Stephen Rogers, portfolio manager, Horizons Investment Mgmt. Inc.|
|Flextronics International Ltd.||FLEX-Q||33.7%||Benj Gallander, president, Contra the Heard investment newsletter|
|Granite REIT||GRT.UN-T||8.0%||Gail Bebee, author, No Hype: The Straight Goods on Investing Your Money|
|Cliffs Natural Resources Inc.||CLF-N||-25.8%||David Sherlock, portfolio manager, McLean & Partners Wealth Mgmt. Ltd.|