Thirteen brave souls accepted the challenge of participating in our annual one-and-only stock-picking contest. At the end of the first quarter, more of our contestants were smiling than crying. All but two of them had made money.
Personal finance author Gail Bebee was in the lead at March 30, having chosen auto parts maker Magna International Inc. The car company has produced a total return of 40.7 per cent since the start of the year
Rising profits and dividends, a management overhaul and increased U.S. car sales helped propel Magna into the top spot, and Ms. Bebee, the author of No Hype – The Straight Goods on Investing Your Money said she wouldn’t sell the stock yet even if the rules of the contest allowed her to.
“For the moment I would stick with it,” Ms. Bebee said. “The auto-industry numbers are looking quite good. As long as the auto industry is continuing to perform, they should do ok. They pay a nice dividend, they have a really good balance sheet, they’ve shaken the dual-class structure.”
Our annual contest is a way to explore what some of Canada’s smartest investment professionals and personal finance specialists are thinking about the market. At the end of last year, we asked each contestant to pick one stock, income trust, American depositary receipt or exchange-traded fund traded on a major exchange in Canada or the United States. The minimum market capitalization for Canadian securities was $100-million, and for U.S. picks it was $1-billion (U.S.).
The security that generates this year’s highest total return in Canadian dollars – including dividends and distributions – will be the winner. So far most of our contestants are beating the S&P/TSX composite index’s total return of 4.4 per cent.
The contest is called “My One and Only” because, unlike in real-world investing, we force the players to hold their picks for the entire year. No switching or selling to take profits on the stars or to cut losses on the dogs. It’s 12 months of watching a seed planted on Jan. 1 until harvest time on Dec. 31.
For spectators, the payoff is entertainment – and maybe, just maybe – some investing ideas. But nothing can replace doing your own research, and none of what is outlined here should be taken as advice to bet the house on any (or all) of our contestants’ picks.
By its nature, a contest like this encourages competitors to swing for the fences with high-risk, high-reward picks. Selections like this tend to fare extremely well – or fizzle spectacularly.
Benj Gallander, president of Contra the Heard Newsletter, shied away from doing that and missed out on a rally in U.S. financial shares. He had thought of picking beaten-down Bank of America Corp. , whose total return in Canadian dollars at the end of the first quarter came to 69.3 per cent. Instead he went with ATS Automation Tooling Systems Inc. , for a 38.4 per cent gain and second place so far in our contest.
Two other players did stick their necks out and went for what might be Canada’s biggest underdog. They picked Research In Motion Ltd. , which was down 1.1 per cent at the end of the quarter, the contest’s only negative return.
At the end of 2011 when the selections were made, the maker of BlackBerry handsets and PlayBook tablet computers was taking heat after a worldwide service interruption, product delays and several missed earnings or sales targets.
But Steven Palmer and Malvin Spooner wagered on a recovery.
“Hopefully, things will turn around,” said Mr. Palmer, president and chief investment officer at AlphaNorth Asset Management. Research In Motion plans to release a new operating system towards the end of the year. “It’s the next big wave. Personally, I’m waiting for that device to buy one as soon as it comes out, and I would guess that a lot of other people are doing the same.”
“I believe efforts to improve pricing and marketing their PlayBook should be evident in the second quarter,” said Mr. Spooner, president of Sienna Capital Management Inc. and the blogger behind maverickinvestors.com.
In real life, the contestants buy and sell the securities they mention. Mr. Spooner, for example, said he’s been buying Research In Motion on dips and sells when it goes above $14.