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The Krispy Kreme column was almost comically badly timed: In the morning’s paper, I said the company “seems to be doing just about everything right.” That afternoon, it reported its first earnings miss in several quarters. (David Bebber/REUTERS)
The Krispy Kreme column was almost comically badly timed: In the morning’s paper, I said the company “seems to be doing just about everything right.” That afternoon, it reported its first earnings miss in several quarters. (David Bebber/REUTERS)

Vox

Stock markets soared in 2013. I didn’t Add to ...

With the U.S. markets celebrating their best year in nearly two decades, and Canadian equities posting respectable, bond-beating returns, it was hard to have a bad year picking stocks in 2013.

Alas, that is just what I managed to do here in the Vox column in 2013. Easily more than half of my picks underperformed, some badly so.

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Here, I think, is what happened: First, since I measure my picks against a benchmark (the TSX/S&P composite for Canadian stocks, or the S&P 500 for U.S. stocks), the bar was high this year. A March U.S. stock pick that ultimately returned 12 per cent still underperformed the market by nearly seven percentage points.

Also, readers who skip over bylines may not notice such things, but Vox began publishing just once a week in February so I could author articles in Saturday’s Globe Investor that took a look at some of the best-known stocks in the U.S. and Canada.

There, I made a number of good recommendations, including airlines in March, bearish views of gold miners in April and IBM in August, and a February suggestion that Safeway was deeply undervalued if it were to sell its Canadian stores (which it did).

Vox, as a result, became a home for more speculative suggestions, including the shares of companies sometimes operating along the fringe of the major exchanges. And while a number of my recommendations indeed panned out, quite a few were spectacularly wrong.

The late summer was particularly cruel.

In August, I recommended Krispy Kreme Doughnuts and Chiquita Brands, two companies posting impressive results while travelling the comeback trail.

The Krispy Kreme column was almost comically badly timed: In the morning’s paper, I said the company “seems to be doing just about everything right.” That afternoon, it reported its first earnings miss in several quarters. (At least I said “at the current gaudy multiples, any misstep could cause the shares to drop sharply.”) Krispy Kreme and Chiquita have underperformed the index by 26 and 18 percentage points, respectively.

Around the same time, I suggested that junior potash miners could be bargains; several have underperformed the TSX composite by 40 or more percentage points.

I also recommended patent firm Acacia Research, which lost more than a third of its value after a terrible earnings miss in its second quarter. A seemingly safe idea that Kraft Foods’ dividend was tasty also went awry. The stock’s small decline since the column ran makes it a big loser in comparison with the S&P 500’s gain of nearly 9 per cent during the same period.

Even winners turned out to be losers: GSV Capital, a small investment company that held shares of Twitter prior to its IPO, gained more than 30 per cent in the two months after I recommended it. Unfortunately, the company also holds shares in online textbook-rental firm Chegg, a disastrous IPO that has erased all of GSV’s Twitter benefit.

It wasn’t all bonehead plays. Bauer Performance Sports rewarded my second “buy” recommendation in three years by outperforming the TSX by 20 percentage points. Trucker Vitran Corp. is up more than 20 per cent since Nov. 7, when I suggested the buyout many investors expected could come at an even higher price. The obscure investment firm Senvest, which I highlighted in my midyear review as a big winner, has doubled since I wrote about in February. (Disclosure: I own Senvest shares.)

On the sell side, a string of negative (or at least underwhelming) pieces in January on pharmacy company Catamaran Corp., booksellers Barnes & Noble Inc. and Indigo Books & Music Inc., and KP Tissue have all worked out, as all those stocks have underperformed. Tesla Motors underperformed the market by 27 percentage points since an October piece highlighting accounting concerns at the company, but that’s my one instance of lucky timing.

All in all, 26 of my recommendations underperformed (counting both “buys” that didn’t beat the market, and “sells” that did), while 16 outperformed. The lesson here may be to only read me on Saturdays, but I’ll stop short of suggesting that. Instead, I’ll try harder to make 2014 a much better year.

 
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