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A midyear look back at the hits and misses

Smack dab in the middle of the year seems as good a time as any to take a look at your portfolio – or, in my case, a look back at some of the things I've written in Vox.

Because I typically have a long-term focus here – the column isn't called "Fast Money" – it's too early to evaluate some of the picks and pans of 2012. But there are some successes, and failures, to note already.

For example, here's a mortifying call: Data storage companies Western Digital and Seagate Technologies are down 20 per cent from my "buy" recommendation just six weeks ago.

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They were inexpensive then, and now they're absurdly cheap. Western Digital closed Friday as one of the most inexpensive stocks in the entire Standard & Poor's 500: Its forward price-to-earnings ratio is a mere 3.1 – or about one fifth of what the broad market is fetching.

Now, I don't go out and buy every stock I recommend. But I'll now put my money behind my reiteration of Seagate's and Western Digital's value: I bought 100 shares of each Monday. Tepid forecasts for personal-computer growth have led some analysts to downgrade the hard-drive makers, contributing to their fall; I think PC pessimism is too strong and there will still be plenty of hard drives sold in the near term even as more people buy tablets.

In past look-back columns, there were plenty of picks that had moved significantly enough that they were worth noting no matter how much the underlying markets had performed. But, typically, when evaluating your portfolio, it helps to compare a stock's performance to a broad-based index. It answers the question, "Would I have done better, or worse, by just putting my money in an index fund?"

Doing that kind of analysis helps flag less-than-obvious gems. In May, 2011, I recommended cable operator Cogeco Inc. It's only up about 4 per cent since then, plus dividends. But the S&P/TSX 60, Canada's large-cap index, has fallen nearly 17 per cent over that time period, meaning Cogeco has outperformed the market by more than 20 percentage points.

Among 2012 picks, a more successful, and particularly satisfying one, is Richelieu Hardware. I thought a "buy" on the maker of parts for furniture manufacturers was a pretty innocuous call. But reader comments on The Globe and Mail website were so nastily skeptical, with one person claiming it was part of an illegal pump-and-dump scheme, that editors asked me to go online, post as myself, and clarify that I was not paid by the company or any promoter and that I did not myself own shares.

I wish I did own some. Richelieu is up nearly 15 per cent since then, and with the S&P/TSX 60 down nearly 9 per cent in the similar period, it's outperformed the market by about 24 points.

Other notable good calls include a February recommendation of U.S. credit-card company Discover Financial Services Inc. It's up about 23 per cent during a period when the U.S. market has been flat. Also good were pessimistic pieces on DragonWave Inc. (February) and Dell Inc. (March). Each of the tech companies are down more than 20 per cent, although the underperformance of the Canadian market mitigates DragonWave's performance.

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Not so good? I should never have doubted my beloved Costco Wholesale Corp., up 21 per cent since I said in January it was too expensive.

One of my oddest wins was a January column on investing in bankrupt companies, where I passed along, without a full recommendation, the idea of buying Eastman Kodak shares early in the first day of a prospective bankruptcy. Had you done that a week later when the filing occurred, you could have realized a gain of nearly 70 per cent.

And yet that wasn't the best call in that column: I suggested that while risky, newspaper company Lee Enterprises Inc. was the rare already-bankrupt company that could deliver gains to its equity holders. Within two weeks, it had doubled. I don't think I'm going to beat that call this year, or perhaps any other.

Vox isn't always about buy or sell recommendations; sometimes I take a look at governance issues or executive-pay excesses.

I've criticized the bonuses and related pension payments at Shaw Communications Inc., the bonus plan at Magna International, and the structure of the performance-share plans at Canada's big banks.

So did shareholders agree? Shaw Communications, as befits a closely-held company, didn't conduct a say-on-pay vote. At Magna International, 80.26 per cent – actually, not a particularly high figure – voted yes on the pay advisory vote. At the five big banks, shareholder approval on say-on-pay ranged from 84.9 per cent (Royal Bank of Canada) to 97.5 per cent (CIBC), with four of the five topping 90 per cent approval.

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For management of those companies, it's an admirable level of success – one that I, or any investor, would love to have for our picks.

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