This has been a bad month for stocks – so bad that you might not want to look at your portfolio any more.
Our advice for readers: Grab a soothing beverage, accept the disappointing results with good humour and try your best to focus on those upbeat pockets of good news. Oh, and blame the economy.
That’s right, smart stock picks can only take you so far when the big picture turns gloomy. Bond yields have surged to multiyear highs, renewing concerns about an oncoming recession, denting the appeal of dividends and weighing on the valuation of tech stocks.
Geopolitics aren’t exactly playing along either. Jamie Dimon, the chief executive officer of JPMorgan Chase & Co., and an influential voice on markets, said in a statement last week: “This may be the most dangerous time the world has seen in decades.”
Yikes. Perhaps we should celebrate the fact that The Globe and Mail Investing Club Challenge is suffering only a few scrapes. Over the past month, to Oct. 13, the Readers’ Portfolio is down 4.2 per cent (not including dividends).
That’s worse than the 2.5 per cent decline of the Standard & Poor’s 500 Index over the same period (in U.S. dollar terms). It’s also worse than the 3.3 per cent decline of the S&P/TSX Composite Index.
But the dozen stock picks from Globe readers continue to perform better than the selections from the, um, collective in-house expertise of investing reporters. Our best ideas, which we call the Globe Hot List, has fallen 4.6 per cent since we looked at the Investing Club Challenge last month.
Yup, that lags major indexes and the Readers’ Portfolio. If one reason for starting this challenge was to illustrate how difficult it is to outperform major indexes consistently, then chalk up our failure as a rollicking success.
Of course, a one-month return is a small piece of this year-long challenge, which kicked off on March 13.
As you’ll recall, we asked readers to send us their top three stock picks, to be held for 12 months. We then collated these submissions – more than 500 of them – to find the 12 most popular picks for the Readers’ Portfolio.
While the past month has been rough for investors, the longer term looks considerably brighter, especially for Globe readers. Since the challenge began seven months ago, their portfolio is up 14.4 per cent, including dividends.
That trounces the total return of just 1.5 per cent for the S&P/TSX Composite over the same period. It also edges past the S&P 500, which is up 13.3 per cent (also with dividends).
Within the Readers’ Portfolio, Nvidia Corp. NVDA-Q, Microsoft Corp. MSFT-Q, Shopify Inc. SHOP-T and Tourmaline Oil Corp. TOU-T are up handsomely since March on enthusiasm about artificial intelligence, e-commerce and traditional energy. Even if some of these stocks are off their recent highs, the broad themes underpinning them appear to be holding up well.
The gains from these big winners more than offset the portfolio’s laggards. Algonquin Power & Utilities Corp. AQN-T, Enbridge Inc. ENB-T and Telus Corp. T-T are struggling with double-digit share price losses, largely because dividend stocks just can’t seem to catch a break this year.
Will the final stretch of 2023 bring some relief? Some of the dividend powerhouses in the portfolio are offering tantalizing yields as share prices decline – a yield of close to 8 per cent, in Enbridge’s case. If big dividend yields looked attractive in March, they may look even better today.
David Berman