The first month of the Globe Investing Club challenge is now history and the verdict is painfully clear: Readers are nearly twice as smart as pundits.
As one of those pundits, I like to take a broad, philosophical view of the results, pointing out that both the Readers’ Portfolio and The Globe’s Hot List have done exceptionally well since we began counting on March 13. But, yeah, on a relative basis, the Hot List is hurting.
The Hot List, as you may recall, is the product of the collective brainpower of those of us at Globe Investor. Surprisingly, though, the market doesn’t seem to be trembling at the prospect of all that massed intelligence. Over the first month of the Investing Club challenge (to April 13), our portfolio of 11 hand-picked stocks has produced a total return of 4.4 per cent, which is pretty much in line with the performance of the S&P/TSX Composite Index during that same period.
If you’re looking for superior performance, you must turn to the Readers’ Portfolio. This collection of 12 stocks was selected by compiling the most popular picks among the more than 500 of you who sent in your suggestions. Over the first month of its existence, the Readers’ Portfolio is already up 8 per cent.
What explains the yawning gap between the two portfolios? Among other things, the Readers’ Portfolio did a magnificent job of avoiding losses. All of its picks prospered. The portfolio’s single biggest winner was Algonquin Power & Utilities Corp. AQN-T (up 16. 1 per cent on the month). A couple of tech giants – chip maker NVIDIA Corp. NVDA-Q (up 12.1 per cent) and software titan Microsoft Corp. MSFT-Q (up 11 per cent) – also produced double-digit gains.
In contrast, The Globe Hot List offered far more drama. Its big winner was copper miner First Quantum Minerals Ltd. FM-T (up 31.1 per cent). Its big loser was alternative energy pioneer Plug Power Inc. PLUG-Q (down 27.1 per cent).
Two other Hot List picks – furniture importer Richelieu Hardware Ltd. RCH-T and entertainment conglomerate Warner Bros. Discovery Inc. WBD-Q – also lost ground, although to a much smaller extent. Fortunately, gains on Constellation Software Inc. CSU-T (up 13.8 per cent) and Canadian Natural Resources Ltd. CNQ-T (up 11 per cent) helped to offset the pain.
A couple of observations seem to be in order here. First, one-month results mean very little. (At least that is what we laggards keep telling ourselves as we read the results and curse.) Second, both portfolios produced one-month results that if extrapolated over the course of the year would be eye-popping. Both the Readers’ Portfolio and the Hot List will nearly certainly come back to earth in the months to come.
Much will depend on how the economy does during that period. For the most part, the Readers’ Portfolio is composed of solid, dividend-paying stocks. It features a hefty dose of banks and utilities – companies that should be able to perform even if the economic weather turns rough.
In contrast, the Hot List features some higher-risk bets, including Plug Power (now facing a class-action lawsuit from disgruntled shareholders) and Warner Bros. Discovery (which did not impress markets with the plans it announced this week to rebrand its HBO Max streaming service). Both will probably require a healthy economy to prosper and help the Hot List claw back some of the early lead that the Readers’ Portfolio has built up. Here’s hoping.