This is getting embarrassing.
Two months into the great Investing Club challenge, our readers have opened up an enormous lead over the finest minds in The Globe’s investing section. The Readers’ Portfolio has rocketed 11 per cent higher since March 13; the Globe Hot List has inched up a mere 1.1 per cent.
Congratulations, readers. Your choices have trounced not just the shattered egos here at Globe Investor but the S&P/TSX Composite Index and the S&P 500 Index as well.
How did this happen? As you may recall, we launched the Globe Investing Club this spring with an invitation to readers to send us their top three picks for the year ahead. We then chose the dozen most popular stocks among the more than 500 submissions we received and used them to make up the Readers’ Portfolio.
Our plan was to see how the Readers’ Portfolio would fare over the course of a year. (Based upon total return in Canadian dollars from March 13, 2023, to March 13, 2024, for those of you keeping track at home.)
To add an additional dash of drama to this experiment, we thought it would be interesting for those of us who write about investing at The Globe to come up with our own portfolio, which we immodestly dubbed the Hot List.
Based upon the evidence so far, it’s clear the Hot List is actually more like Team Tepid.
On the other hand, Globe readers have shown themselves to be an unusually intelligent lot. Good-looking, too. (Yes, I’m shamelessly flattering you, in the hope that you won’t be too cruel about the Hot List’s lacklustre performance.) By aggregating your thoughts and opinions, we appear to have tapped into a deep well of market knowledge.
In the early going, you have demonstrated an uncanny ability to pick stocks that were on the verge of rebounding. Among your big winners are e-commerce innovator Shopify Inc. SHOP-T (up 44.8 per cent), software titan Microsoft Corp. MSFT-Q (up 20.2 per cent) and chip maker Nvidia Corp. NASDAQ - NVDA-Q (up 21.9 per cent).
In contrast, those of us in Globe Investor have demonstrated the opposite talent – a remarkable ability to step into potholes. Our losers include fuel cell innovator Plug Power Inc. PLUG-Q (down an excruciating 40.4 per cent), entertainment conglomerate Warner Bros. Discovery WBD-Q (down 11.9 per cent) and credit-card giant American Express Co. AXP-N (down 6.9 per cent).
We weren’t complete dunces. We did score a couple of big gains in copper miner First Quantum Minerals Ltd. FM-T (up 20.3 per cent) and distributor Richelieu Hardware Ltd. RCH-T (up 19.5 per cent). Those wins, though, weren’t enough to propel us out of the deep hole our losing bets had put us in.
There may be a lesson here. If you swing for the fences with high-risk, high-reward picks like many of those on the Hot List, you have to figure out a way to deal with the inevitable losses. If this were a real-world portfolio, those of us in Globe Investor would be reassessing our positions in Plug Power and Warner Bros. Discovery.
The Readers’ Portfolio doesn’t face the same challenge because, remarkably, none of its picks has lost money so far. In many ways, its performance has been exemplary: a few big winners, several moderate gainers, no losers.
Can this charmed streak continue? Extrapolating the two-month performance of the Readers’ Portfolio for a full year would result in a one-year gain of 66 per cent – a level of performance that not even Warren Buffett has managed to achieve on a sustained basis. I’m not wishing bad luck on anyone, but market history suggests readers’ picks will slow their furious pace of gains over the months ahead.
Maybe (and I realize I’m probably dreaming here) the Globe Hot List will experience the opposite effect and see a pick-up in its dismal record to date. There is, ahem, a lot of room for improvement.