Four months into the great Globe and Mail Investing Club challenge, it’s clear that our readers are not only good looking and charming, but brilliant, too.
The Readers’ Portfolio has achieved an eye-popping return of 19.4 per cent since it launched on March 13. Its performance over that period puts the S&P 500 Index (12.4 per cent in Canadian-dollar terms) and the S&P/TSX Composite Index (4.9 per cent) to shame. It also leaves most global hedge funds in the dust.
Hats off to all of you. As you will recall, this superstar stock collection reflects the flood of submissions we received this past spring when we asked you to name your top three stock ideas for the year ahead. More than 500 of you sent in responses. We collated those picks and selected the dozen most popular stocks to make up the Readers’ Portfolio.
We didn’t know what to expect from this experiment in crowd-sourced stock picking. Some of us – not me, I swear – thought it would show how small investors get carried away by fads and whims.
To demonstrate the value of expertise, we thought it might be interesting to contrast the public’s penchant for hot stocks with the deeper, more meditative insights of those of us who write about investing for The Globe. We collected our own best ideas and put them into what we modestly called the Globe Hot List.
Ahem. This has not worked out quite the way we hoped. The best we can say is that it has taught us useful lessons in humility, the randomness of life, managing expectations, etc., etc.
The Hot List has produced a total return of 7.3 per cent over the past four months. Nothing horrible about that: It beats the S&P/TSX Composite. Still, the uncomfortable fact is that we are nowhere close to the stellar results of the Readers’ Portfolio.
What’s caused us to fall so far behind? In large part, our lagging performance reflects our skepticism about the Big Tech stocks that have dominated the market in recent months. The Readers’ Portfolio has benefited from huge gains by chip maker Nvidia Corp. NVDA-Q (total return of 91.4 per cent), e-commerce specialist Shopify Inc. SHOP-T (60.7 per cent) and software giant Microsoft Corp. MSFT-Q (29.3 per cent). The Hot List has largely missed out on this boom in tech.
Instead, we have placed many of our bets on real assets − companies such as copper-producer First Quantum Minerals Ltd., landlord Dream Industrial Real Estate Investment Trust, oil producer Canadian Natural Resources Ltd. and Brookfield Infrastructure Partners. Our First Quantum selection has rewarded us with a 31.9 per cent return. Otherwise, results have been middle-of-the-road.
It’s anyone’s guess how these trends will play out in the eight months that remain in the investing challenge. For now, the enthusiasm for tech shows no signs of abating. Excitement over artificial intelligence is propelling Nvidia, Microsoft and similar companies to new heights. Instead of being a fad, the AI revolution looks as if it may be a genuine turning point.
Maybe there’s a lesson there for those of us who write about the stock market every day. Too much familiarity with the market’s ups and downs can breed cynicism about whatever the latest hot trend happens to be. Looking back, those of us who write about investing for a living were probably prematurely skeptical about the AI buzz.
Still, we’re not giving up on our more sedate selections. If the economy does slow over the next few months, we think the virtues of these steadier, less-flashy stocks may become clearer. At least, we hope so. Because our Hot List desperately needs some help.