Grading Our Winners and Losers from 2010
12/22/2010 1:39 pm EST
John Heinzl, reporter and columnist for GlobeInvestor.com, reviews the performance of Investor Clinic picks from the past 12 months.
Ever notice that nobody corners you at a cocktail party to tell you about all the investments that blew up in their face?
“This penny mining stock wiped out half my net worth!” for example. Or, “My wife left me after I remortgaged the house and lost it all on Research In Motion call options.”
No, they only tell you about their winners.
Well, newspaper columnists don’t have that luxury. If we write a flattering article about a stock, it’s there for all to see. There is no hiding from it after the fact.
Here at Investor Clinic, we don’t spend a lot of time recommending specific companies. But we wear other hats at Globe Investor, and we occasionally profile stocks that we consider attractive, or that analysts and money managers are recommending.
So today, to satisfy our own curiosity and/or open ourselves to ridicule, we’ll look back over the past 12 months (or slightly longer) to see how some of these picks turned out. We’ll also compare the stock’s price change—excluding dividends—to the relevant benchmark from the date the article appeared through Dec. 20, 2010.
You can’t judge an investment based on such a short time horizon, but that’s not going to stop us. Drum roll please …
Tim Hortons (NYSE: THI)
Profiled: Dec. 10, 2009
Then: $30.30 Now: $40.86
Return: +34.8 per cent
S&P/TSX return: +15.9 per cent
We called Tims a “sweet deal” because its stock had sunk to 2006 levels even as its sales and profits were growing by leaps and bounds. We’ve never won more than a muffin on Roll Up the Rim, but we lucked out on this pick: Last summer Tims agreed to sell its half-interest in Maidstone Bakeries for a cool $475-million, giving the stock an extra shot of cream.
Jean Coutu Group (Toronto: PJC.A-T)
Then: $9.75 Now: $9.25
Return: -5.1 per cent
S&P/TSX return: +10.3 percent
We wrote that the Quebec drugstore chain’s stock was on the mend, thanks to store expansions and renovations, better inventory controls, and a growing contribution from its Pro Doc generic drug manufacturing unit. However, changes to Quebec’s generic drug pricing laws have since given Jean Coutu a case of the flu.
Verizon Communications (NYSE: VZ)
Profiled: April 23, 2010
Then: $29.28 (US) Now: $34.74
Return: +18.6 per cent
S&P 500 return: +3.1 percent
We quoted Larry Sarbit, manager of the IA Clarington Sarbit US Equity Fund, who gushed about Verizon’s huge—and growing—free cash flow, rich dividend yield and attractive valuation. He predicted a dividend hike, and Verizon delivered. Even better, the largest US wireless provider announced it will start carrying the iPhone in 2011.
Emera Inc. (Toronto: EMA-T)
Profiled: July 30, 2010
Then: $26.43 Now: $31.32
Return: +18.5 percent
S&P/TSX return: +12.5 percent
We cited Halifax-based Emera’s history of dividend hikes, growing profits, stable regulated operations, and diversification strategy as reasons to like the utility company. Judging by the stock’s performance, many people agreed. But Emera has since announced even bigger plans: It’s investing $1.8-billion in a blockbuster deal with Newfoundland’s Nalcor Energy to develop the Lower Churchill hydro project in Labrador.
Procter & Gamble (NYSE: PG)
Profiled: Sept. 8, 2010
Then: $60.14 (US) Now: $64.97
Return: +8 per cent
S&P 500 return: +14.2 percent
P&G’s stock was hammered by the global recession and competition from cheaper, private-label products. But the drop was overdone, we said, citing the company’s attractive valuation, world-class brands and long history of growing profits and dividends. Investors apparently aren’t convinced, however: P&G’s stock is up, but it has lagged the market.
Hasbro (Nasdaq: HAS)
Profiled: Nov. 9, 2010
Then: $47.32 (US) Now: $49.32
Return: +4.2 per cent
S&P 500 return: +2 percent
When our eight-year-old and his buddies started talking non-stop about Beyblades—those popular spinning tops made by Hasbro—we figured the toy company was worth a closer look. Turns out the maker of Monopoly, Scrabble, and Transformers has a lot of other things going for it: Expansion into emerging markets, a new kids cable channel, a slate of upcoming movies and new avenues for growth in video games and wireless devices. So far, this toy story is working.
Having reviewed our picks, we’re pleased that four of the six stocks have outperformed the market since the stories appeared. Just remember, if we bump into you at a cocktail party and start boasting about Tim Hortons or Verizon, please don’t bring up Jean Coutu.