Top Picks for 2005 - Part 1

12/31/2004 12:00 am EST


Welcome to our Annual Top Picks Report, in which we ask our Money Show Digest contributors to select a favorite stock or fund for the year ahead. Last year's Top Picks rose an average 24%, following their initial recommendation. Here's a review of the top performers and an overview of the new Top Picks for 2005. (Part 2 will be sent next week.)

With the holiday shopping season behind us, it is now time to compile a portfolio shopping list of some of the best stock and fund opportunities for the coming year. To begin, I would like to share some insights garnered over the more than 20 years that I have been conducting these annual surveys, in order to help you better utilize this report in your own investment strategies.

First and foremost, it is important to understand that this report is a snapshot in time. The advisors are selecting a Top Pick based on their current assessment of a particular company and the current market environment. However, fundamentals change, and hence, a stock that is now a favorite buy can become a strong sell, based on future events. As such, the stocks featured in this report should not be blindly bought and ignored for the balance of 2005.

As an extreme example, two stocks in last year's report showed gains of more than 50% during the year, only to reverse course and close 2004 with double-digit losses. Historically in these Top Picks reports, some advisors tend to "swing for the fences." In those cases, it is particularly important that investors understand the inherent risks of these speculative plays, monitor the changing fundamentals behind these stocks, and employ stop losses to preserve gains and protect against undue loss.

I would also emphasize that this annual feature is not intended as a "contest" between the advisors. It would be exceedingly unfair to compare the performance of a high-risk-oriented advisor whose Top Pick comes from among volatile, small-cap tech stocks with a Top Pick that comes from an advisor whose expertise is low-risk, income investments. Our Annual Top Picks report includes selections from both extremes.

For example, in last year’s report Gary Alexander chose the Al Frank Fund as his Top Pick, recommending the fund for its solid, value-oriented focus. Likewise, Sheldon Jacobs selected Schwab Dividend for its income potential. Obviously, neither of these were meant to be "home-run" plays. However, the Al Frank Fund’s 15% gain and the Schwab Dividend fund’s gain of 12.6% were top-notch performances based on those advisor’s expectations for those picks. In similar vein, Gordon Pape chose Royce Value Trust for 2004 and Jim Lowell picked Fidelity Small Cap Int'l. Both funds rose 22%. Indeed, all four of these funds were steady performers throughout the year, with all of them closing 2005 at or near their highs.

Despite our aversion to having this report viewed in a competitive light, several advisors deserve special mention for the exceptional relative performance of their 2004 picks during an otherwise lackluster year. Chris Johnson picked UPS, which closed out 2004 with a relatively strong 17% gain. And despite a difficult environment for healthcare, Richard Band chose Johnson & Johnson, which gained 24% as of year end. Elliott Gue chose Xerox, and the stock is up 27% for the year. And Ian Wyatt went for a speculative Internet play, The Knot, which closed the year up 30%.

Richard Moroney was certainly in the right place at the right time. His pick of ConocoPhillips rose 34% for the year. An even stronger performance came from Eric Roseman, who selected Kingsway Financial; the stock is up 38%. And, as always, John Buckingham was a strong outperformer. Ironically, he is decidedly adverse to selecting a single favorite, given his strong belief in diversification. But despite his hesitancy, his selection for 2004 was the second-best performer in last year's report. His Top Pick, Optimal Robotics, gained 49%.

Special mention must go to Mark Skousen, whose performance in last year’s report was rather remarkable in light of the single-digit gains for the market averages. Skousen is not only a noted financial author and director for the Young America's Foundation, but teaches at Columbia Business School and maintains his 24-year editorial role at Forecasts & Strategies. But it was his expertise at collectibles, art, and numismatics, which led to his 2004 pick – Collector’s Universe. The stock gained 95% in 2004, ending the year at its high.

Finally, I'd like to mention that this special report and our weekly Money Show Digest is made available free to readers as a way to help expose you to the exceptional advisors who appear throughout the year at our Money Shows, and to encourage you to attend these investment conferences. Please join us at The World Money Show  in Orlando, Florida, February 2-5. Registration, as always, is FREE.

Most importantly, if you plan on attending, please register through the links on this Digest, as that is our only way to know if this newsletter is helping to expose its readers to these shows. I'd encourage readers to share this Digest with their friends, family, and business associates. I also welcome your  comments or suggestions about how to make the Digest an even better product to meet your needs. Please send comments directly to me at .

Please enjoy this special report. To all, we offer our best wishes for a healthy, happy, and prosperous 2005!

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