Stock Market Picking Contest

I truly don’t believe that there are more than handful of people out there who can truly pick stocks with enough skill to beat the street on a long-term basis.  The more I read and gain experience with investing, the more sure I am that the best course for 99% of people out there is basic ETFs and index funds.  So why then am I entering a stock picking contest hosted by Nelson over at Financial Uproar?  Because I’m a geek with nothing else to do.

I briefly considered randomly throwing 4 darts at a stock market chart in order to illustrate the point that I truly believe that strategy would be almost as good as my ability to pick stocks.  When 80% or so of managers don’t beat the market before fees (and up to 98% or so, don’t beat market long-term once their fees are calculated into it) I’m not at all confident of my ability to pick 4 “winners.” But I decided that if I do all this financial reading I might as well try my hand at predicting the future along with these other “experts.”  The best long-term result for me would probably be to do absolutely terribly, prove my ineptness at picking stocks, and take home the gag gift Nelson has promised the last place finisher.  If I do well, I could see my ego getting bigger, and it might have a similar effect to someone that walks into a casino for the first time and comes out way ahead – irrational overconfidence.  This could cost me a lot of money in the future!  Here are 4 picks that I think look like good investments to make some serious gains in the next year.  I definitely do not recommend investing based on my picks, and I’m not even sure I would get into all of these stocks for the long-term, but I do think they are currently undervalued and should see some nice gains in 2012.  Read on at your own risk…

1) Apple (APPL)

Yes, I am this cliché.  Despite the recent brilliant Samsung commercial that spawned this exchange:

Hipster: I could never get a Samsung… I’m too creative

Everyday Guy: Dude, you’re a barista

I am betting on Apple.  Here is my reasoning.  I’m as old school a blogger as you’re going to find.  I have resisted technology at almost every stage of my life, and still have no idea about any sort of coding (yay for partners).  I recently succumbed to pop culture and bought the iPhone 4S… and I love it.  Barista’s aside, I think Apple has several competitive advantages over its competitors.  One of the most underrated ones is the innovative retailing strategy that Apple created with their own Apple Stores.  Right now, people are hesitant to buy the stock based on the fact that no one knows what effect Steve Jobs’ departure might have on the company.  I refuse to believe that one guy who has been battling some pretty serious sicknesses over the last couple of years was that integral to the day-to-day operations.  Apple’s products are education- and business-friendly.  They are useful for almost every demographic, yet somehow maintain their “cool” factor.  Apple has also become masters at the short-term investment game of suppressing earnings expectations and then reaping the benefits of exceeding them.  I’m betting the iPhone 5 will propel this stock to new heights in 2012.

2) Berkshire Hathaway (BRK-B)

In Buffett I trust.  This guy (along with his partner Charlie Munger) continues to defy investing probability.  Through their process of picking value stocks, establishing a discount from regular shareholders, and actively getting involved in the management of specific companies, has proven the test of time.  Everything I read about these guys I love.  Buffett has been quoted as saying that he is always looking for undervalued stocks, and he believes Berkshire stocks are severely undervalued right now.  They started initial rounds of stock buy backs in 2011 and will likely continue in 2012.  This means great news for the stock price.  It is also a good way to play the meek, but accelerating growth of the USA domestic market.

3) Halliburton (HAL)

Anyone who invests according to morals or sustainable agendas should probably skip ahead.  Halliburton is severely undervalued right now (even though it is rising even as I type article).  It is way off its 52-week highs, and has a ridiculous forward looking P/E.  Any weakness in the Eurozone will be offset by growth in Emerging markets and people will continue to keep demand high for oil.  This is probably the stock I’m most comfortable with for one year (long-term, not so much).  Look for the fracking technology that is getting increasing popular in North America to push earnings growth.

4) Kelly Services (KELLYA)

Ok, so this is a long shot.  Here is my reasoning.  You need an aggressive pick that has a lot of room to grow in order to win a competition like this.  I’m not trying to be average, I’m trying to win a one-year stock picking contest.  Kelly Services is a company that was hot at the beginning of last year and then lost a lot of ground.  They are a company that basically places people in jobs around the USA.  I’m betting the jobs picture in the USA will continue to slowly improve throughout 2012 (Barrack will do anything he can to aid this in an election year) and Kelly should benefit from this.  The stock could be the small-cap, large-percentage growth that I need to win a competition over people who probably have much more investing experience than I do.  Or it could just be the thing that everyone makes fun of me for in a year?

So there it is.  I should state that I have no positions in these companies at this moment, nor do I intend to take any in the foreseeable future.  I do think they will return above-average market returns going in 2012.  Let’s see how I do.  If I can beat the street for a year do I get my own mutual fund?

 

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I would have to agree with you on Apple. As much as I too try to avoid keeping up with consumerism, they do have numerous advantages on the market in comparison to their counterparts. Despite Steve being gone, I still think this company is going to do some pretty amazing things.

I saw your picks on Financial Uproar. I was shouting at the computer: ‘no, not Apple’. Now you know what I think. But then I amy be completely wrong.

Oh, and dyslexic as well; sorry.

I think you picked 4 great companies. I also like AAPL in 2012. I am hoping to add AAPL as long term investment for my 401K this year but right now it is too high…

I think that what can stop Apple’s momentum is not Apple – they will continue on the trajectory on which they are. Samsung will stop them – apparently their tablet is really good (and there is no lock in with a particular platform like iTunes) and the phones are a rave. Apple is a hendhog – they go for one thing and do it really well. This works when you have Jobs; how is it going to pen out now is a mystery.

If 80% of fund managers can’t beat the market why do we have them? I say get rid of them and use automated trading platforms. Think how cheaper it would be for investors!

I think Birk-B will be slow and steady but they are massive and won’t give you more than 1-2%. Also I believe in efficient markets and share your sentiment about active managers not being able to beat the market. But, it sure is fun trying :-) especially, when you don’t have any money at stake.

Apple are where Microsoft was 10 years ago. And IBM (remember them) 30 years ago. They have become too big for their boots, arguing about IP when they have plagiarised like there is no tomorrow. All this negative energy will eventually pull them down. After the iPhone, iPod and iPad will they come up with the next killer? Not necessarily. Fashion is a very fickle master. Nice kit, shame about their bad breath. Of course in the short run, you may be right but when you are at the top of the hill, there is only one way to go… Read more »

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