As we enter 2014, it is appropriate to review my recent stock-picking record. After a year of excellent success in 2012, I have to admit that my performance in 2013 has been a mixed bag. On the one hand I had a good spurt with my ten Japanese stock picks of March 2013. When I reviewed them on October 9, they had jumped 15.3 percent – not bad compared to a rise of just 6.6 percent for the S & P 500. My advice then was to take profits on the five best performers, up 25.6 percent on average, and double up on the laggards, to wit KUBTY, KYO, MKTAY, MFG, and NSANY. I remain happy with that advice and I am prepared to give it at least another year to prove its worth. (A key element in my thinking is that the Japanese yen is now greatly undervalued against the U.S. dollar.)
My five picks of January 2, 2013 — BCS, GSK, MT, RDS.A, and SSREY — have done less well. Although they are up 9.8 percent on average, they have greatly underperformed a 26.4 percent rise in the S & P 500 index. One mitigating factor is that they are all big dividend payers (as are my Japanese picks). Another factor is that I deliberately took an ultra-conservative approach as I believed that U.S. stocks were already a year ago looking frothy. I also chose stocks with heavy non-American exposure as I am pessimistic about the U.S. dollar’s long-term prospects. I am sticking to my guns on both counts but for now waiting for markets to recognize the value of non-dollar earnings feels like watching paint dry. (Disclosure: I own GSK and MT.)
As for my boldest stock commentary, that was a bearish call on Apple posted on October 10, 2012. Then 641, AAPL closed yesterday at 561. This represents an underperformance of nearly 32 percent (the stock has sagged 12 percent at a time when the S & P 500 gained 29 percent). I remain bearish on AAPL because the company has simply given too much technology to Samsung and it is increasingly suffering margin erosion at the hands of Google and even Amazon.