Seeking Alpha
Profile| Send Message|
( followers)  

In 2013, we tracked the performance of stocks selected by Fortune, Barron's, RBC Capital Markets, Barclays, BOA / Merrill Lynch, CNN Money, Credit Suisse, Goldman Sachs, JPMorgan, Kiplinger and a group of 15 Star Investors. We later added Sabrient Systems when their selections became available in early January.

As you might expect there were some great performances. Credit Suisse's financial portfolio with a 55% gain took first place narrowly beating out Sabrient Systems' more diversified portfolio with a 54% gain. Sabrient had the second best performing stock selection; Jazz Pharmaceuticals (NASDAQ:JAZZ) with an impressive 128.7% gain. Sabrient's annual "Baker's Dozen" portfolios have beat the market convincingly for the past five years with their quantitative GARP (growth at a reasonable price) method.

Fortune managed to improve the fifteen elite fund manager's portfolio from 30% to 38% to take third place by weeding out five of the fifteen selections.

Barclays had the largest portfolio containing 60 stocks and took fourth place with a 36% gain. They had the top performing pick; Tesla (NASDAQ:TSLA) with a 329.8% gain, however, they also had the two worst picks; Ariad Pharmaceuticals (NASDAQ:ARIA) and Penn National Gaming (NASDAQ:PENN), down 65.78% and 71.34% respectively.

Our AAII SI Pro selections took fifth place with a 34.8% gain, which was enough to beat the Nasdaq (NASDAQ:QQQ) and S&P 500 (NYSEARCA:SPY) market index ETFs and 8 other professional portfolios. Our AAII SI Pro portfolio was made by running all 142 stock recommendations for 2013 though the AAII (American Association of Individual Investors) Stock Investor Professional software database and selecting the stocks that passed the standard AAII selection screens that had the highest annual returns over the past 3 years. You can see the original article here.

The chart below shows the individual weekly portfolio performances throughout 2013.

(click to enlarge)2013 Stock Picks Performance Chart

Overall, only about half of the portfolios beat the Nasdaq index ETF (QQQ) as you can see in the table below:

(click to enlarge)

This performance is similar with previous years and shows that it is very difficult to pick individual stocks expected to beat the market one year out.

For 2014, we have compiled 275 stock recommendations from Merrill Lynch, MSN, Barron's, UBS, Piper Jaffray, Jefferies, 20 Star Investors, Deutsche Bank, Needham and Company, Barclays, Kiplinger, Fidelity, BlackRock, Firsthand Tech Value Fund, Glenview Capital Management, JPMorgan and Credit Suisse. You can see all the recommendations, links to the original source articles as well as a link to charts of all of the stocks here.

The AAII SI Pro portfolio for this year is selected from the 275 professional stock recommendations by passing the following screens:

1. Price-to-Free-Cash-Flow (3 year - 26.8% annual return)

This screen looks for companies with positive and consistent free cash flow and reasonable stock valuations. This screen produced a total of 146 passing companies but only the following 11 were in the pros choices:

  1. AGCO Corp. (NYSE:AGCO)
  2. American Public Education Inc. (NASDAQ:APEI)
  3. Broadcom Corp. (NASDAQ:BRCM)
  4. CenturyLink Inc. (NYSE:CTL)
  5. DaVita HealthCare Partners Inc. (NYSE:DVA)
  6. EMC Corp. (NYSE:EMC)
  7. F5 Networks Inc. (NASDAQ:FFIV)
  8. Intel Corp. (NASDAQ:INTC)
  9. PepsiCo Inc. (NYSE:PEP)
  10. Target Corp. (NYSE:TGT)
  11. VMware Inc. (NYSE:VMW)

The passing criteria for this screen are:

  • Those companies in the financial sector and real estate operations industry are excluded
  • The market capitalization for the latest fiscal quarter (Q1) is greater than or equal to $50 million
  • The free cash flow per share for the last 12 months and for each of the past five fiscal years is positive (greater than zero)
  • Note that some companies may have negative free cash flow because of the seasonal nature of their business
  • The price-to-free cash flow per share ratio is lower than the industry's median price-to-free cash flow per share ratio
  • The price-to-free cash flow per share ratio is lower than the company's 5-year average price-to-free cash flow per share ratio
  • Only those companies with the 30 lowest price-to-free cash flow per share ratios are included in the final results

2. IBD Stable 70 (3 year - 22.3% annual return)

This screen looks for companies with strong and stable long-term earnings growth. This screen produced 14 passing companies with only one coinciding with the pros choices;

  1. Cognizant Technology Solutions Corp. (NASDAQ:CTSH)

The passing criteria for this screen are:

  • Earnings per share from continuing operations for the last four fiscal quarters (12m) is greater than or equal to earnings per share from continuing operations for the last fiscal year (Y1)
  • Earnings per share from continuing operations has increased by at least 10% over each of the last five fiscal years (Y6 to Y5, Y5 to Y4, Y4 to Y3, Y3 to Y2, Y2 to Y1)
  • The growth rate in earnings per share from continuing operations between the last fiscal quarter (Q1) and the same quarter one year ago (Q5) is at least 10%
  • The growth rate in revenue between the last fiscal quarter (Q1) and the same quarter one year ago (Q5) is at least 10%
  • The R-squared value for earnings per share from continuing operations for the last seven years is at least 80%
  • The price per share is at least $12
  • The company's shares do not trade as American depositary receipts (ADRs)
  • The stock trades on either the American, New York, or NASDAQ exchanges (does not trade over the counter)

3. O'Shaughnessy Growth Screen (3 year - 21.3% annual return)

O'Shaughnessy's screen tries to predict the future using historical long-term trends seeking value and price momentum. This screen produced 38 passing companies with only one coinciding with the pros choices;

  1. Delta Air Lines Inc. (NYSE:DAL)

The passing criteria for this screen are:

Value Screening:

  • Those companies in the utilities sector are excluded
  • The market capitalization for the last fiscal quarter (Q1) is greater than or equal to the average market capitalization for the entire database
  • The average number of shares outstanding from the last fiscal quarter (Q1) is greater than the average number of shares outstanding for the entire database for the same period
  • Cash flow per share for the last 12 months is greater than the average cash flow per share for the last 12 months for the entire database
  • Total sales for the last 12 months is greater than 1.5 times the average total sales for the last 12 months for the entire database
  • The dividend yield is such that only 50 companies are included in the final results
  • Adjust the Yield value until only 50 companies pass the screen

Growth Screening:

  • The market capitalization for the last fiscal quarter (Q1) is greater than $150 million
  • The price-to-sales ratio is less than 1.5
  • The growth rate in earnings per share over the last four fiscal quarters is positive
  • The percent change in stock price over the last 52 weeks is such that only 50 companies are included in the final results
  • Adjust the Price Change 52-week value until only 50 companies pass

4. PEG With Estimated Growth Screen (3 year - 20.7% annual return)

This screen calculates PEG ratios and price strength to find growth stocks trading at a reasonable price. This screen produced only 6 passing companies and only one coinciding with the pros choices;

  1. GNC Holdings Inc. Cl A (NYSE:GNC)

The passing criteria for this screen are:

  • Those companies that trade on the over the counter (OTC) market are not included
  • The ratio of the current price-earnings ratio to the estimated growth rate in earnings per share (PEG ratio) is less than or equal to 1 and greater than 0.2
  • Earnings per share from continuing operations for the latest 12 months and for each of the last five fiscal years (Y5 to Y1) are positive
  • Same-quarter growth (Q5 to Q1, Q6 to Q2, etc.) in earnings per share from continuing operations for each of the last four fiscal quarters is positive
  • The 26-week relative price strength ranks in the top 70% of the entire database (Percent Rank greater than or equal to 70)

5. Templeton (3 year - 20.6% annual return)

This screen seeks companies with favorable margins, consistent earnings, growth and price-earnings ratios below historic norms. This screen produced only 4 passing companies with only one coinciding with the pros choices;

  1. F5 Networks Inc.

The passing criteria for this screen are:

  • The price-earnings ratio is less than the average price-earnings ratio for the last five years
  • The average price-earnings ratio for each of the last five fiscal years is less than 75
  • The growth rate in earnings per share for the last 12 months is positive
  • The growth rate in earnings per share for the last five years is positive
  • The estimated long-term growth rate in earnings per share is positive
  • The estimated long-term growth rate in earnings per share is greater than the industry's median estimated long-term growth rate in earnings per share
  • Earnings per share for the last twelve months is greater than or equal to earnings per share for the last fiscal year (Y1)
  • Year-to-year earnings per share have increased over each of the last five fiscal years (Y5 to Y4, Y4 to Y3, etc)
  • The operating margin for the last 12 months is positive
  • The operating margin for the last fiscal year (Y1) is positive
  • The operating margin for the last 12 months is greater than or equal to the industry's median operating margin for the same period
  • The operating margin for the last fiscal year (Y1) is greater than or equal to the industry's median operating margin for the same period
  • The ratio of total liabilities to total assets for the last fiscal quarter (Q1) is less than the industry's median ratio of total liabilities to total assets for the same period

6. Oberweiss Octagon (3 year - 20.4% annual return)

This screen seeks out rapidly growing companies and invests in those that are attractively priced. This screen produced 10 passing companies with only one coinciding with the pros choices;

  1. Santarus Inc. (NASDAQ:SNTS)

The passing criteria for this screen are:

The following criteria are applied separately to those companies with a market capitalization between $1 billion and $8 billion:

  • The growth rate in earnings per share from continuing operations over the last four quarters (trailing 12 months) is at least 20%;
  • The growth rate in pretax income over the last four quarters (trailing 12 months) is at least 20%;
  • The growth rate in sales over the last four quarters (trailing 12 months) is at least 20%; and
  • The price-earnings ratio is less than the projected earnings per share growth rate over the next year.

The following criteria are applied separately to those companies with a market capitalization less than or equal to $1 billion:

  • The growth rate in earnings per share from continuing operations over the last four quarters (trailing 12 months) is at least 30%;
  • The growth rate in pretax income over the last four quarters (trailing 12 months) is at least 30%;
  • The growth rate in sales over the last four quarters (trailing 12 months) is at least 30%; and
  • The price-earnings ratio is less than one-half of the projected earnings per share growth rate over the next year.

The following criteria are applied to those companies meeting the two separate sets of criteria outlined above:

  • The stock must be traded on the American, New York, or NASDAQ exchanges;
  • Earnings per share from continuing operations for the last fiscal quarter are greater than earnings per share from continuing operations for the same quarter one year ago;
  • Earnings per share from continuing operations for two quarters ago are greater than earnings per share from continuing operations for the same quarter one year ago;
  • Earnings per share from continuing operations for the last four fiscal quarters (trailing 12 months) are greater than or equal to earnings per share from continuing operations for the last fiscal year;
  • Sales for the last fiscal quarter are greater than sales for the same quarter one year ago;
  • Sales for two quarters ago are greater than sales for the same quarter one year ago;
  • Sales for the last four fiscal quarters (trailing 12 months) are greater than or equal to sales for the last fiscal year;
  • The price-to-sales ratio is less than the median price-to-sales ratio for the industry; and
  • The relative strength over the last 52 weeks ranks in the top quartile (25%) of all stocks.

7. Buffettology: EPS Growth (3 year - 19.9% annual return)

A Buffett approach screen seeking consumer monopolies selling at a reasonable price. This screen produced 47 passing companies with the following 4 coinciding with the pros choices:

  1. Marsh & McLennan Cos. (NYSE:MMC)
  2. Monsanto Co. (NYSE:MON)
  3. PetSmart Inc. (NASDAQ:PETM)
  4. Qualcomm Inc. (NASDAQ:QCOM)

The passing criteria for this screen are:

  • The current operating margin is greater than or equal to the industry's current median operating margin
  • The current net profit margin is greater than or equal to the industry's current median net profit margin
  • The total liabilities to total assets ratio for the last fiscal quarter (Q1) is less than or equal to the industry's median total liabilities to total assets ratio for the same period
  • The seven-year growth rate in earnings per share from continuing operations ranks in the top 75% of the entire database (percent rank greater than or equal to 75)
  • The three-year growth rate in earnings per share from continuing operations is greater than or equal to the seven-year growth rate in earnings per share from continuing operations
  • The earnings per share from continuing operations for the last 12 months and for each of the last seven fiscal years is positive
  • The current return on equity is greater than 12%
  • The seven-year average return on equity is greater than 12%
  • The projected 10-year rate of return (calculated using the current price and the projected price in ten years based on historical earnings growth, projected earnings per share, and historical average price-earnings ratio) is greater than or equal to 15%

In summary, the stocks selected for 2014 are:

2014 Stock Picks: 19 Out Of 275

Company NameTicker
AGCO Corp.AGCO
American Public Education Inc.APEI
Broadcom Corp.BRCM
CenturyLink Inc.CTL
DaVita HealthCare Partners Inc.DVA
EMC Corp.EMC
F5 Networks Inc.FFIV
Intel Corp.INTC
PepsiCo Inc.PEP
Target Corp.TGT
VMware Inc.VMW
Cognizant Technology Solutions Corp.CTSH
Delta Air Lines Inc.DAL
GNC Holdings Inc. Cl AGNC
Santarus Inc.SNTS
Marsh & McLennan Cos.MMC
Monsanto Co.MON
PetSmart Inc.PETM
Qualcomm Inc.QCOM
Source: 2014 Stock Picks: 19 Out Of 275