Coming To Grips With The Performance Of My Top 10 Picks For 2011

by: Chris Katje

Each year since I began writing on Seeking Alpha I have published a list of my top ten stock picks for the year. Each year I have checked in on them periodically and published my results at the end of the year. At the bottom of the article are links to 2009 and 2010. The original article appears as My Top Ten Stock Picks for 2011 Plus 7 Honorable Mentions. Without further ado here are the results for this past year.

2011 Results

Ameresco (NYSE:AMRC)

Start: $14.36

End: $13.72

Performance: -4%

52 Week: $8.60-$17.46

Why I Picked: Ameresco went public in 2010 and has not seen its share price rise more than 10% from that time. The company makes buildings more energy efficient and is beginning to get a nice backlog of projects.

What’s Ahead: The company has recently signed a couple of large deals which will add to its backlog of projects. Several small acquisitions were made in the last couple of months as well. The company remains a play on energy initiatives and a great speculative green play for a portfolio. I remain bullish on shares in 2012.

Recommendation: BUY

Bank of America (NYSE:BAC)

Start: $13.34

End: $5.56 + $0.04 in dividends = $5.60

Performance: -58%

52 Week: $4.92-$15.31

Why I Picked: With this horrible pick, I selected Bank of America because I thought shares had reached their lowest when they approached the fifty two week low in share price. The financial markets in my mind were beginning to turn the corner.

What’s Ahead: Bank of America shares are undervalued at this time. However, investors are scared by large national banks due to new financial regulations and bad mortgages still on the books. Investors are beginning to look at smaller regional banks for growth and value. Bank of America shares could reach $15 the next year but I won’t be touching it due to investor fears.

Recommendation: SELL

Case New Holland (NYSE:CNH)

Start: $47.74

End: $35.99

Performance: -25%

52 Week: $22.19-$54.45

Why I Picked: Case New Holland has several large brands in the agriculture sector which I thought was going to continue with its growth in 2011. Shares traded at close to book value and were an amazing ratio of 1 in price to sales. I predicted $60 at the end of 2011 but shares headed in the other direction.

What’s Ahead: Case recently announced plans for a new plant in China which will greatly increase output of new tractors. The company’s value will be unlocked as shares trade at less than 10x next year’s earnings.

Recommendation: BUY


Start: $20.23

End: $18.08 + $0.18 in dividends = $18.26

Performance: -10%

52 Week: $13.30-$22.34

Why I Picked: I selected Cisco due to its large value proposition at $20 a share. The company is expanding its efforts in the cloud computing area and gaining ground on new initiatives as it makes up for lost market share in other areas.

What’s Ahead: The company declared a dividend for the first time in 2011 and now yields around 1.3%. Cisco is a great long term play on the technology sector and is a large institutional holding due to its under $20 position.

Recommendation: BUY

Corning (NYSE:GLW)

Start: $19.32

End: $12.98 + $0.23 in dividends = $13.21

Performance: -32%

52 Week: $11.51-$23.43

Why I Picked: I selected Corning for the second time in three years for my top ten lists thanks to the company’s Gorilla Glass technology and the value I saw in shares. However, declining prices in LCD televisions and increasing competition in the smartphone glass market saw shares drop significantly for the year.

What’s Ahead: Corning is a great company but has lost some of its market dominance as it faces stiff competition in most of its segments. Television prices have dropped and continue to come down which has hurt Corning’s margins.

Recommendation: SELL

Dreamworks Animation (NASDAQ:DWA)

Start: $29.47

End: $16.59

Performance: -44%

52 Week: $16.34-$30.73

Why I Picked: Dreamworks shares were trading close to a fifty two week low when I selected them for this list. The animation company was set to release two movies for the year which ended up being Kung Fu Panda 2 and Puss in Boots.

What’s Ahead: Dreamworks has a potential big year in front of it for 2012. The movies being released in 2012 include "Madagascar 3" and new original film, "Rise of the Guardians". Dreamworks will also have to decide on a movie distributor as current deal with Paramount is expiring. Talks with Paramount have seem to have stalled and Dreamworks will likely have to consider partnering with a smaller movie company or distributing movies on their own. I think 2012 could be the year I predicted in 2011 for the company and it will likely be staying on my top ten list for this year.

Recommendation: BUY

EMC Corporation (EMC)

Start: $22.90

End: $21.54

Performance: -6%

52 Week: $19.84-$28.73

Why I Picked: EMC was selected for my top ten list because of its market dominance in the network storage and cloud computing markets. EMC also owns 80% of publicly traded VMWare (NYSE:VMW).

What’s Ahead: EMC’s ownership of VMWare gives the company great value as sometimes the stake is not price in as shares of VMWare rise. I think the company can gain momentum as network storage picks up and shares could see a nice 2012 climb.

Recommendation: BUY

hhgregg (NYSE:HGG)

Start: $20.95

End: $14.45

Performance: -31%

52 Week: $8.88-$22.75

Why I Picked: The growth of stores being built led me to select this company for the list. I wish that I would not have come across the company as it was a horrible performer in 2011 and likely will be in the future. I predicted the company could take the vacancy left by Circuit City, but it seems the company right now is closer to the same path of the once large electronics store rather than replacing it.

What’s Ahead: The stock looks like a value down here and has had a nice gain since lows a couple of months ago. It appears the company is headed the same direction as Circuit City and Best Buy (NYSE:BBY) as it tries to compete with large online retailers like Amazon (NASDAQ:AMZN). Customers are not that worried about seeing items in person or testing them out before buying them when they have so many options available on the internet. Jim Cramer recently called the hhgregg a broken company. I don’t think the company is broken but I don’t believe the growth of stores will solve the company’s low margins or customer bases.

Recommendation: SELL

PriceSmart (NASDAQ:PSMT)

Start: $38.03

End: $69.59 + $0.60 in dividends = $70.19

Performance: +85%

52 Week: $31.20-$78.71

Why I Picked: With 28 large warehouse stores in Latin and South America, I saw the potential for strong growth and liked the company’s plans to open two stores. One of the new stores was opened in Colombia, the company’s first in the country. I pointed out the company as a buyout target of Wal Mart (NYSE:WMT) or Costco (NASDAQ:COST) and continue to believe that is a possibility.

What’s Ahead: The company recently acquired land in Colombia for its second store in the South American country. I think PriceSmart has room to put 8-10 stores in Colombia over the next five years.

Recommendation: BUY

Sirius XM Radio (NASDAQ:SIRI)

Start: $1.63

End: $1.82

Performance: +12%

Why I Picked: I pegged this stock I own in my portfolio to have a great 2011 thanks to the signing of a new NFL deal, and a renewal with Howard Stern.

What’s Ahead: The company faces strong competition from Pandora (NYSE:P) and other radio companies. I think shares are a huge bargain due to the large subscriber base, increasing lowered debt, increasing free cash flow, ability to raise prices, and introduction of Sirius 2.0. However, shares will see large pops and drops throughout the year as the company is one of the most frequently traded stocks on the market.

Honorable Mention Stocks

Boeing (NYSE:BA)

Start: $65.26

End: $73.35 + $1.68 = $75.03

Performance: +15%

Recommendation: BUY

Coach (NYSE:COH)

Start: $55.31

End: $61.04 + $0.83 = $61.87

Performance: +12%

Recommendation: BUY

Discovery Communications (NASDAQ:DISCA)

Start: $41.70

End: $40.97

Performance: -2%

Recommendation: BUY

Fortune Brands (NYSE:BEAM) (NYSE:FBHS)

Start: $60.25

End: $51.23 + $0.57 = $51.80 BEAM, $17.03 FBHS = $68.83

Performance: +14%

Recommendation: FBHS-HOLD, BEAM-BUY

LivePerson (NASDAQ:LPSN)

Start: $11.30

End: $12.55

Performance: +11%

Recommendation: BUY

Madison Square Garden (NASDAQ:MSG)

Start: $25.78

End: $28.64

Performance: +11%

Recommendation: BUY

Smart Technologies (NASDAQ:SMT)

Start: $9.44

End: $3.69

Performance: -61%

Recommendation: HOLD

First off, if you’re still reading this article after seeing my horrible picks for the year, thank you. We learn a lot over time from the markets and it seems my streak of dominating the market could not be continued. I picked stocks that I believed were undervalued and it seems the market and investors disagreed. Overall I selected eight losers and two winners. For the first time in three years I did not produce a positive return on the selections. This was also the first year that one of my stocks did not increase over 100% as 2009 saw three selections with DNDN, GLW, and IMAX. In 2010, Netflix (NASDAQ:NFLX) was my double bagger with a return of 219%.

The overall performance for 2011 was -113% for an average return of -11.3% for each top pick. The honorable mention selections fared better with five winners and two losers but were ultimately brought down to an average gain of 0% due to the large fall by Smart Technologies.

I think shares of many of the companies listed still offer value which is why for the first time I have left recommendations of what to do with shares for 2012. I own shares of Sirius and likely will for the long term as I think the company remains undervalued. I will also put Dreamworks Animation back on the list for 2012 and would like to buy shares this year as I have believed in the company for several years and think this is the year to do so.

Overall Performance:

2009: 10 Winners 0 Losers, +999% Total Return, Average 99.9%, Three Double Baggers

2010: 8 Winners 2 Losers, +329% Total Return, Average 32.9%, One Double Bagger

2011: 2 Winners 8 Losers, -113% Total Return, Average -11.3%

Disclosure: I am long IMAX, SIRI.