Today is the best year of the day so far for stocks - and the stock market is not even open! But, since it's the only day so far, we thought we'd scan the web to see if we might find any potentially meaningful stock investment ideas. Since stock stories number in the gazillions, let's clarify what we mean by "meaningful:"
Numerous stock market stories, including - actually especially - those quoting big-name money managers, don't mention any stocks.
This story fresh out from Money gathers the thoughts of a very distinguished panel, including Rob Arnott (Research Affiliates), Sarah Ketterer (Causeway Capital), Jim Paulsen (Leuthold Group), Liz Ann Sonders (Charles Schwab), and Floyd Tyler (Preserver Partners), and contains some interesting analysis - but there is no mention of any individual securities for those who care about those details. Another example of the no-stocks-named genre can be found in the U.K.'s Telegraph, which interviews several British money managers on broad investing themes as the new year commences.
There are lots of potential reasons for this. The interviewees could be concerned about lead time - perhaps the interview was conducted long before its planned publication, and the managers didn't want to name names that seemed good to them, say, two weeks ago, but which might not hold up in the new year's rapidly changing markets.
Going on record is another factor - many big firms particularly don't allow their managers to name names that can adversely reflect on their firms if the stock doesn't do well. Other firms may take the view that their stock ideas are for paying clients only, and others may be concerned with regulatory compliance. Whatever the reason, famous money managers are quieter today than in years past.
Our search found the most stock mentions coming from publications based in India. This article from Luxura Leader, for example, names five stock picks from JP Morgan analysts thought most likely to outperform in 2018 as a result of trends in artificial intelligence. However, some further checking indicated that the client note containing these stock picks was referenced in other publications as much as one month earlier, so although the ideas are meant to have a yearlong shelf life, the ideas are less than fresh.
Then again, even fresh analyst ideas have their foes. Seeking Alpha contributor Jeff Miller had this to say in his own just-out analysis of markets in the new year:
Analyst stock ratings. Citigroup (NYSE:C) was fined my FINRA for sending false stock ratings to retail customers. Buy instead of Sell, for example. And vice-versa. The fine was $11.5 million. Wow! For the record, in my "Great Stocks" program I use analyst ratings as a contrary indicator, buying Apple (AAPL) when it was hated and selling when CNBC could not find a negative analyst to feature."
So was our search for fresh, out-of-the gate yet meaningful stock investing ideas fruitless? It was not - thanks to a Reuters story we found that names names which were themselves presented by genuine names in the investment management business.
Reuters reporter David Randall sought the opinion three small-cap money managers that achieved market-beating performance in 2017, a year in which many managers brought in absolute performance but fewer stood out in relative performance; (of course, every year has relative outperformers - the point is that in a year as strong as 2017 absolute performance alone doesn't make the cut).
Those managers included Kenneth Korngiebel (Wasatch Micro Cap); John Slavik (Loomis Sayles Small/Midcap Growth); and Stephen DeNichilo (Federated Kaufmann Small Cap).
Their picks? Well, not quite yet.
Managers with a record of performance is meaningful; naming names rather than just themes - that too is meaningful. But talking your book doesn't strike us as meaningful. The book may be great and the stocks may ultimately do well, but there is an inherent bias towards believing in what you already own. We're more impressed therefore with new acquisitions or adding to existing positions. Only two of the above-named managers did that in the Reuters story, and that is therefore what we will quote:
Korngiebel is adding to stocks like Japanese outsourcing company UT Group Co Ltd, whose shares are up 243 percent for the year to date, and which he expects to grow its revenue by more than 30 percent in the year ahead. He is also adding to his position in U.S.-based Tabula Rasa Healthcare Inc, which helps doctors screen for potential drug interactions. Shares of the company are up 97 percent in 2017.
The percentage of the population who take five or more medication is going up and adverse drug events are expensive and can lead to loss of life. What we see here is opportunity to take advantage of an under-covered company that is unique and meets a large need," he said.
Stephen DeNichilo, a portfolio manager of the $872 million Federated Kaufmann Small Cap fund, the 9th best small-cap fund this year....has a larger position overall in biotech companies, which have greater growth potential, he said. He has been adding to his position in Nektar Therapeutics, which is developing in abuse-proof opioid medication, and gene-therapy drug maker Spark Therapeutics Inc.
He also added a position in retailer Floor & Decor Holdings Inc shortly after its initial public offering in April as a play on consumer spending on home renovation.
You can evaluate yourself whether these ideas have merit, but they do seem meaningful, and worth watching in the new year.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.