In 2015, we tracked the performance of stock portfolios selected by Oakmark Funds, Jefferies, Forbes, Fidelity, Fortune, Farr/Miller/Washington, Barron's, William Blair, Needham & Company, Kiplinger, Goldman Sachs, RBC Capital Markets, Motley Fool, TheStreet, Dorfman, Sabrient Systems, Vickrey Brown, USA Today's investment Roundtable and several others.
Oakmark Fund's portfolio took first place with a 12.24% gain in 2015, beating out second place Jefferies' portfolio which had a market beating 9.59% gain. Oakmark Funds, along with RBC Capital Markets, also managed to pick the best performing stock selection; Amazon.com (NASDAQ:AMZN) with an impressive 116.23% gain. (See chart below).
Sabrient Systems impressive track record, with their annual "Baker's Dozen" portfolios failed to beat the market this past year with a 3.26% loss, but has still convincingly beaten it over the past seven years with their quantitative GARP (growth at a reasonable price) method. Their 2016 "Baker's Dozen" selections will be made known around the 15th of the month.
Seeking Alpha contributor, Varan, devised a portfolio based on selecting the 12 best performing stocks from the NASDAQ 100 which just beat the Nasdaq (NASDAQ:QQQ) performance and was only topped by 3 other portfolios. He also had a hedged version with the same 12 stocks but with the inclusion of a bond ETF which also performed well, beating the S&P 500 (NYSEARCA:SPY). For 2016 Varan has added an "Elite Aristocrats" portfolio based on dividend paying stocks. The selection criteria for this portfolio will be added to dark-liquidity.com shortly.
Our AAII SI Pro selections ended the year with a 1.02% loss, which was just enough to beat the S&P 500 (SPY) ETF for the third year in a row. It also beat 18 other professional portfolios but not the Nasdaq (QQQ) which had a 7.8% gain. The AAII SI Pro portfolio was made by running all the stock recommendations for 2015 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 worst performing stock selection for 2015 was Horsehead Holding Corporation (ZINC) selected by Kiplinger which lost 87.12% of it's value, a victim of declining commodity prices.
(See chart below)
The two worst performing portfolios were Credit Suisse's which lost 32.47%, and an amalgamated portfolio with selections by 'The Buyback Letter', Motley Fool's Insider Value and Investment Quality Trends which lost 29.34%.
The chart below shows the week by week performance of the portfolios tracked.
Overall, only 4 of the 22 professional portfolios beat the S&P 500, showing how difficult it is to pick a portfolio of individual stocks expected to beat the market one year out.
For 2016, we have compiled 430 stock, ETF and fund recommendations (including a few shorts) from Fortune, MKM Partners, Barron's, Goldman Sachs, TheStreet, Jefferies, Dan Dorfman, Farr, Miller & Washington, Motley Fool, Kiplinger, USA Today's Roundtable, RBC Capital Markets, Forbes, Piper Jaffray, Barclays, JP Morgan, Merrill Lynch, FBR Capital Markets, T.Rowe Price, Edward Jones and several groups of investment professionals. You can see all the recommendations and links to the original source articles here.
The most popular stocks for 2016 selected by four or more investment professionals are shown below:
Before you load up on these, take a look at the most popular stock selections for 2015 below;
and how they performed (below);
The average performance of all 269 stock pro selections for 2015 was a loss of 8.31%, which was well below the performance of the S&P 500 as represented by the ETF , which lost only 1.22%. The average performance of the 13 most popular stocks for 2015 shown above was a loss of 10.79%. So, consensus among professional stock pickers does not guarantee market beating performance.
The AAII SI Pro portfolio for this year is selected from 430 professional stock recommendations, whittled down to 307 stocks after removing duplicate recommendations, and then running them through the following best performing screens over the past 3 years;
1. O'Neil's CAN SLIM Revised 3rd Edition (3 year: 42.5% annual return, 1 year: 36.6%)
The CAN SLIM approach seeks companies with a proven record of quarterly and annual earnings and sales growth showing strong relative price strength and support from leading institutions. This screen produced two passing companies and none coincided with the pros' choices. For the record, the stocks are:
The passing criteria for this screen are:
- The growth rate in earnings per share from continuing operations between the last reported fiscal quarter (Q1) and the same quarter one year prior (Q5) is greater than or equal to 20%
- The growth rate in earnings per share from continuing operations between the last reported fiscal quarter (Q1) and the same quarter one year prior (Q5) is greater than the growth rate in earnings per share from continuing operations between the reported fiscal period two quarters ago (Q2) and the same quarter one year prior (Q6)
- The growth rate in sales between the last reported fiscal quarter (Q1) and the same quarter one year prior (Q5) is greater than 25%
- Earnings per share from continuing operations for the last reported fiscal quarter (Q1) is greater than zero (is positive)
- Earnings per share from continuing operations for the last trailing 12 months (last four fiscal quarters) (12m) is greater than earnings per share from continuing operations for the last reported fiscal year (Y1)
- Earnings per share from continuing operations for the last fiscal year (Y1) is greater than earnings per share from continuing operations from two fiscal years ago (Y2)
- Earnings per share from continuing operations from two fiscal years ago (Y2) is greater than earnings per share from continuing operations from three fiscal years ago (Y3)
- Earnings per share from continuing operations from three fiscal years ago (Y3) is greater than earnings per share from continuing operations from four fiscal years ago (Y4)
- The consensus earnings estimate for the current fiscal year (Q0) is greater than fully diluted earnings per share from continuing operations for the last reported fiscal year (Y1)
- The compounded, annualized growth rate in earnings per share from continuing operations over the last three years is greater than or equal to 25%
- The current stock price as a percentage of its 52-week high is greater than or equal to 90%
- The percentage rank for relative strength over the last 52 weeks is greater than 80
- There are at least 10 institutional shareholders
- The number of shares purchased by institutions over the last quarter is greater than or equal to the number of shares sold by institutions over the last quarter
2. Price-to-Free-Cash-Flow (3 year: 35.6% annual return, 1 year: 7.7%)
This screen is value oriented and looks for companies with positive and consistent free cash flow and reasonable stock valuations. This screen produced a total of 257 passing companies of which the following 21 were in the pros' choices:
- Apple (NASDAQ:AAPL)
- The Boeing Company (NYSE:BA)
- Cognizant Technology Solutions (NASDAQ:CTSH)
- Citrix Systems (NASDAQ:CTXS)
- Delta Airlines (NYSE:DAL)
- Ester Lauder Cos. Inc. (NYSE:EL)
- Gilead Sciences (NASDAQ:GILD)
- International Business Machines (NYSE:IBM)
- JAZZ Pharmaceuticals (NASDAQ:JAZZ)
- Kennametal Inc. (NYSE:KMT)
- Lear Corp. (NYSE:LEA)
- McKesson Corp. (NYSE:MCK)
- NeuStar Inc. CI A
- Outerwall Inc. (NASDAQ:OUTR)
- Perrigo Co. PLC (NASDAQ:PRGO)
- J.M.Smucker Co. (NYSE:SJM)
- Seagate Technology PLC (NASDAQ:STX)
- Teva Pharmaceuticals Industries Ltd. ADR (NYSE:TEVA)
- TreeHouse Foods Inc. (NYSE:THS)
- Trimble Navigation Ltd. (NASDAQ:TRMB)
- Time Warner Inc. (NYSE:TWX)
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
Remember that all the stocks selected are done so purely on the screening criteria noted above. The portfolio does not consider whether it is diversified, how a strengthening US dollar or weakening oil price might affect earnings, or whether Apple is expected to have a new product launch in 2016 or the current state of the Chinese stock market.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.