As 2011 winds down, we at InvestorPlace thought it would be a good idea to reflect on our good and bad calls this past year. It’s important that investment writers and anyone else in the media making recommendations, predictions or prognostications about investments keep themselves accountable, as investors sometimes act upon our collective words of wisdom.
Because I’ve only been contributing to InvestorPlace since the beginning of August, I think it makes more sense to discuss my best and worst calls from that month, providing a longer duration of time and a more accurately reflection of the quality — or lack thereof — of my calls.
Let me start with my most interesting call, Petrohawk Energy, which no longer trades on the New York Stock Exchange after an Aug. 25 acquisition by BHP Billiton (NYSE:BHP) for $15 billion. What makes it so interesting is that I was merely recommending existing shareholders immediately dump their stock, as a white knight wasn’t coming to the rescue. Class-action lawyers were simply revving up the billing machine at the expense of shareholders.
I made 17 sell recommendations in August and, on average, they’re down 3% through late December, while the S&P 500 is slightly up. Here are a few of my winners and losers:
- The biggest mover in either direction is Green Mountain Coffee Roasters (NASDAQ:GMCR), down 56%. I reasoned that the presence of momentum investor Richard Driehaus atop its major shareholder list was an indication its stock was overbought.
- My worst call is Rackspace Hosting (NYSE:RAX), up 28%. My opinion at the time was that RAX stock was trading at fair value given the competition in cloud computing. However, I did point out the existence of safer growth alternatives like Red Hat (NYSE:RHT), which is up 17% in the same time frame.
- My second sell recommendation that came through in August is Melco Crown Entertainment (NASDAQ:MPEL), an operator of casinos in Macau. With growth in China slowing, Macau’s dependence on the mainland is going to come back to haunt it both economically and politically. It seems Chinese government officials are resorting to theft to cover gambling debts, and this has led to greater casino oversight from Beijing. MPEL is down 22% since my call.
- My second-worst sell recommendation is American Tower (NYSE:AMT), the largest owner of cell towers anywhere. Its stock is up 19% since the article’s appearance in August thanks to a number of acquisitions, including paying $500 million for 2,500 towers in Mexico. My biggest concern with American Tower is its debt, and that hasn’t changed. AMT can only grow by piling on the debt, and that will come back to haunt it. Despite the move up, I’m unrepentant.
Accountability at InvestorPlace.com
“In the new year, I hope to continue some regular disclosures from all our InvestorPlace columnists as a way to show that we are giving recommendations in good faith and that we are not afraid to own up to our mistakes.
If you have any comments to share with our writers or have ideas on how we can best achieve some form of transparency, please send your thoughts to me at firstname.lastname@example.org.
We are a site run by investors, for investors, and we are in this together. It’s very important to me that all readers can trust our commentary — so please don’t hesitate to drop us a line.”
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.