My Best (and WORST) Investment Calls So Far in 2012

by Jeff Reeves | August 30, 2012 6:30 am

A month or two ago, I penned an article with the headline, “Forget Uncertainty: TRUST Is the Big Issue for Investors.”[1]  I believe wholeheartedly in the notion that the market should be accessible and reasonable fair (excluding obvious advantages of means and skill) for everyone.

As such, I think it’s only honest to share regular updates on my personal track record with readers. While the majority of my writing is more journalistic in nature, focused on the trends creating opportunities and risks in a broad sense, I do like to weigh in regularly with clear “actionable” advice.

And while I’ve made some profitable calls, I’ve also made some stinkers.

Without an exhaustive track record for proof, my informal take is that I’m better than breakeven but hardly outperform the market. That doesn’t surprise me, as underperformance is par for the course among active fund managers[2]. So readers should remember the Jack Bogle philosophy[3] of just buying the market with low cost and low stress via an indexed fund.

Of course, if you’re reading this, it’s probably because you have an “itch” for investing and yearn for ideas that will help you beat the market. Me too — and we’ll get to some of the best picks I’ve made this year that I hope your shared in. But first, let’s cover my worst calls that I sincerely hope you thought better of …

Worst Calls So Far in 2012

WORST BY FAR — Over 100% Loss in Sears Screw-Up

In January[4], I panned Sears (NASDAQ:SHLD[5]) as a possible short candidate. Well, that was quite a crowded trade — and the resulting short squeeze caused the stock to more than double by March.

For anyone familiar with short-trading, this is an epic fail. Because while your losses going long are limited to 100% as a stock goes to zero, your downside on a short can be infinite if a stock keeps going up. Thus, I literally could not have been more wrong had I picked a stock that went bankrupt.

TRIPLE FAIL — Buying a Top in Blue Chips

I thought I would be clever[6] in the run-up to March Madness and highlight some “triple threat” blue chips. The factors I looked at were dividends/cash, share performance and growth potential. Sounds good, right?

Well, the screen identified Intel (NASDAQ:INTC[7]), Caterpillar (NYSE:CAT[8]) and McDonald’s (NYSE:MCD[9]) as the “best” buys. But while the S&P is up almost 3% since publication, all of these picks are dramatically in the red. The worst, CAT, is down almost 27%.

ALMOST AS BAD — Run Screaming From My “Screaming Buys”

Also in January[10], I picked three cheap stocks under $10 that were “screaming buys.” Instead, I hope you ran screaming from the picks, which included Wendy’s (NASDAQ:WEN[11]) and SandRidge Energy (NYSE:SD[12]).

I was hoping for a turnaround in Wendy’s to gain momentum, as well as some firming up in energy prices. Wrong on both counts, and both stocks have fallen around 20% as the S&P 500 picked up about 8% since publication.

My third pick, LSI Corp. (NYSE:LSI[13]) tracked the market … not as bad as the triple-threat flops, at least.

SHAMEFUL PANDERING — Gas Goof

In February[14], I bought into the hype about increasing demand and rising commodity costs, penning one of those shamefully clicky articles about $5 gas. Anyone who has filled up their car in the last few months should know how wrong this call has been.

But hey, aren’t you glad I was so wrong?

Next up, the best calls.

Best Calls So Far in 2012

BEST CALL — Yes, This Was REALLY Better Than Apple

In March[15], I wrote an article about how to buy Apple (NASDAQ:AAPL[16]) stock without buying Apple itself. After all, there were no shortage of bulls on the tech giant earlier this year, so I looked around for options.

Most of the seven picks in this article tracked the market, but one — Cirrus Logic (NASDAQ:CRUS[17]) — has soared an incredible 80% since publication.

I’ll admit it’s a tired convention of financial sites to call out the “next Apple.” But this time I managed to identify a real tech stock that actually did outperform the Cupertino Colossus.

OBVIOUSLY — Beating the Drum on Apple

In January, I wrote about 5 $200-plus stocks worth every penny[18]. The entire list is in the green year-to-date, led by Apple, which has soared 67%, and Priceline.com (NASDAQ:PCLN[19]), which is up 28%.

But I never stopped beating the drum on Apple — twice in March (amid the spring iPad event[20] and again here[21] in the days after) and once in April[22] after a pullback below $600.

Yes, it’s a crowded trade. Yes, everyone knows about Apple’s performance. But you can’t argue with the success here — and since I took my own advice and bought the stock early in the year, I am pretty proud of this trade despite its popularity.

WELL-TIMED WARNINGS — Chipotle, GMCR and the Spring Pullback

Not surprisingly, my worst calls came earlier in the year when I was giddy about the market being back in bull mode. But as the rally started to unravel, I took off the rose-colored glasses and got realistic. Thus, some of my better calls in 2012 were bearish ones made in the spring.

Green Mountain (NASDAQ:GMCR[23]): In March[24], I warned of trouble with expiring Keurig patents, critical mass and increased competition. GMCR has tanked 60% since.

Chipotle (NASDAQ:CMG[25]): In April[26], I drew a connection between China and Chipotle. Namely, it was a problem of expectations, not of growth. The commentary proved to be right on as CMG crashed 30%[27] in its next earnings report after this article was published.

Hewlett-Packard (NYSE:HPQ[28]): I have been hating on HP for a long time, ever since I said it embodied the worst of corporate America[29] in 2011. I have kept panning the stock this year, in the spring here[30] and here[31] and most recently after its ugly earnings[32]. The stock is off almost 35% this year.

Bearish ETFs for Big Profits: Lest you think I was only warning of trouble, I also pitched a short-term profit strategy[33] with bearish ETFs in March. All three of the vehicles posted gains across the next 60 days as the S&P dropped 5% — with the best performer, the AdvisorShares Active Bear ETF (NYSE:HDGE[34]), tacking on a 17% gain.

Please note: I am not much of a day trader, and fancy my ideas as mid-term to long-term advice. As such, this only includes articles older than 60 days to give more recent advice time to prove (or disprove) my thesis.

And a final word of advice: I strongly advise you read every one of my articles — and everything you find on sites like InvestorPlace.com, Seeking Alpha, TheStreet, Motley Fool and others — with great skepticism and an independent point of view. I strive to deliver high–quality advice, as do my peers, but never invest just because some idiot with a blog told you to.

Otherwise, you might wind up on the losing end of my next Sears trade. And trust me, there will be another.

After all, failures are part of being an active investor. Hopefully by sharing my own successes and failures on this site, you learn a thing or two about risks and opportunities in the market.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.”[35] Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

Endnotes:
  1. “Forget Uncertainty: TRUST Is the Big Issue for Investors.”: http://investorplace.com/2012/07/forget-uncertainty-trust-is-the-big-issue-for-investors/
  2. underperformance is par for the course among active fund managers: http://investorplace.com/2012/03/actively-managed-mutual-funds-underperform/
  3. Jack Bogle philosophy: http://investorplace.com/2012/08/10-lessons-for-investing-from-vanguard-icon-jack-bogle/
  4. In January: http://investorplace.com/2012/01/stocks-set-to-crash-sell-recommendation/view-all/
  5. SHLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=SHLD
  6. I thought I would be clever: http://investorplace.com/2012/02/3-triple-threat-blue-chips-to-snap-up/view-all/
  7. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  8. CAT: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAT
  9. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD
  10. Also in January: http://investorplace.com/2012/01/3-under-10-stocks-that-are-screaming-buys/view-all/
  11. WEN: http://studio-5.financialcontent.com/investplace/quote?Symbol=WEN
  12. SD: http://studio-5.financialcontent.com/investplace/quote?Symbol=SD
  13. LSI: http://studio-5.financialcontent.com/investplace/quote?Symbol=LSI
  14. In February: http://investorplace.com/2012/02/5-reasons-youll-see-5-gasoline-in-2012/
  15. In March: http://investorplace.com/2012/03/7-ways-to-buy-apple-without-buying-aapl/view-all/
  16. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  17. CRUS: http://studio-5.financialcontent.com/investplace/quote?Symbol=CRUS
  18. 5 $200-plus stocks worth every penny: http://investorplace.com/2012/01/5-expensive-stocks-worth-every-cent/view-all/
  19. PCLN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PCLN
  20. amid the spring iPad event: http://investorplace.com/2012/03/apple-stock-aapl-buy-ipad-3-event/
  21. here: http://investorplace.com/2012/03/4-reasons-why-apple-is-still-a-bargain/
  22. once in April: http://investorplace.com/2012/04/5-bargain-stocks-to-buy-on-the-pullback/
  23. GMCR: http://studio-5.financialcontent.com/investplace/quote?Symbol=GMCR
  24. In March: http://investorplace.com/2012/03/starbucks-single-serve-coffee-may-kill-green-mountain-sbux-gmcr-keurig-verismo/
  25. CMG: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMG
  26. In April: http://investorplace.com/2012/04/what-china-and-chipotle-cmg-have-in-common/
  27. CMG crashed 30%: http://investorplace.com/2012/07/chipotle-stock-crash-was-overdue-cmg/
  28. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  29. the worst of corporate America: http://investorplace.com/2011/08/hewlett-packard-hp-stock-buyback-autonomy-buyout-hpq/
  30. here: http://investorplace.com/2012/05/hpq-a-tech-dinosaur-fooling-nobody/
  31. here: http://investorplace.com/2012/05/hewlett-packard-hpq-latest-turnaround-doomed-to-fail/
  32. ugly earnings: http://investorplace.com/2012/08/hewlett-packard-no-steps-forward/
  33. a short-term profit strategy: http://investorplace.com/2012/03/feeling-bearish-try-these-3-inverse-etfs/
  34. HDGE: http://studio-5.financialcontent.com/investplace/quote?Symbol=HDGE
  35. “The Frugal Investor’s Guide to Finding Great Stocks.”: http://www.amazon.com/dp/B007KB9CSI/ref=rdr_kindle_ext_tmb

Source URL: http://investorplace.com/2012/08/my-best-and-worst-investment-calls-so-far-in-2012/
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