At the end of last year, InvestorPlace kicked off a contest called Ten Best Stocks for 2012. In it, 10 stock market experts each picked a buy-and-hold investment they thought would deliver market-beating returns over the course of 2012.
The roaring first quarter set the bar pretty high, but things slowed down a bit in Q2. At the midway point, seven of the picks were in the black, and four were topping the S&P 500’s performance.
The third quarter was also tough, though. Now, just six companies have made gains since January, while only the top four are ahead of the Dow’s 10% gains and the S&P 500’s 14% gains. Only two stocks didn’t budge from their spot at the halfway point.
With that in mind, let’s take a look at how the picks stack up heading into the final quarter. Here’s a recap of InvestorPlace‘s Ten Best Stocks for 2012:
No. 10: MAKO Surgical
Q3 Return: -32%
YTD Return: -31%
Investor: David Gardner
The higher you climb, the higher you have to fall; little-known MAKO Surgical (NASDAQ:MAKO) knows this better than anyone.
The company actually sat atop this list after the first quarter, then dropped nearly 40% in Q2 to sixth place. In Q3, it crumbled further, with 32% losses that kicked it all the way to last place.
Shares especially took a hit last quarter when the company posted another loss — one that widened from the year before. Revenue did grow by double digits, but higher operating costs and expenses offset that silver lining, and investors continued to flee.
MAKO, of course, was a volatile play to begin with. This small-cap, niche medical company was banking on a narrow product line: MAKOplasty procedures. That’s why any pick like MAKO is high-risk, high-reward.
At the beginning of the year, though, it looked like the scales were tipping toward the “high-reward” side of that dichotomy. Heading into the last quarter, the opposite is true.
No. 9: Arcos Dorados
Q3 Return: +4%
YTD Return: -25%
Investor: Josh Brown
The good news is that Arcos Dorados (NYSE:ARCO) — the largest McDonald’s (NYSE:MCD) franchisee in the world, operating primarily in Latin America — did see gains in Q3 and moved up a spot in the rankings.
The company got a boost following its Q2 earnings report, as news of organic revenue and same-store sales growth sent shares up around 15%.
The bad news is that the company has still lost around a quarter of its value since January.
ARCO has struggled in the wake of slowing consumer spending in Brazil, for example — something Brown didn’t foresee when he recommended the company. Plus, ARCO’s management team is been unable to control expectations, the political situation in some of the countries ARCO operates has grown shakier and a negative currency exchange has taken its toll.
Still, Q3 was a silver lining for these golden arches and could be just the bump ARCO needs to reach its clear potential. In terms of this contest, though, the company seems to be running out of time.
No. 8: Caterpillar
Q3 Return: +1%
YTD Return: -5%
Investor: Dan Burrows
Caterpillar (NYSE:CAT) didn’t budge from its third-to-last spot at the end of Q3, as its 1% gains were hardly gains at all.
Such good news was overshadowed by general fears of a global slowdown — fear that was trumping fundamentals, as Dan Burrows put it.
Now, though, that fear seems pretty justified. Most recently, the company made headlines when it lowered its 2015 forecast because it expects “fairly anemic and modest growth” until then.
Still, Burrows remains convinced that the world’s largest maker of construction and mining equipment is still a good long-term buy (the next three to five years), thanks to its bargain valuation and the fact that demand just can’t stay low forever.
Unfortunately, the contest is called Top Stocks of 2012 — and CAT simply doesn’t seem to be one of them.
No. 7: Banco Santander
Q3 Return: +14%
YTD Return: -1%
Investor: Jim Jubak
Banking on Spain coming into 2012 seemed a bit risky, considering all the drama that’s been unfolding in the eurozone.
But in the past few months, Jim Jubak’s Banco Santander (NYSE:STD) has indeed done well. In fact, STD takes the silver medal in the third quarter alone for its double-digit gains.
Shares of the company moved downward slightly in the beginning of July, but have been on a steady upward trend ever since — possibly as a result of Mario Draghi’s bond-buying announcement.
As with others sitting in the back half of the race, though, the short-term rally wasn’t enough to offset the tough reality of the year overall. Even with last quarter’s jump, the company still hasn’t been able to claw back into the black.
On top of that, Banco saw double-digit gains in the first few months of 2012, then a drop offset that climb soon after. Will the fourth quarter also erase the company’s solid Q3 — or if can it build on the latest rally for a last-minute comeback?
No. 6: FedEx
Q3 Return: -8%
YTD Return: +1%
Investor: Paul R. La Monica
La Monica liked FedEx off the bat because it is a fundamentally strong, low-risk stock. Unfortunately for FedEx and its advocate, that hasn’t been enough to offset the reality that the global economy is weak.
So weak that FedEx — a key global economic bellwether and the second-largest delivery company after UPS (NYSE:UPS) — lowered its Q1 earnings forecast last month. The result: a fall totaling 8% for the past three months, plus a drop of two spots for the contest.
With that in mind, the company should be pretty happy with its measly 1% gains for the year. And the latest sell-off could actually be a nice buying opportunity, for the long haul at least.
But that’s what all the losers seem to be saying.
No. 5: Alcoa
Q3 Return: +1%
YTD Return: +2%
Investor: Jeff Reeves
It’s been an up-and-down year, but Alcoa (NYSE:AA) could be perfectly poised for a fourth-quarter run to shake up the standings. The company broke into the top five with a two-spot gain over the last three months.
It hasn’t necessarily been pretty, though. Even recently, Alcoa has struggled, facing an 18% drop in “realized prices” during Q2 for a whopping 50% price drop over the past year.
But, as InvestorPlace Editor Jeff Reeves told us, investors already have baked in the low prices for aluminum — and they have low expectations for the company. Plus, the current low prices also confirm his original thesis: Aluminum prices and demand have no where to go but up.
All of it could mean the perfect storm for Alcoa — unless the usual woes of the global economy that FedEx warned about prove Reeves’ prediction wrong.
Disclosure: Jeff Reeves owns a personal position in Alcoa stock.
No. 4: Microsoft
Q3 Return: -3%
YTD Return: +15%
Investor: James Altucher
James Altucher is a strong believer in Microsoft (NASDAQ:MSFT), as he picked it for two straight years.
The results seem to show why. Even despite the recent slide of its shares — a 3% loss in Q3 — the company still has solid 15% gains and a substantial lead over the trailing picks.
Still, that recent slide did kick it back two spots. At the end of Q2, the tech giant was sitting pretty in second place. The fall in shares and ranking came despite news that the company hiked its dividend.
Maybe investors have realized that Microsoft is basically nothing more than a utility and has little to no prospects for growth.
Or maybe being a steady utility is just the kind of consistency that will be needed to win this contest.
No. 3: Hershey
Q3 Return: -2%
YTD Return: +15%
Investor: Jon Markman
Sweet stock Hershey (NYSE:HSY) held onto its bronze-medal spot through Q3 — but just barely. The company edged out Microsoft with slightly slimmer losses in the third quarter.
Does this mean Hershey could be set up for a final bolt to the top? Maybe, considering it remains the leader in the North American chocolate market with 43% of sales and also pays out an appealing steady dividend.
But while Markman continues to be bullish on the stock, calling its results “hard to argue with,” those impressive third-place gains are still less than half the gains of the leader.
So, while Hershey’s performance definitely deserves a nod, it still needs to sell a few more Reese’s and Kit Kat bars if it wants to be No. 1.
No. 2: Turkcell
Q3 Return: +21%
YTD Return: +29%
Investor: Charles Sizemore
Charles Sizemore, editor of the Sizemore Investment Letter, has watched his pick just keep on moving up. Turkcell (NYSE:TKC) gained one spot in Q2, then climbed three more in Q3 for a solid second-place standing.
That leap came thanks to outsized 21% gains — the best of all expert picks — in the past three months. And it happened despite the soap opera drama surrounding the company.
Sizemore remains sure, though, that the main boardroom dispute will soon be resolved — and that such a resolution should result in the dividend getting paid again, which would boost the stock even further. Heck, maybe even boost it to first place.
Even without the dividend, this conservative way to play the emergence of Turkey and its up-and-coming middle class has been a winner so far — and is indeed a contender for the final first-place title.
No. 1: Capital One
Q3 Return: +4%
YTD Return: +35%
Investor: Philip van Doorn
TheStreet.com contributor Philip van Doorn is probably getting pretty comfortable in the top spot, having been there for half the year.
Heading into Q4, Capital One (NYSE:COF) is ahead by double digits with impressive 35% returns — more than triple the Dow’s and more than double the S&P 500’s.
The company should be set to move up even more as well. It was busy with acquisitions in the second quarter — buying ING Group‘s (NYSE:ING) ING Direct for roughly $9 billion and HSBC‘s (NYSE:HBC) roughly $30 billion U.S. credit card portfolio. Both deals should give earnings a nice boost.
It looks like van Doorn was right on the money when he said not only that financials weren’t looking all that bad, but that smaller banks like Capital One were ready to soar.
He just has to be right for one more quarter — then he’s home free with the imaginary trophy.
Plenty of other stocks are hoping for a Q4 rally to steal the title — but there can be only one champion. Stay tuned to see how the final lap unfolds.