Happy halfway point, investors!
The second quarter of 2013 has come and gone, making it again time to take a quick look at InvestorPlace‘s 10 Best Stocks for 2013 contest.
For those who aren’t familiar with our contest, this annual showdown is a list of expert-picked buy-and-hold investments meant to provide an entertaining race to first place for spectators … and market-beating returns for investors.
So far, though, that second part isn’t going quite as planned. Only two are sitting ahead of the S&P 500‘s total return, while — as was the case at the end of Q1 — the bottom three are downright ugly.
Still, more than half the picks have at least eked out gains so far this year … and we still have another six months of moving, shaking and (hopefully) soaring to go.
With that in mind, let’s see how InvestorPlace’s 10 Best Stocks for 2013 stack up at 2013′s midway point:
Q2 Return: -24%
YTD Return: -35%
Investor: Stephanie Link
Stephanie Link’s pick of Vale (VALE) — the world’s largest producer of iron ore — has been on a pretty steady race to the bottom so far this year. In fact, the stock’s already hefty Q1 losses have doubled during the past three months, with a nearly 29-cent payout in April far from covering for VALE’s awful decline.
One reason for Vale’s struggles: Iron ore prices have been just plain ugly. The commodity has lost a quarter of its price in the past three months — which is especially troublesome since Vale is facing slipping production as it is.
Such a reality translated to an earnings drop of 10% in the first quarter and a revenue slide of 5% … along with this last-place spot at halftime of our contest.
#9: Global X FTSE Greece 20 ETF
Q2 Return: +4%
YTD Return: -14%
Investor: Mebane Faber
Mebane Faber’s pick of the Global X FTSE Greece 20 ETF (GREK) wins the “Roller Coaster Award” so far in 2013.
Faber was looking like a genius about a month ago when the beaten-down fund reversed course, gained back all its losses and continued to surge. By mid-May, GREK’s year-to-date return was a market-beating 18%.
However, after hitting a 52-week high on May 17, GREK shifted into reverse, eating away all those gains and more. A few likely factors in the selloff: continued political instability and index-provider MSCI Inc.’s (MSCI) downgrade of Greece to emerging-market status.
Now, the ETF’s losses come to 14% — a tad better than the bleeding at the end of Q1, but hardly anything to cheer about. Then again, that’s how deep in the red ninth-place contest pick Banco Santander (SAN) was sitting a year ago, and it rallied back to snag the bronze.
#8: Great Lakes Dredge & Dock
Q2 Return: +16%
YTD Return: -14%
Investor: Greg Harmon
The good news is Greg Harmon’s pick of Great Lakes Dredge & Dock (GLDD) isn’t in last place anymore.
The bad news: It’s still two digits into the red, and only two spots better.
That’s especially painful considering that GLDD burst out the gates this year, beating the broader market until it fell off a cliff in early March.
The sudden change in direction came after the company disclosed an accounting error and said it would have to restate earnings for the second and third quarters of 2012. The company also is facing a class-action lawsuit as a result of the error and subsequent selloff.
That’s a tough turn of events for Harmon, who was banking on the dredging company’s technical strength. Even though the stock was the biggest Q2 gainer overall, the chart now is anything but pretty.
Q2 Return: -9%
YTD Return: Flat
Investor: Paul R. La Monica
For Qualcomm (QCOM), the race is just starting. While the tech stock chosen by Paul R. La Monica was sitting pretty in fourth place at the end of the Q1, an 8% slide in the second quarter has put QCOM back to flat.
Although the chip-set maker posted record earnings back in April — and did so after boosting its dividend 40% and authorizing more buybacks in Q1 — it also posted a weaker-than-anticipated outlook for third-quarter earnings.
Investors immediately got skittish.
Still, that could be good news for anyone looking to get into a company perfectly poised to cash in on the growth of smartphones and tablets. QCOM is a trading at a reasonable forward P/E of 13 once again — one of the original reasons La Monica recommended it six months ago.
#5 (tie): Femsa
Q2 Return: -9%
YTD Return: +3%
Investor: Jon Markman
Jon Markman — a contest veteran — started off the year strong. His pick of Mexico-based Fomento Economico Mexicano (FMX) — commonly known as Femsa — was the leader a month in, then slightly slipped to second by the end of Q1.
After hitting a 52-week high in mid-April, though, the stock started to pull back. And when the company reported worse-than-expected bottom-line results for Q1 2013 not long after, things only got worse. Factoring in its May dividend, FMX’s first-half total return is a mere 3%.
It’s been regaining some momentum lately, though. FMX improved by 10% last week — and could be set to keep going if Markman is right about the company’s strong prospects for growth.
#5 (tie): Two Harbors
Q2 Return: -18%
YTD Return: +3%
Investor: Steve Freehill
Matching Femsa’s meager gains is Two Harbors (TWO) — another one-time leader. In fact, the mortgage REIT — chosen by InvestorPlace reader Steve Freehill — was actually doubling the second-place contender early on in the contest.
As was the case with FMX, though, Q2 was anything but kind to TWO.
And in this instance, Ben Bernanke is to blame.
See, Freehill chose Two Harbors for what he said was one big reason: its eye-popping yield. The stock’s dividend currently makes for a 12% yield — and it wasn’t anything to sneeze at before the selloff, either.
With rising rates and increased fear of tapering, though, investors have been fleeing mREITs and other income-yielding investments in droves. TWO is just one of many causalities.
Q2 Return: +7%
YTD Return: +14%
Investor: Rick Pendergraft
Mylan (MYL) is proof that sometimes, slow and steady is the way to go. The stock was hanging around in sixth place at the end of the first quarter with a decent 5% climb.
Unlike some of the previous picks, though, it actually kept on climbing. In fact, Mylan’s total return is just behind the broader market’s — and that’s good enough for a fourth-place halftime finish.
The pharma company — chosen by Rick Pendergraft for its strong technicals and fundamentals — gained momentum in early May after reporting a 19% year-over-year improvement in earnings and maintained its outlook. It also has made more recent headlines for launching a generic version of Viagra in 11 European countries.
If the good news keeps coming, Pendergraft might just be proved correct in his hypothesis of 30% upside.
Halfway through the year, he’s basically halfway there.
#2 (tie): Daimler
Q2 Return: +11%
YTD Return: +15%
Investor: Charles Sizemore
Luxury automaker Daimler (DDAIF) is one of our first market-beating picks, tallying up a total return of 15% so far this year even after some recent weakness, putting it in a tie for second place.
And contest veteran Charles Sizemore definitely thinks Daimler still has plenty of room to run.
Even when the stock was at a 52-week high, Sizemore still wrote that it was not just a buy, but a bargain. The German company has been priced for zero growth thanks to weakness in Europe, as seen of late, but the luxury car market has remained solid.
Daimler’s profit outlook is improving, and demand for its redesigned S-Class — the high-end flagship model — has been strong. For the cherry on top, the Mercedez-Benz car-maker has also been cutting costs of late — and doing so faster than it originally expected.
#2 (tie): Sherwin-Williams
Q2 Return: +5%
YTD Return: +15%
Investor: Louis Navellier
Inching ahead of Daimler is Louis Navellier’s “recession-proof” pick of Sherwin-Williams (SHW). While Sherwin-Williams has a solid track record when the economic landscape is bleak — part of the reason Navellier picked it in in the first place — it does even better when the housing market is booming.
And booming it has been.
That reality — combined with the company’s big-time acquisition of a Mexican paint company late last year — helped the company post record net income and sales in the first quarter, and is why SHW is expecting another 20% earnings improvement for Q2.
Of course, many think the housing market’s hot run simply cannot continue in the second half of the year. The question is whether SHW will slow down with it.
Q2 Return: +11%
YTD Return: +20%
Investor: Jeff Reeves
InvestorPlace Editor Jeff Reeves squeezed into the top five after the first quarter, then kept on climbing to the very top in the months that followed.
The pick behind the outperformance: not-so-sexy tech staple Intel (NASDAQ:INTC). After what Reeves described as “two painful showing in this annual stock-picking contest,” he purposely went with “a stable and undervalued blue chip instead of a long shot.
So far, the strategy has been working. Investors began piling into the dividend stock back in April, when Intel reported PC sales that didn’t plummet quite as dramatically as many were expecting in Q1.
Things have cooled off in the past month, but not dramatically considering the general flee from income stocks … and not enough for Intel to relinquish its six-month crown.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.