by Alyssa Oursler | September 30, 2013 8:58 am
Boy, does time fly.
It feels like yesterday that we were marveling at the fact that the year, and thus InvestorPlace‘s 10 Best Stocks for 2013 contest, was already halfway over. Now we’re heading into the homestretch.
For those who aren’t familiar with our Best Stocks contest, it’s an annual showdown where experts pick stocks to buy and then hold for all of 2013.
So far this year, it has been an entertaining race — though it hasn’t produced the market-beating returns some of our pickers would’ve hoped. Only two stocks are sitting ahead of the S&P 500‘s total return, while — as was the case at the end of Q2 — the bottom two are downright ugly.
Still, those two leaders are doubling the broader market, and there’s still a good three months for the rest of the stock picks to stage a comeback.
With that in mind, let’s see how InvestorPlace’s 10 Best Stocks for 2013 look with only one quarter to go:
Q3 Return: +19%
YTD Return: -24%
Investor: Stephanie Link
Stephanie Link’s pick of Vale (VALE) — the world’s largest producer of iron ore — actually had a great third quarter. Since July 1, the stock has soared more than 19%, which is better than three times the broader market’s gains.
The bad news, though, is that run just brings VALE’s 2013 from terrible to not-so-bad. At the halfway point, Vale’s year-to-date total return was 35% in the red; those losses have been shaved to 24%, meaning VALE would be lucky to break even for 2013.
Then again, JPMorgan is bullish on the stock thanks to its recent cost-cutting efforts, and gave VALE a $25 price target. That’s 16% upside from its share price at the start of the year. On top of that, Vale boasts a hefty dividend, which currently yields more than 5%.
Q3 Return: -4%
YTD Return: -17%
Investor: Greg Harmon
Greg Harmon’s pick of Great Lakes Dredge & Dock (GLDD) has been consistent so far this year, but only as a member of the bottom three.
GLDD was actually the biggest Q2 gainer, lifting it out of last place. However, the stock’s 4% slide during the past three months still puts its year-to-date total return an ugly 16% in the red.
Great Lakes Dredge & Dock has been weighed down by a host of issues, including an accounting error that forced the company to restate earnings for the second and third quarters of 2012. That event led to a class-action lawsuit and a selloff.
On top of that, the company’s recent earnings report left a lot to be desired as revenue, gross profit margin and adjusted EBITDA all fell … while expenses and the company’s net loss grew.
That’s a tough turn of events for Harmon, who was banking on the dredging company’s technical strength at the start of the year.
Q3 Return: -6%
YTD Return: -3%
Investor: Jon Markman
Fomento Economico Mexicano (FMX) — commonly known as Femsa — might win the award for rockiest third quarter.
FMX moved sideways from July until mid-August, then proceeded to plummet around 13% in two weeks. In late August, it again reversed course, posting a 13% climb … until around a week ago.
In the past five days alone, the stock has shed 5% yet again — enough to finish the quarter in the bottom three. That’s especially disappointing considering Jon Markman’s pick was on pace for the silver medal back in March.
Markman was bullish on the Mexican market, but so far seems to have misjudged the company’s strong prospects for growth — at least for 2013. In the past two quarters, Femsa missed earnings and posted unimpressive same-store sales growth.
On top of that, Zacks slapped the stock with a downgrade this quarter, citing weak earnings, stiff competition and rising commodity costs.
Q3 Return: -5%
YTD Return: Flat
Investor: Steve Freehill
Next up, we have Two Harbors (TWO) — the mortgage REIT chosen by InvestorPlace reader Steve Freehill. The stock raced out to an early lead in this contest … yet has slowly and surely sunk toward the bottom.
Freehill chose Two Harbors for what he said was one big reason: its eye-popping yield, which currently sits at 11.5%. Rising rates and increased fear of tapering, though, sent investors fleeing mREITs and other income-yielding investments in late spring.
That downward trend continued in the third quarter, with Two Harbors stock losing another 5%. Now, TWO is less than 9% off its 52-week low and has a flat total return despite its oversized payout.
Still, JPMorgan is bullish on this laggard, too, recently initiating coverage on the mREIT with an “overweight” rating. But with only three months to go and tapering still on the horizon, the odds of comeback from TWO seem slim.
Q3 Return: +25%
YTD Return: +7%
Investor: Mebane Faber
Well, Mebane Faber’s pick of the Global X FTSE Greece 20 ETF (GREK) continued its roller-coaster ride for 2013.
In mid-May, Faber was looking like a genius when the beaten-down fund reversed course from an ugly start to the year. But after hitting a 52-week high on May 17, GREK shifted into reverse, eating away all those gains and more.
Now, the upward climb has resumed. GREK was the second-best performer of the third quarter with a 25% run during the past three months, bringing GREK back into the black for 2013.
And, as Faber’s competition Charles Sizemore recently pointed out, conditions in Greece are indeed improving and the capital markets have more or less stopped reacting to news of protests and increased bailout funds in the recovering country.
Still, the sole ETF on our list will need to kick things into gear to get into a top spot — much less the top half — before 2013 comes to a close.
Q3 Return: +10%
YTD Return: +10%
Investor: Paul R. La Monica
Qualcomm (QCOM) got off to a bit of a late start, as it was sitting on a flat performance halfway through the race.
Since then, though, the tech stock chosen by Paul R. La Monica has put on a solid show. In the last three months alone, QCOM posted a double-digit climb — more the double the gains of the broader market.
QCOM has a lot for investors to like, including a yield north of 2%, 22% earnings growth on tap for the current full year and a recently announced $5 billion buyback program.
Plus, despite its recent bump, QCOM still trades at a reasonable forward P/E near 13 — one of the original reasons La Monica recommended it originally.
Of course, investors will need to get very bullish, very quickly for QCOM to break into the top three, much less catch up with the two runaway leaders.
Q3 Return: -5%
YTD Return: +15%
Investor: Jeff Reeves
InvestorPlace Editor Jeff Reeves’ not-so-sexy pick of tech staple Intel (INTC) was looking brilliant halfway through the contest. Now, I would downgrade the dividend stock to decent.
Intel sat in first place at the end of June, but has fallen from its perch. One reason: Intel posted a drop in sales and earnings for its second quarter, and lowered its full-year revenue forecast. In fact, it’s missed analyst estimates for earnings in each of the past two quarters.
Another bad sign for the chip-maker came last week when INTC failed to improve its dividend for only the second time since 2008. As retirement writer Marc Bastow pointed out:
“That might not sound too disastrous, but for a company that’s essentially flat against its 2010 highs and has become mostly just a pure income play, it sure doesn’t feel right.”
And it sure won’t be good enough for INTC to make a run back to the top spot by contest’s end.
Q3 Return: +3%
YTD Return: +19%
Investor: Louis Navellier
Louis Navellier’s pick of Sherwin-Williams (SHW) has been slowly and surely tacking more on to its year-to-date return … but it hasn’t been enough for SHW to hold onto its second-place spot.
Yes, Sherwin-Williams was tied for the silver medal at the halfway point of this contest, thanks in part to the strong housing recovery. But in late July, news broke that Mexico’s competition watchdog denied SHW’s pending $2.34 billion purchase of Comex Group — the fourth-largest paint maker in North America.
On top of that, the stock’s second-quarter earning and revenue results — released on the same day — missed analyst estimates. The stock fell off a cliff as a result.
SHW has regained some ground since then and is trading around 3% higher than it was at the start of Q3. But that’s nothing compared to the sizzling run its competitors posted during the third quarter, and leaves quite a lot of work to be done if SHW wants to finish on top.
Q3 Return: +23%
YTD Return: +39%
Investor: Rick Pendergraft
At the start of the year, Rick Pendergraft predicted a 30% gain for generics drug-maker Mylan (MYL). Three-quarters of the way through the year, it looks like Pendergraft was too conservative.
Mylan was sizzling in the most recent quarter, racing out to 23% gains. One catalyst: The company reported a 28% jump in profits for the second quarter despite a negative currency exchange. It also reaffirmed full-year guidance.
As a result, analysts have been bullish on the stock. Bernstein upgraded MYL in September, while Goldman Sachs recently raised its price target to $46, citing “increased confidence in key revenue and earnings drivers.”
That’s more than 20% upside from its current price — not bad considering the stock already has soared almost 40% in only nine months.
Q3 Return: +29%
YTD Return: +48%
Investor: Charles Sizemore
Luxury automaker Daimler (DDAIF) clobbered the competition over the last three months with a nearly 30% return, and is clubbing the competition overall as a result. Year-to-date, DDAIF has a mouth-watering 48% total return.
In late July, management said Europe’s car market was likely at a bottom and that earnings in the second half of 2013 would be “significantly better” than they were in the first half. And it’s not like they were terrible so far. Daimler posted a profit that nearly doubled year-over-year in Q2.
Investors have fed on the optimism and bid shares of DDAIF up big-time in recent months. And despite its run, Daimler still yields a solid 3.8%.
Sizemore says the road is wide open for Daimler, thanks to an apparent end to the bottoming in the important market of China, as well as stabilization taking hold in Europe.
DDAIF might have to keep climbing if it wants to take home the top spot, though. Sizemore’s 2012 pick, Turkcell (TKC), was leading in the last few days of the 2012 contest before being edged in its final hours.
Stay tuned to see how the final lap unfolds.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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