Year-end investment realities and Dian’s Stock Pickers Rule No. 1
By Dian Vujovich
Funny thing about stocks— each one performs in its own unique way each year no matter how the markets in general have performed. That means, unless you’ve only invested in popular indices or the ETFs that follow them, your returns aren’t likely to be anywhere near how those indices have performed.
That point was driven home to me one more time last week while talking with a long-time friend about investments. Both of us are business writers. I’ve got a more-or-less local status. He is an international journalist with a radio and sometimes TV presence and ranks at the top-of-the-heap.
For decades we’ve been friends who have talked about which stocks to buy or hold yet rarely share the same opinions. But none of that matters as it’s a friend’s first relationship. Making money in a subject we’re both well versed in has always fallen into a distant 50th position.
Nonetheless, when the “How’d your portfolio do this year?” question came up, I was surprised to hear his portfolio had returned about 3 percent for the year.
Before telling you’re the rest of the story, let me preface everything that follows by saying I am absolutely positively not recommending that you invest into either of the two companies I’m about to mention. Think of them as two real characters in a teachable moment Wall Street story.
Okay. Back to my friend’s three percent portfolio return.
Three percent when the S&P 500 is up over 31 percent surprised me. Before I had time to ask how that happened in this bull market he said, “I own Apple and it dragged my portfolio down.”
Apple (AAPL) has had close to a 200 point spread in its per share price this year. The low was $385.10 , the high was 575.14 and the stock closed at $560.09 on Friday. Year-to-date, Apple was up 2.01 percent from Jan.2 through Dec. 27, according to Yahoo Finance.
My friend is confident that Apple is going back up to 700 and quite likely beyond. Plenty of analysts on the street agree. UBS, for one, upgraded it from “neutral” to “buy” in early December.
I made one tiny investment this year on a cheapo pharma might-be-something-someday company named Galena Biopharma (GALE). They’ve got a breast cancer drug that could be something someday, if all goes well. The stock has been a top performer for the past two years. This year it’s up 186 percent. I am happy with my portfolio of one holding.
The only two things these two companies have in common is first, they are both publicly traded and second, offer opportunity. Beyond that they are as different as night and day: One is a very well established company with a boatload of money and products the world seems to adore and the other not.
Going forward, nobody knows which one of the two will provide its shareholders with the best returns in the coming year. You can research each till the cows come home and still be unable to come up with a guaranteed definitive answer. But that’s the way of investing.
That said, as you review your current holdings and compile a list of stock picks for 2014, keep in mind something that the market has taught me: Dian’s Stock Pickers Rule No. 1: Every stock performs in its own universe. No ifs, ands or buts about it.
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