I have spent the past few days going over my ho-hum performances in calling corporate acquisition targets and mutual fund predictions in 2010. Now that I'm done lathering in self-effacing humility, let's go over some of the market calls that I got right.
Two Decembers ago, I wrote about five stocks that I felt should beat the market in 2010. I hadn't taken the time to reflect on those picks, but LikeAssets.com's Dirk Quayle was kind enough to dig them back up in a Seeking Alpha article over the weekend.
Four of my five picks -- OpenTable
Dec. 31, 2009
Dec. 31, 2010
Source: Yahoo! Finance. Adjusted for dividends.
With an average return of nearly 95%, the five picks soundly beat the market. Quayle gives more intricate breakdowns -- pitting each stock by its appropriate benchmark -- but the end result is the collective picks clearly trounced the market averages.
A closer look
I wouldn't waste your time watching me pat my own back, so let's dig a little deeper. What did I see 13 months ago? Are there lessons that can be applied to investing in general? How ironic is it that a company named Perfect World should be the one to break up an otherwise perfect call?
Let's start with OpenTable.
"OpenTable has earned its place at the public table," I wrote at the time. "It has beaten analyst estimates in its first two quarters as a public company, and it's growing nicely."
Well, those two market-thumping quarters since its 2008 IPO have now grown to six analyst-besting reports. OpenTable was able to grow its network of restaurants on its Web-based reservations platform during the recession, so it isn't a surprise to see it growing even faster during last year's recovery.
"Satellite radio has come a long way since last year's merger between Sirius and XM," I wrote. "The combined company is focused, generating operating cash flow, and breaking even."
Sirius XM has continued to grow its subscriber base, and Wall Street expects its meager profitability to expand nicely during the year ahead. Throw in credit rating agency upgrades, pushing out debt maturities at lower rates, and retaining its star talent, and you have an easy win for one of the market's most actively traded stocks.
"Studios need IMAX more than ever, in a climate of diminishing DVD sales and devalued rentals," I wrote.
It may have been a humdrum year at the multiplex, but the same can't be said for IMAX screenings. Ticket sales for theatrical releases remastered for IMAX more than doubled to $546 million in 2010. Last year's IPO of 3-D leader RealD
"Even if we don't get the iTablet during the company's fiscal 2010, there's enough in the tank for Apple to continue to outpace the market," I wrote.
Apple was just Apple for another year, once again blowing through Wall Street's profit targets and growing its base of fans with every annual update of iPhones, iPods, and Macs. The introduction of the iPad back in April also gave investors a reason to be excited about the new tablet market.
"You rarely find the perfect combination of improving fundamentals and meandering share prices," I wrote about Perfect World. "How cool is it to run into a company that's expected to grow its bottom line by 83% this year, and 27% come 2010, for less than 12 times forward earnings?"
Well, Perfect World's momentum came undone in 2010. Instead of growing its profitability by 27% in 2010, it's heading toward a nearly 10% dip on the bottom line. Weakening guidance, crushed margins, and analyst downgrades slammed the shares. In retrospect, if I had wanted to single out a play in China's still growing online gaming market, I should have gone with market leader NetEase.com
The 2011 asterisk
It's already mid-January, so I won't insult you with a 2011 collection of market-thumping picks when we already have the benefit of a strong first week of trading for many of the tech stocks I follow.
I did single out my favorite overall stock and tech investment -- picks that are already beating the market since I recommended them to Motley Fool Rule Breakers subscribers last year. I'll obviously stand by those. There were also my four growth stock predictions.
We'll see how it all plays out. There will be a few misses here and there, but we all know that it's not a Perfect World.
What stocks do you think will beat the market this year? Share your thoughts in the comment box below.