So Eddy Elfenbein has made his twenty favorite stock selections for 2013 a la his superb blog at Crossing Wall Street.
So what? Why should we care?
First and foremost, (1) Because it’s likely that he thinks like you do. We know how rare it can seem to find truly committed and faithful long-term investors and Eddy is one of those. We’ve been following his work for a while and consider his tendencies and thoughtful approach to be very consistent with our investing community. (2) And because it’s a Christmas miracle version and a possible answer to what’s-in-it-for-me? His track record suggests that this is a probability-stacked trove of shopping and study ideas. (3) And three — if you’re a shareholder or investment club stock watcher for any of these, we think you should track Eddy’s regular commentaries and updates as he helps all of you (us) to keep track of what matters — threats and opportunities in the year ahead. As an added bonus: He’ll also point out what doesn’t really matter en route to ignoring the chaos and distractions.
As 2012 winds down, it’s appears headed to a finish of +0.9% relative return (vs. the S&P 500) the sixth consecutive year that Eddy’s “20” have outperformed the S&P 500. A batting average of 6-for-7 is worth drafting.
New For 2013
As he points out while unveiling the 2013 Picks, he’s turning over a mere 25% of the 2012 list — low turnover of ideas, a concept that we also embrace.
The five selections for 2013 all rank near the top of many of our screens and represent a number of community favorites:
- Cognizant Technology (CTSH): One of the most successful MANIFEST 40 (most widely-followed) stocks and frequent addition to the Core Diem demonstration portfolio over the past couple of months.
- FactSet Research (FDS): Long-term community favorite, responsible for many smiles in the community — and well-positioned for the future opportunities in its industry.
- Ross Stores (ROST): Highly ranked on the screening results we shared a few days ago as Eddy pondered the new crop.
- Microsoft (MSFT): Very widely-held. Some would cite patience as we wait for returns that are representative of the long-term opportunity (and with a nod that Bill and Melinda finished their saturation sell off a while ago.)
- Wells Fargo (WFC): In combination with JPM, regarded as among the strongest institutions going forward. Also a long-term community favorite. Book values are steadily being repaired and it’s reasonable to expect return-on-equity expansion, even if the ROE levels of yore are a distant memory. ROE levels do not have to fully return to historical trends for WFC to be a solid selection here.
The growth forecast, quality rating and return forecast (PAR: Projected Annual Return) are on display for all twenty stocks here.
As always, what really matters is what it all adds up to. In this case, although we’d probably target a little more overall growth — I’m sure that Eddy is thinking that it just might be time for the S&P 500 (larger, slower-growing) stocks to find some No-Doze and ease up on the Rip Van Winkle mode they’ve been in for over ten years. Quality is fine 70.7 despite the inclusion of some non-core stocks (like Ford). The overall return forecast at 12.4% is also fine — and compares favorably to the current median of 8.2% for all 2400+ stocks that we follow.
When we add to Nicholas Financial (NICK) to coverage, it probably won’t hurt a bit.
Here’s the tracking portfolio. We’ll reset all position balances to $50,000 on 12/31/2012 to align with Eddy and enter 2013 with equal-weighting of all 20 positions.
For now, CONGRATS on a sixth consecutive market-topping result and we’ll continue to hope for the best going forward, Eddy — because we really believe that we’re in this together. Based on the stocks on your favorite list, a lot of our community participants agree.