Alpha Central: Alive and Well

It’s become something of an annual pilgrimage. The Mid-Michigan chapter of NAIC, the umbrella organization for investment clubs, started a stock picking challenge twelve years ago. Clubs and individuals submit their entries and the results are tracked over the course of one “Halloween” to the next. (The annual breakfast is always between Halloween and Thanksgiving.)

This year, a club that goes by the name of Street Smarts (Saginaw, Michigan) took home the top prize by turning $100,000 into $175,000 over the 12-month period. 75%. Yowza. Wowza.

They were joined by another (16) clubs with returns besting 30% — in other words, out performing the market by at least five percentage points. In contrast, only 12-of-28 failed to beat the market … and the average result was 29%. Their consensus selections essentially matched the market — but the track record is strong as the consensus portfolio has beat the market in 10-of-11 years.

Kudos. I attend a lot of these. I watched recently as similar groups in other parts of the country handed winner’s certificates to portfolios finishing closer to 30%. Eddy Elfenbein of www.crossingwallstreet.com is closing in on another victorious year — hopefully his 7th in a row — with a Buy List portfolio tracking at 34-35% YTD.

The leaders of our annual Groundhog Day-to-Groundhog Day Iditarod are no slouches, either. Our defending champion investment club, the Broad Assets (St. Louis) stand at +83% in the current contest. (Since 2/2/2013) We chronicled their exploits for 2012 here as they finished #1 with a +27.5% total return last year. The finish line for our contest (2/2/2014) is still on the horizon, but Broad Assets has a mammoth lead going into the home stretch.

2013 Groundhog Challenge Scoreboard

We’ll be taking entries for Groundhog 2014 during the last week of January. All individuals and groups (clubs) are invited to submit 5-20 investments.

The fact that 57% of the Mid-Michigan entrants beat the market is not unusual. 51.7% of participating Groundhogs have done the same over the trailing 8 years.

It’s how they/we do it that matters. The swinging-from-the-heels is actually kept to a minimum. The list of top performers include Apple (AAPL), Bio-Reference Labs (BRLI), Coach (COH), Cognizant Technology (CTSH), Google (GOOG), IPC Hospitalist (IPCM), Qualcomm (QCOM), ResMed (RMD) … you get the idea. Many of our community favorites represented by our 40 most-widely held companies are present and accounted for, along with a suitable dose of promising small- and medium-sized companies that keeps the overall growth forecast of the portfolio where it should be (12% or more).

Companies of Interest

Would you be surprised if I told you that Edwards Lifesciences (EW) is on the radar screen of these successful Mid-Michigan stock pickers? Because it is. You shouldn’t be surprised. The road to Alpha is paved with companies with superior return forecasts in combination with high quality rankings.

Materially Stronger: Johnson & Johnson (JNJ), McKesson (MCK)

Materially Weaker: Cutera (CUTR), Thoratec (THOR), Nissan Motor (NSANY), Caterpillar (CAT) 1, Astec Industries (ASTE), II-VI (IIVI), Rofin-Sinar (RSTI), Abaxis (ABAX)

1 Would not usually make this list, but dropped from $105 to $95.

Market Barometers

The median Value Line low total return forecast (VLLTR) is now 3.7%, down from 3.9% last week.

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