Professional money managers like to talk up the importance of experience when stock markets are down and clever stock-picking can spare investors from a portfolio of dogs. But Globe readers may have more to fear from rallying stocks.
Readers who are participating in our inaugural Investing Club Challenge are nursing gains of 24 per cent since the challenge began in March. That includes dividends.
Worry not, these impressive gains are still beating many of the more popular benchmarks. However, they have narrowed over the past month. Now, readers are outperforming the total return of the Standard & Poor’s 500 index by a whisker of just 0.6 percentage points, compared with a wider 4.1-percentage-point lead last month (the S&P/TSX Composite Index has gained just 8.1 per cent over this period).
Blame the Federal Reserve. It hasn’t raised its key interest rate since July amid widespread chatter of defeated inflation, stoking expectations that the central bank could cut interest rates next year.
As a result, bond yields are falling, economic expectations are recovering and stocks are rallying. (Well, except some of the more unfortunate picks from the Globe’s inhouse team.)
We asked readers earlier this year to send us their top three stock selections, to be held for 12 months. From more than 500 submissions, we found the 12 most popular picks and used them to create the Readers’ Portfolio. A team of Globe investment reporters assembled their own portfolio, called the Globe Hot List.
The competition kicked off on March 13, with monthly updates since then. We’ll examine results from individual competitors soon. But for now, regular probes into the collective wisdom of our readers is fascinating stuff.
Nine months ago, the investing landscape looked very different than today’s environment. Back then, central banks were still raising interest rates, making a recession a popular call. Dividend stocks were struggling. Banks were duds. Former go-go stocks such as Shopify Inc. SHOP-T were down on their luck. Artificial intelligence was an emerging theme, but was it a bubble in the making?
Add geopolitical risks to the mix, and that’s a tough investing maze to get through over 12 months, especially without the freedom to buy or sell (no excuses or what-have-yous allowed, either).
But Globe readers have chosen well. Two-thirds of the stocks in the Readers’ Portfolio are in positive territory, after dividends are included. Among these winners, four stocks are standouts with gains of more than 30 per cent each. Nvidia Corp. NVDA-Q – part of an AI bubble? If so, bring it on – shares have risen more than 107 per cent since readers tapped its potential. Shopify is up nearly 74 per cent.
At the same time, laggards are exerting only a minor drag on the portfolio’s returns, and some of these duds are making progress as the competition progresses. The worst of the worst, Algonquin Power & Utilities Corp. AQNU-N, is down just 13 per cent, with dividends.
The Globe’s in-house group of stock pickers would love a laggard like that. Instead, the Globe Hot List is nursing far more serious wounds with First Quantum Minerals Ltd. FM-T and Plug Power Inc. PLUG-Q, which are dragging down the portfolio’s returns.
But as we approach the final quarter of the competition, new-found enthusiasm for stocks has taken hold, driving a dazzling rally in the S&P 500 and improving the fortunes of some of the year’s most unpopular sectors.
Globe readers have done extraordinarily well so far with their stock picks, under challenging market conditions. Curiously, a screaming bull market now threatens their impressive outperformance.