Covid-19, Election Jitters Were No Match for Heard Readers

 Covid-19, Election Jitters Were No Match for Heard Readers

This post was originally published on this site

The Dow Jones Industrial Average closed above 30000 for the first time on Nov. 24.

The Dow Jones Industrial Average closed above 30000 for the first time on Nov. 24.

Photo: Brendan McDermid/Reuters

Ignoring scary headlines can boost your bottom line.

Heard on the Street’s columnists and 1,764 of our readers had to contend with the thorniest environment of our four annual stock-picking contests so far: a global pandemic, a contentious U.S. presidential election and record-high prices for technology stocks. Despite a deadly second surge of Covid-19 and a political contest that left a bitter aftertaste, stocks hit fresh records. People in much of the world hunkered down but kept up their spending on physical purchases even as investors grew more confident that they would soon spend again on experiences. The best performers of all were companies with shiny, new technologies and lots of skeptics.

Heard’s columnists anticipated some of this but were too pessimistic overall. Our picks had an average return of only 5.4%, not including dividends, lagging behind the S&P 500. The top 14 performers were all “buy” recommendations, while the seven worst picks were all “sells.” Readers were more attuned to the markets’ mood, with a total return of 14.5% across their 3,390 picks.

The best Heard bet by far, and 296th overall in the contest, was by retail columnist Jinjoo Lee, whose old-school pick,
Qurate Retail,
managed to shine in a tough year for physical stores, rising 65%. The owner of television shopping bazaar QVC has expanded sales during the pandemic yet sported a bargain-bin valuation compared with department stores and big-box retailers. The second-best Heard pick, Jon Sindreu’s recommendation to buy
Axon Enterprise,
the maker of Tasers and police body cameras, rose 57% on concern over public unrest and a backlash against police brutality. The next two winning picks were both non-U.S. auto makers,
Fiat Chrysler
and Geely Automotive, recommended by Stephen Wilmot and Jacky Wong, respectively.

But 223 readers bet on an auto maker that left those companies in the dust:
Tesla.
The electric-car pioneer already was worth more than several established manufacturers in August and by this month had a market capitalization as high as several of them combined. Its valuation seemed ludicrous enough in August 2019, when selling Tesla was the most popular bet in our contest of that year. That ended badly, yet hope triumphed over experience as some 237 subscriber picks in this year’s contest were shorts on Tesla. Its shares have surged 114% since the first week of August.

Tesla tussles aside, readers did well overall by wagering that life would soon return to normal, which paid off once effective vaccines were announced. More than 100 bet on an air-travel recovery with buys on
American Airlines,
United Airlines Holdings,
Delta Air Lines,
Southwest Airlines
or
Boeing
—all with handsome gains. Even more rewarding were readers’ many bets on tourism plays such as
Carnival,
Norwegian Cruise Lines Holdings,
Marriott International
and
MGM Resorts International.

Companies poised to take off when the pandemic vanishes were joined in the winners’ column by those helping to end it: Shares of early Covid-19 vaccine leaders
Moderna
and
Pfizer
were both popular bets. So were companies such as
Zoom Video Communications,
Teladoc Health
and
Peloton,
which are helping us stay connected, healthy and fit while we wait to be vaccinated.

Heard’s columnists were correct in predicting this summer that the pandemic would linger for a while, but bets to that effect were a mixed bag. Longs on
Chegg
and
Amerco
did fairly well as the remote-education company and the U-Haul owner benefited from school closures and a continuing urban exodus. But sell recommendations on
Vail Resorts,
Walt Disney
and restaurant supplier
Middleby,
all pinched by the pandemic, were three of the five worst columnist picks. Most disastrous of all was a skeptical call on
Virgin Galactic
which, despite an aborted launch that sent its stock tumbling on the last day of the contest, rose impressively overall.

Readers even showed reporting chops by digging up some clever Covid-19 plays. Two of the best performers were relatively unknown
Navios Maritime Containers
and
ProPhase Labs,
which gained 306% and 255%, respectively. Navios benefited from the boom in container shipping demand while ProPhase, a medical-technology company, has set up Covid-19 testing facilities.

You know it was a tough year for stock picking when getting a sneak peek at today’s newspaper headlines back in August might have hurt you as much as helped you.

Write to Spencer Jakab at spencer.jakab@wsj.com

Related post