Guru Picks 2005

At the end of every year, I stop by the newsstands to see what the financial magazines suggest in their annual “Where To Put Your Money In [YEAR]” cover story. I make a list of the top ten or so ideas that stand out to me and monitor that list throughout the year for cheaper prices.

This system has proven useful in the past. For instance, at the end of 2003, SmartMoney recommended buying Maxtor at $11 and Kevin Landis, manager of the Firsthand Tech Value mutual fund, suggested UTStarcom at $37. They closed the year at $5.30 and $22.15, respectively. Had you followed their advice, you would have ended last year with losses of -52% and -40%. However, I realized that both sources had jumped the gun on those investments and I watched all year for better prices. On Oct. 21, I suggested buying Maxtor at $3.25 and on Nov. 8, I suggested buying UTStarcom at $16.59. Doing so resulted in respective gains of 63% and 33.5% by year’s end. I track these and other picks on this page.

If you’re looking for a fund manager to hate, Kevin Landis should top your list. If he were trying to be a contrary indicator, he’d be as popular as Warren Buffett. Unfortunately, he makes suggestions expecting that you’ll follow them. When you do, you lose. I’ve written a few times about Mr. Landis and his abysmal track record. You can see a summary of those articles here. The latest Landis news is that he’s staying true to form with the following track record at his flagship fund:

Firsthand Technology Value (TVFQX)

performance as of 12/31/2004

1-Year: -6.62%

3-Year: -10.59%

5-Year: -18.47%

Wow, it doesn’t get much better than that. Here’s how the list I compiled at the end of 2003 fared in 2004, ranked from best to worst:

– Plum Creek (PCL) from $26 to $38 (46%) by Jeremy Grantham of Grantham, Mayo, Van Otterloo

– Millea Holdings (MLEA) from $57 to $75 (32%) by Mason Hawkins of Longleaf partners

– Rayonier (RYN) from $37 to $49 (32%) by Susan Byrne of Westwood Equity and Bob Perkins of Janus Small Cap Value

– Janus (JNS) from $15 to $17 (13%) by Money

– Washington Mutual (WM) from $40 to $42 (5%) by Bill Nygren of The Oakmark Fund

– Interactive Corp (IACI) from $31 to $28 (-10%) by Bill Miller of Legg Mason

– Pfizer (PFE) from $32 to $27 (-16%) by many sources — it was the most popular pick among all publications that I read

– UTStarcom (UTSI) from $37 to $22 (-40%) by Kevin Landis of Firsthand Tech Value

– Maxtor (MXO) from $11 to $5 (-52%) by SmartMoney

When looking over this year’s list, I was struck by how many Dow companies I saw. To me, recommending a Dow company as a good stock to own is like recommending The Great Gatsby as a good book to read. Who could argue? Books like Gatsby in the standard English canon should be required reading, literature’s foundation. Stocks like those found in the Dow should be required investing, a portfolio’s foundation. Hence my constant references to my Dow portfolios which keep chugging along year after year. If you’re on board or thinking of getting on board, you’re in good company. Here’s a sampling of Dow stocks recommended for 2005 in the financial media:

– Altria (MO) at $59 by David Dreman in Fortune

– Caterpillar (CAT) at $90 by SmartMoney

– Citigroup (C) at $48 by Fortune, Money, and SmartMoney

– Disney (DIS) at $28 by First Albany Corp in the Chicago Tribune

– ExxonMobile (XOM) at $51 by Kiplinger’s

– General Electric (GE) at $36 by SmartMoney

– IBM (IBM) at $98.50 by Money

– McDonald’s (MCD) at $30 by SmartMoney

– 3M (MMM) at $82 by Goldman Sachs in Barron’s

– Procter & Gamble (PG) at $55 by SmartMoney

These are just the ones I saw. There were probably more recommended. If you saw some that I missed, let me know. I wouldn’t be surprised if we could find all 30 Dow stocks recommended. My list alone represents almost one-third of the 30. If you like these suggestions, I point you yet again to my no-research-required, no-pundits-needed, no-guru-input, year-in, year-out Dow portfolios.

Outside of the Dow, I found these picks:

– Apache (APA) at $51 by A.G. Edwards and Morgan Stanley in Forbes

– ChevronTexaco (CVX) at $53 by Susan Byrne of Westwood Equity

– Cisco Systems (CSCO) at $19 by Money

– Interactive Corp (IACI) at $28 by Richard Cripps of Legg Mason in the Chicago Tribune

– Pharma HOLDRS (PPH) at $68 by Money

– Southwest Airlines (LUV) at $16 by Kiplinger’s

– Symantec (SYMC) at $61 by Kiplinger’s

– Texas Instruments (TXN) at $25 by Money and Richard Cripps of Legg Mason in the Chicago Tribune

– Tupperware (TUP) at $19 by Fortune

– Washington Mutual (WM) at $41 by Bill Nygren of The Oakmark Fund

– Yahoo (YHOO) at $38 by Kiplinger’s

Note that Susan Byrne, whose recommendation to buy Rayonier returned 32% in 2004, is back with a recommendation to buy ChevronTexaco. Also, both Legg Mason and Bill Nygren are back with the same picks they offered for 2004: Interactive Corp and Washington Mutual.

I’ll keep an eye on this list throughout the year and see if a better buying opportunity presents itself.

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