Yesterday, I wrote about the performance of Forbes magazine’s two sets of “guru” stock picks for 2008 that, I assume, were supposed to help individual investors beat the market.  The “Guru Picks” portfolio returned -46.46%, lagging all three major benchmarks, while the “Recession Beater” portfolio did a bit better with a -38.20% return, but still trailed the Dow Jones.

Today, we will look at the performance of the other major magazines’ “picks” to see how they stack up and then draw some conclusions on where we should look for investing help.  Feel free to skip ahead if you are pressed for time and want to see the ending.

Kiplinger’s

Each year,Kiplinger’s publishes both a “Stocks To Own” as well as a “Best Stocks and Mutual Funds” list.  I have no idea what the difference is between the two. 

For 2007, these picks did quite well, producing a 23.28% return compared to 10% for NASDAQ, 6.5% for the Dow and 3.5% for the S&P that year.  This was driven by one great call in Sunpower, whose 250% return drove the performance.  You can see the details here:

Position Symbol Return
Fairholme    FAIRX     8.73
Medronic    MDT     0.26
T Rowe Price New Era    PRNEX     34.13
Dodge and Cox International    DODFX     1.79
Vanguard Mid Cap Index    VIMSX     5.72
Homestead Value    HOVLX     (8.93)
Sunpower    SPWR     250.79
GE    GE     (1.14)
RYDEX S&P EQUAL WEIGHT    RSP     (4.67)
3M    MMM     4.35
AIG    AIG     (22.84)
Annaly Capital Management    NLY     29.10
Arch Coal    ACI     39.40
ATT    T     18.44
Cisco    CSCO     5.72
Johnson & Johnson    JNJ     2.70
Textron    TXT     32.24

2007 Return         23.28

For 2008, Kiplinger’s did incredbile because of one incredibly prescient call- shorting bonds- which netted a whopping 3,000%+ return.  Controlling for that call, the portfolio would have returned -31%, which still did beat both the market and Forbes.  Here you can see for yourself:

Position Symbol Return
CGM Focus    CGMFX     (49.80)
Grizzly Short    GRZZX     74.19
Amana Growth    AMAGX     (31.22)
Procter & Gamble    PG     (18.66)
T. Rowe Price Capital Appreciation    PRWCX     (32.38)
Fairholme    FAIRX     (34.47)
ATT    T     (34.05)
Cemex    CX     (65.15)
Consol Energy    CNX     (62.16)
Intel    INTC     (47.60)
Parexel    PRXL     (65.22)
Stanley Works    SWK     (34.26)
Teva Pharma    TEVA     (10.37)
XTO Energy     XTO     (32.89)
ProShares UltraShort Lehman 7-10 Year Treasury (PST)    PST     3,271.71

Average         188.51
Average Without PST         (31.72)

BusinessWeek

BusinessWeek has its “Where To Invest” tradition, which was published religiously…until this year.  There must be no where to invest this year because it changed its title this year to “Investment Outlook“.  In 2007, the picks (40 of them!), eeked out an 11% return beating all benchmarks.  Similar to Kiplinger’s calls, the market beating performance was driven by 2 stocks- Apple and Hess.

Position Symbol Return
Abercombie & Fitch    ANF     16.48
Alexandria Real Estate    ARE     5.27
Apple    AAPL     95.22
Bank of New York    BK     20.83
Cephalon     CEPH     4.15
Charles Schwab    SCHW     29.71
Davita    DVA     5.25
Hess    HES     97.44
KB Home    KBH     (65.27)
Oracle    ORCL     23.40
Southwestern Energy    SWN     39.22
Target    TGT     (12.45)
Banco Itau    ITU     35.49
Companhia Bebidas das Americas (AmBev)     ABV     45.88
Gol Linhas Aereas    GOL     (26.02)
Telesp    TSP     (6.05)
Altria group    MO     22.46
Groupe Danone    DA     8.73
L’Oreal    OR     27.42
Procter & Gamble    PG     12.87
Ericsson     ERIC     (42.80)
H&M    HMB.ST
National Bank of Greece    NBG     50.98
Porsche    POR.3F
Vodafone    VOD     33.37
Comcast    CMCSA     (39.72)
Juniper Networks     JNPR     40.44
NDS Group    NNDS     7.73
NETGEAR    NTGR     13.07
News Corp.    NWS-A     (6.84)
Color Kinetics    CLRK
Energy Conversion Devices    ENER     (14.77)
Fuel Tech    FTEK     (18.84)
Quantum Fuel Systems Technologies Worldwide     QTWW     (64.42)
Zoltek    ZOLT     117.95
Canon    CAJ     (18.68)
DENSO    DNZOY     4.87
Nidec    NJ     (4.97)
Toray Industries 3402    TRYIF
Toyota    TM     (22.22)

2007 Return         11.53

This year, BW could find only 16 stocks to recommend, producing a -35% return which barely beat the indices.  McDonald’s was it’s only selection that was in the black.

Position Symbol Return

Diageo    DEO     (35.10)
GE    GE     (56.92)
Waste Management    WMI     (5.23)
Stericycle    SRCL     (13.87)
Iron Mountain    IRM     (46.06)
VCA Antech    WOOF     (59.12)
Coca Cola    KO     (27.36)
Royal Caribbean    RCL     (70.33)
Smithfield Foods    SFD     (55.12)
Power Integrations    POWI     (42.99)
O’Reilly Automotive    ORLY     (9.13)
Stryker    SYK     (46.71)
Sempra Energy    SRE     (35.02)
McDonald’s    MCD     3.65
Raytheon    RTN     (18.76)
Dentsply International    XRAY     (39.83)

2008 Return         (34.87)

Smart Money

SmartMoney has its own “Where To Invest” tradition.  In 2008 it could only come up with 3 stocks to recommend.  Their thesis was to invest in non-American companies and financials that were unduly beaten down, which was a smart play.  Unfortunately, they picked the wrong stocks and saw a -76% drop.  Not so smart.

Position Symbol Return

Bunge    BG     (57.07)
Central European Media Enterprises    CETV     (83.05)
Genworth Financial    GNW     (89.43)

2008 Return         (76.52)

Fortune

Fortune was excited to tout 10 companies as its “Best Stocks for 2008.” While it did produce a great pick in Genentech with its 20%+ gain, the portfolio would have netted you a market losing -45% return.  Merrill Lynch, which was forced into a shotgun marriage with Bank of America by the government, seems to be a particularly egregious selection here.

Position Symbol Return

Electronic Arts    ERTS     (74.27)
St. Joe    JOE     (32.77)
Dick’s Sporting Goods    DKS     (54.97)
Genentech    DNA     21.57
Merrill Lynch    MER     (79.32)
Berkshire Hathaway    BRK.B     (35.75)
Annaly Capital Mgmt    NLY     (16.61)
Petrobras    PBR     (61.07)
Jacobs Engineering    JEC     (53.65)
GE    GE     (58.00)

Fortune 2008 Return         (44.48)

Summary and Conclusion

Here is how the magazines’ annual picks for 2008 compared to one another and to the markets.

Magazine Return

Kiplinger’s     188.51
Kiplinger’s Without Shorting Bonds     (31.72)
BusinessWeek     (34.87)
Dow Jones     (35.80)
Forbes Recession Beaters     (38.20)
S&P     (40.60)
NASDAQ     (42.30)
Fortune     (44.48)
Forbes Gurus     (46.46)
Smart Money     (76.52)

The Cake findings for 2008 are consistent with the previous academic research done on the subject over a 20 year period.  I think this is further proof that the editor’s of these major financial publications know no more than you and I about what the coming year will hold.

Top Performing Investors Reduce Cash Positions, Putting More in Market

San Francisco, Calif.—December 5, 2008—Cake Financial, the website that gives personalized investing insights to help investors maximize returns, today released the first of its monthly metrics, providing a lens into the behavior of individual investors. November’s metrics show the average retail investor is down 42.25% this year, made half as many trades as they did in January, and withdrew 20% from mutual funds, reflecting increased concern over the crisis on Wall Street.

The best performing investors on Cake – those members ranked Elite – are beating major market indices and have reduced their cash positions significantly since October to invest more in the market.

“The stock markets have been brutal on investors everywhere but many using Cake are holding their own,” said Steven A. Carpenter, CEO of Cake Financial. “Our November metrics suggest mutual fund companies may be in for a difficult year as many investors pull their money out of underperforming funds.”

Cake’s Elite (top 1%) investors have experienced losses this year of just 13.9% as compared to major market indices losses of 42.7% for the NASDAQ, 34.7% for Dow Jones and, 40% for S&P 500 during the same timeframe.

Possibly seeing a buying opportunity in December, top performers significantly reduced their cash positions from 29% of assets at the end of October to 18% at the end of November. They are using this cash primarily to buy equities, 36% of which are in the technology sector.

Carpenter added, “It’s been encouraging to see how investors are handling the toughest market we’ll likely see in our lifetime. Drawing from their insights, I’ve been able to improve my own investing strategies in an effort to safeguard my retirement account.”

In the month of November, 16 stocks, ETF’s, and mutual funds moved up from F to A in Cake’s ratings indicating investors feel confident about these stocks and are buying. Notable stocks that moved from F to A in November include Amazon (AMZN), Ebay (EBAY), and Oracle (ORCL). Other on the list are Allied Irish Bank (AIB), General Dynamics (GD), James River Coal Company (JRCC), US Air (LCC), Legg Mason (LM), Markel Corporation (MKL), ProShares Ultrashort Financials (SKF), Schwab Health Care (SWHFX), ProShares Ultra Real Estate (URE), Vasco Data Security (VDSI), Vanguard REIT ETF (VNQ), Vanguard Value ETF (VTV), and, Vanguard Emerging Markets ETF (VWO).

About Cake Financial
Headquartered in San Francisco, Cake Financial is an investing website that provides actionable investment ideas based on the historical returns of the Cake Community. Cake offers a complete view of all holdings across multiple brokerage accounts and measures investing performance as far back as 10 years. Investors compare and share strategies with others while Cake aggregates millions of transactions to generate investment ideas customized to the profile of each investor.

Cake Financial is backed by Alsop Louie Partners and angel investors including Ron Conway of Baseline Ventures, Bay Partners and KPG Ventures. For more information visit http://www.cakefinancial.com.

Media Contact:
Lisa Hempel
lisa@hempelconsulting.com
650-823-5410