KEY POINTS:
It will come as no surprise to anyone that the results for Broker Picks 2008 weren't too flash. Stock markets around the world have had a terrible year as the credit crunch turned to an equities crunch and eventually a commodity crunch.
But it is worth noting
that six out of eight of the participants this year managed to out-perform the NZX- 50. First NZ Capital was the best of the bunch, coming in just 13.4 per cent down. Included in its picks was this year's best-performing stock, Fisher & Paykel Healthcare (also the most popular pick for 2009).
Fisher & Paykel Healthcare was down just 3 per cent - but other manufacturers didn't do so well. Fisher & Paykel Appliances was down 56 per cent, Wellington Drive Technologies was down 63 per cent and Bathroom fittings maker Methvyn was down 30 per cent.
But every sector was hit hard. The most problematic stocks in 2008 turned out to be listed finance companies - Dominion Finance and Dorchester Pacific shed 98 per cent and 82.6 per cent respectively. Retailers took a beating as the economy slowed.
Pumpkin Patch was down 53 per cent and Hellaby Holdings 43 per cent. Resource and energy stocks started well but turned down halfway through the year as the commodity boom went into reverse.
The Broker Picks game has been running for seven years now and - as bad as 2008 was - returns over five, six and seven years still show equity markets performing well as an investment.
First NZ Capital - which has been the most consistently successful player of the game - can boast total returns of 285 per cent for the period. That's a return on an original $10,000 investment (with dividends reinvested) of $38,570.
Running second over the seven-year period is ASB Securities with total returns of 88.6 per cent. Before investors use the Business Herald survey to choose a broker, they should recognise the results are skewed by some features:
The figures exclude brokerage fees. Brokers are asked to choose the securities that will give the best short-term performance. Had the brokers, for example, been asked to choose for a four- or five-year term, the results might be different.
The survey does not allow brokers to review choices during the year. So, for example, those that sensibly picked energy stocks like NZ Oil & Gas last year were unable to switch out mid-year as oil prices fell.
The survey implies a one-size-fits-all approach. It takes no account of individual circumstances such as an investor's appetite for risk or a requirement for income or special tax circumstances. These are all factors integral to a "buy" recommendation.
The survey is not exhaustive. Macquarie Equities, UBS and Citigroup are the most obvious omissions. Some choose not to participate. Finally, past performance is no guarantee of future performance.
