Tough year for picking stocks, but it still pays

By GEOFF SENESCALL

Few brokers would be sad to say goodbye to the year 2000.

In terms of picking stocks, it was a tough year. This was reflected in our survey, which asked brokers to choose their five most-favoured stocks.

Those with speculative technology companies in their portfolio, looked very sharp early on.

DF Mainland, which had three such stocks, was certainly looking to take the honours for the second year in a row.

But the company which gave it a stunning 138 per cent rise in 1999, Advantage Group, proved its nemesis in 2000.

Advantage rose fourfold in 1999, but has since lost around two-thirds of its value.

It managed to hang on to seventh place in this lighthearted competition which had 13 firms participating.

Taking the honours this year was Ord Minnett (now JP Morgan). It had previously come in third with a 76.4 per cent return. This year it won with a 41 per cent return - using December 11, 2000 as the cut-off date and taking account of dividends, cash issues and share price movements.

That means anyone investing $10,000 in each of the five Ord Minnett's picks would now have a portfolio worth $70,500.

It won with Fletcher Paper, Baycorp, The Warehouse, Restaurant Brands and Sky TV. Of those, the real standout was Fletcher Paper, which produced a 95.5 per cent return after being sold part way through the year to the Norwegian pulp and paper giant Norske Skog.

Interestingly, the only company to outperform Fletcher Paper among those picked, was a technology stock, Renaissance.

It had a 117.6 per cent annual return. The only company picking this was DF Mainland. But it was not enough to compensate for Advantage, Spectrum and Pacific Retail Group.

Second this year was Salomon Smith Barney with a 39 per cent return from a portfolio which mirrored that of Ord Minnett in all but one stock. Unfortunately for Salomon, its choice of Steel and Tube did not quite match up to Restaurant Brands.

Third place went to Craig and Co, which had a 28 per cent return from Auckland International Airport, Baycorp, Fisher & Paykel, The Warehouse and Tower.

Overall, the average broker return was 14 per cent. This compares favourably with the NZSE-40 gross index, which ended the year down 4.7 per cent.

Ten of the brokers produced positive returns.

Of the three that didn't, two failed to match the NZSE-40.

Apart from Advantage, stocks that dragged performances down included Newcall, E-Phone, Spectrum and Fletcher Forests - each more than halving in value.

The top four performers were Renaissance, Fletcher Paper, Montana and Fletcher Energy, each with returns of more than 80 per cent.

The Warehouse, the most favoured stock in 1999, returned nearly 50 per cent, proving again that it is one of the most consistent performers in our market.

Six brokers beat the average return of 14 per cent - a commendable showing in such a soggy market.

The fact that most the brokers managed to outperform the benchmark NZSE-40 index, demonstrates that stock picking is still the way to go.