As we approach a new year, it’s time to reflect on what we accomplished in 2019, what’s left to do, and our hopes and dreams and goals for 2020. Those thoughts will differ, whether you’re focused on your family, your job or your golf handicap.
For me, those thoughts focus heavily on stock picking, because December is the busiest month of the year for me. There’s a lot of forecasting involved. What will the major stock and economic trends be in 2020 and how can I position my stock portfolio to best capitalize on those opportunities?
In addition, various publications will ask me for my best stock picks for 2020 – a popular feature in the financial media. As a matter of fact, subscribers to Cabot Undervalued Stocks Advisor will receive my annual Top Ten Stocks to Buy and Hold for 2020 publication in a few short weeks.
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Let’s review the 2019 portfolio, and go over my best stock picks from 2019 (and my worst), which might give you a clue as to how the 2020 portfolio could perform.
While it would be fun to fill my stock portfolios with a bunch of hit-it-out-of-the-park growth stocks like Nvidia (NVDA) and RH (RH) and Tesla (TSLA), my investment strategy is intended more for the investor who likes to control risk by building a portfolio full of high-quality, undervalued growth stocks.
My 2019 Top Ten portfolio contained the following thriving companies:
Alaska Air Group (ALK)
Ciena Corp. (CIEN)
Cooper Tire & Rubber (CTB)
Designer Brands (DBI)
Equinor ASA (EQNR)
Lennar (LEN)
Mercury General (MCY)
NXP Semiconductors NV (NXPI)
Owens Corning (OC)
Sleep Number (SNBR)
I make a strong effort to diversify the portfolio by industry and market capitalization, so that if these are the only 10 stocks that an investor owns, they’ll have a very good variety of potentially winning investments. As for market cap, the portfolio included huge companies like Equinor ASA (EQNR), with a $60 billion market cap, and tiny companies like Cooper Tire & Rubber (CTB) and Sleep Number (SNBR), with a $1.5 billion market cap. I’ll usually include one or two European stocks, as I did with NXP Semiconductors NV (NXPI), which is based in the Netherlands. And I won’t include more than two stocks from the same industry, because if that industry suddenly falls out of favor during the year, my annual portfolio performance is doomed!
We’re heading into the home stretch, so let’s assess my 2019 portfolio.
My Best Stock Picks from 2019
The entire group of 10 stocks delivered an average total return of 18.1% year-to-date. That includes both capital gains and dividends. As you might expect, there were some serious winners and some laggards.
My best stock picks from 2019 included building products company Owens Corning (OC), up 49.9%, homebuilder Lennar (LEN), up 52.5%, mattress retailer Sleep Number (SNBR), up 54.5%, and semiconductor company NXP Semiconductors NV (NXPI), up 66.6%. Wow!
This year’s laggards include Cooper Tire & Rubber (CTB), Designer Brands (DBI), Equinor ASA (EQNR) and Mercury General (MCY). Hint: this could be a good shopping list for 2020! As long as those companies’ revenue and profit outlook remains strong, you can assume that these stocks are even more undervalued than they were a year ago.
Would you like to receive a fresh list of excellent, undervalued growth stock opportunities for 2020? I’ll deliver the new portfolio to all my Cabot Undervalued Stocks Advisor subscribers.
To learn how to become one of them, click here.
In the meantime, best wishes for the New Year!
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