Intelligent Speculator

Back in December, during the mostly volatile trading months that ended 2008, when I was approached to join this stock picking contest, I was quite unsure about how to play it. I usually do picks based on specific valuations that can be closed weeks later. But this time, our picks were for the entire 2009 year. Like the other competitors, I was to base my picks on what I expected for the year. Was it going to be a rally back to the 2007 levels or would it be more pain in the financial markets?  You can see the post with my picks here.

Without further wait, here are the results for Q1, I am obviously very happy about my 1st place but also about being the only one in positive territory:

And the results of my 4 picks:

Turns out that the first quarter saw a little bit of both. Overall the market is down with the S&P500 dropping from 903.25 to 796.08 (-11,86%) and I would say that played in my favor. I was a little surprised I must say at how aggressive the other picks were with lots of leveraged ETF’s, and small companies that would be bound to have a solid bounce back if the markets went along. But instead, I went for 2 broader picks as well as 2 companies I thought were clearly undervalued.

USO and GLD were clear plays on gold and on oil. I’d say that both picks were correct and I’m happy with the 4.35% return of GLD for Q1. What I had not anticipated was the contango effect’s drag on USO and its inability to match the return of oil over the first few months. I am hoping that does not keep up and that USO can pick up more steam in the upcoming quarters.

As for the internet plays, I seem to be clearly wrong on Ebay and still have trouble believing how low of a valuation it is getting, I really think the stock will bounce back unless a major player launches a competitor to Paypal, their online payment division. The stock is down 12,24% though which is not too far from the market’s return and something I can live with. The pick that has put me at the front so far is clearly Baidu(BIDU), the Chinese search engine that continues to dominate despite great efforts put forth by both Google and Yahoo. At the time, Baidu had just gotten slammed because of reports it was accepting advertising for “fake” pharmaceuticals. My opinion was that the markets had killed Baidu too much ignoring that the company operates in China, far from the much more severe US regulations. Even Google does things in China it would never dare doing in the US, it is just a different environment. The 35,25% return is obviously above my expectations and at this point, I’m hoping more out of Ebay than Baidu for the next 3 quarters….

Upcoming shortly will be reviews by other members of the contest, I will add links as they are published so stay tuned!