Stock Market Video
The Stocks That Got Away: 2013 Edition
This Week’s Fortune Cookie
In Case You Missed It
In this week’s Stock Market Video, I sing the same song I’ve been singing for weeks: market conditions are good, indicators are positive and it’s a time for putting on your bull hat and doing some buying. There are also a few warning signs in investor sentiment and slippage among former market leaders, but that’s not a reason to ignore the fact that the bulls are in charge right now. I also mention a few strong stocks among the pharmaceuticals, financials and builders that look good now.
The Stocks That Got Away: 2013 Edition
The transition from December to January can be a tough one, especially if you live in New England. All of the 2013 holiday good cheer is just a memory, the Christmas tree is lying on top of the remaining 12” of dirty snow by the street and the thermometer read 7 degrees F when I got up. Welcome to the reality of the New Year.
Fortunately, I have my usual way of cheering myself up in early January. I always spend a little time researching the top-performing stocks of the previous year. The irritation I feel from looking at all the stocks I didn’t own that blew off the charts makes me forget all about the frigid temps, slick roads and gray skies.
If you enjoy the same kind of wallowing in stock-market regret that I do, here’s what we all missed.
#1 The top-performing stock of 2013 (drum roll) was Canadian Solar (CSIQ), a Chinese solar company based in Canada. CSIQ soared a staggering 777% during the year, from 3.5 on January 2 to 29.82 on December 31.
Like many stocks that make big gains in any given year, CSIQ is a rebound story. The stock was trading at 34 when 2010 dawned, but fell over the next two years to below 5. The stock spent all of 2012 trading under 5 on sparse volume. And it even got a late start on its big 2013 run, waiting until May to get above 5, which is also when volume began to pick up.
[Note: CSIQ probably wasn’t even the top-performing stock of the year in absolute terms. But I’m not interested in the monumental moves made by inconsequential stocks. So I screen for stocks that trade at least 50,000 shares a day, on average, and that finished the year trading above 10. This isn’t any guarantee of institutional quality, but it does eliminate most penny stocks and other mayflies from the pool.]
#2 The second-best performer in 2013 was VisionChina Media (VISN), a Chinese advertising company that delivers ads via monitors on mass-transit systems in 19 cities. VISN made a 680% gain during the year.
But the chart for VISN is a bit bizarre, with almost zero investor interest from the beginning of the year (where it opened at 3.2) through early October. The stock was still trading at 2.45 on October 4, but blasted off to 4.5 on October 7 and rode a wave of big-volume buying to as high as 18 later in the month. But a sizable correction pulled the stock back to earth, and when December dawned, VISN was flat as a pancake at 9. Then came another rocket shot that peaked over 30 in late December, before a selloff on December 30 that scrubbed of a full six points. VISN finished the year at 23.8.
Just btw, VISN is continuing its volatile ways, dipping below 20 on January 8, then tacking on a couple of points on January 9. Volatility cuts both ways.
So, what conclusions can I draw from these two stocks?
Well, first, it’s good to start from a very low base. Low prices attract a more speculative kind of investor, and aggressive players can make for big gains. Then, when a stock gets into the low double digits, the bigger sharks start to take notice, which can give a hot issue a new tank of fuel.
Am I surprised that both of the top performers were stocks of Chinese companies? Not at all. Chinese stocks have been out of favor for Western investors for at least a couple of years, so conditions were ripe for a shift in sentiment. In all, four of the top ten performers for 2013 were Chinese stocks.
It’s also worth noting that when I did this research last year, I found just 12 stocks that met my price and liquidity requirements that had topped 200% gains. This year, I had to cut off my list at 16 stocks that had booked gains of over 400% for the year!
As I did last year, I’ll be working on a report on all 16 of the top performers for the year. I’ll be happy to send it to you when it’s finished, probably some time in the middle of next week.
To get the report, just email us at email@example.com and I’ll send it when its finished. And you can join me in torturing yourself with the ones that got away!
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Tim’s Comment: Up close, everything about investing is different these days, with technology playing a huge part. But if you step back and look at the patterns of stocks, you see the exact same patterns that existed a century ago—and the reason is simple. Human emotions play a huge part in investment decisions, and always will. Today, sentiment is improving everywhere, thanks to growing productivity and falling unemployment, and thus stocks are rising. But when sentiment peaks, watch out!
Paul’s Comment: Lots of people use this French aphorism as a cynical dismissal of the idea that anything can ever change for the better. But I love it for its wry take on history, just as I flinch when I hear anyone say, “It’s different this time” about anything at all. The fundamental things apply, as time goes by, no matter what. And the more you learn about the history of the stock market, the more you appreciate the market’s ingenuity in finding new ways to produce the same results, over and over.
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
In this issue, Cabot Stock of the Month editor Tim Lutts disposes of his predictions for the year in a few sentences. He also continues his new series on Disruptive Stocks with his number two pick, Align Technology (ALGN).
Nancy Zambell, the new editor of Investment Digest and Dividend Digest, writes about the Internet of Things (IoT) that will connect more and more devices. Among the companies helping this to happen, she likes International Business Machines (IBM).
I use this issue to discuss Cabot Dividend Investor, Cabot’s revolutionary advisory for income investors, with its head analyst, Chloe Lutts Jensen. Cabot Dividend Investor will launch at the end of January, and Chloe talks about how subscribers can customize their income portfolios to meet their individual needs.
Have a great weekend,
Chief Analyst of Cabot China & Emerging Markets Report
and Editor of Cabot Wealth Advisory
P.S. I’m going to be presenting a program on China at the World MoneyShow in Orlando, Florida on January 30, just before dinnertime. The World MoneyShow is a major gathering of investors of every stripe, including gold bugs, day traders, dividend investors, growth investors and vendors of every kind of investment software and service imaginable. The conference kicks off January 29 and ends on January 31. If you need an excuse to go to Orlando to build up your strength to get through February, I’m glad to provide it. I hope to see you there.