We still need 15 ‘Lousy’ Stocks — Can you pick a loser?

Can a bunch of 350 pound runners really keep up with Olympic athletes?
 
The answer to that question, of course, is “no”–not if each group is relying on their own two feet.  But in the mysterious world of finance the answer to that is clearly, “maybe”.
 
I asked readers to select the metaphorical Olympic runners.  And you’ve done a fine job.  You’ve selected 10 actively managed mutual funds with fabulous track records, and I’ll roll them together in a single $500,000 “virtual” portfolio:  $50,000 allocated to each fund.
 
I also asked readers to select the 350 pound runners:  30 individual U.S. stocks that you figured were “lousy”.  I asked, initially, that those stocks traded above $15 a share, but as long as they aren’t penny stocks, I think we can relax the rule. 

Of course, what one person deems a “lousy” stock, another person might see as an “opportunity”, but that’s normal.  In the stock market, there are always two sides to everything—explaining why there’s a buyer for every seller, and vice versa (always).  The bottom line is that my readers selected stocks that they thought were crummy—not stocks that they thought would do well.  Fantastic!
 
The Actively Managed Mutual Funds
 
Three of the selected actively managed mutual funds carry front end loads of 5.75%.  They include the American Funds New World A, the American Century Heritage and the American Funds American Mutual A.  This is akin to lumping a 40 pound sack of potatoes on an Olympic marathon runner, and insisting that she carry it for the first 5km of the marathon.  She’s going to fall behind right away.  But will her speed eventually allow her to catch up?  When I track this collection of funds, I’m going to make this as real as possible.  Investors will have to pay fees to buy three of these funds, so I’ll be deducting 5.75% from each of the fee charging funds before they exit the starting gate.
 
The “lousy” stocks
 
Each stock will carry a commission of $9.99—a competitive rate for a discount brokerage account.  As such, this portfolio will carry the total burden of $299.70 for the 30 purchase orders an investor would need to make to buy these stocks.

Will the “lousy” stocks or the actively managed funds have the lead from the beginning?

  • Starting with $500,000, the “lousy stock” portfolio will need to shell out $299.70 in commission fees.
  • Starting with $500,000, the great actively managed mutual fund collection will shell out $8,625 in commission fees.

It doesn’t take Nostradamus to predict that the “lousy stock” portfolio will take more than an $8000 lead in the first day—thanks to the burden of commission sales fees on just three of the selected funds.
 
Here are the 15 actively managed funds selected by contributors to the challenge.  It’s a complete list, so we don’t need to add any more funds.
 
1.  American Funds New World A
2. American Century Heritage Inst
3. American Funds American Mutual A
4. FMI Large Cap
5. Sound Shore Fund
6. T. Rowe Price Equity Fund (PRFDX).
7. Dodge and Cox Stock Fund
8. Fidelity Puritan
9. Fidelity Select Energy.
10. Legg Mason Value Trust 
 
Here are the first 15 below, and I’m looking for 15 more before I can make this race official:  10 great actively managed mutual funds vs. 30 “lousy” stocks.

1. AIG
2. Juniper Networks
3. Banco Santander
4. Eli Lilly and Alcoa
5. Alcoa
6. Kimco Realty Corp. (KIM)
7. NutriSystem Inc. (NTRI)
8. Gamestop (GME)
9. Zions Bancorp (Zion)
10. Lucent
11. Citibank
12. Sun Microsystem
13. AOL-Time Warner
14. Ciena (US:CIEN)
15. ATC Technology Corp (US:ATAC-Q)

However we do need 15 more stock suggestions. 

It’s said that Nostradamus could foretell disasters…

Can you pick a loser?

 (Add your “Loser” via the ‘Comments’ section at the top of this post)






Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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11 Responses

  1. Rob McMath says:

    My picks are Pfizer and Scotia Dividend Fund. Pfizer is the only "good" stock that I have never made money on and it has never recovered from its dive in 2000. Scotia Div is a solid mutual fund with a relatively low MER that has averaged about 12% since it came on the scene.

  2. Andrew Hallam says:

    Thanks for that Rob!

    We have all the mutual funds we need, but I'll add Pfizer to our list of "dogs"

    Thanks again Rob! This is going to be a fun race to watch.

  3. Patrick Green says:

    How about Microsoft? Has anyone been able to make money on them in the last 10 years?

  4. Linda says:

    Here are three more to consider for the "lousy" list and why I suggested them:

    Burger King Holdings (BKC) (unhappy franchisees at the moment)

    Bank of America (BAC) (a bit of a movement underway in the U.S. to move money out of the big banks into community banks and credit unions – http://www.moveyourmoney.info)
    Krispy Kreme Doughnuts, Inc (KKD) (this one may be too "lousy" in terms of stock price)

    These are just suggestions, Andrew. Hopefully, at least one, will help extend your list so the game can soon begin!

  5. Starting to throw some darts here Andrew, but how about…

    1) Textron Inc (US:TXT-N), if you still want stocks above the $15 USD threshold or

    2) If below (the threshold), Goodyear (US:GT-N)?

    Looking forward to the contest!

  6. Hey Linda,

    Thanks for those! I look forward to adding them to the portfolio.

    Financial Cents,

    I love the dart throwing concept! Fantastic! Thanks for tossing these into the mix!

    I'm thinking that once this race starts, it's going to be a pretty even match over time. And if I can be so bold….I think the crummy stocks might be ahead after 5 years.

    What do you think?

    Andrew

  7. Hey Linda and Financial cents!

    Thanks for your contributions to the rest.

    Personally, what do each of you think the results will be: short term and long term?

    I am really curious!

    Thanks again!

    Andrew

  8. Dave says:

    News Corp

    While not a junk stock (is it?) I'd like to see how Rupert, (who's a pretty smart cookie and would be decidely unhappy at seeing his co. make this list:), gets his company to adapt to the proliferation of free info on the web — particularly how it goes with its battle with Google over paid content. Interestingly Rupert said about the Apple ipad, "It may well be the saving of the newspaper industry." I'm guessing that utimately the stock price in a few years will tell who wins and who loses…

  9. Andrew Hallam says:

    Dave,

    What a great idea and addition (Newscorp) Fantastic. Looking up the company's ticker symbol, I noticed that Rupert Murdoch pays himself $13.5 million per year as the CEO. That's a pretty sick amount of money. Yeah, I'm definitely adding that stock to our list!

    Financial Cents,

    Your darts have hit the board. I look forward to adding Textron and GoodYear. Thanks for these!!

    Linda,

    Thanks for another three stocks! Burger King, Bank of America and Krispe Creme are super additions to this portfolio. Thanks again!

    Patrick,

    It's going to be so interesting to see what happens to Microsoft over the next ten years or so. I'll add it to the portfolio!

    Thanks again!

    Andrew

  10. How's your list coming Andrew? Almost there? When does this madness begin? 🙂

  11. Hey Financial cents!

    I think I'll put it all together this weekend. Thanks for keeping me on my toes!

    I still need a few more stocks, but I could complete the roster with newspaper stocks!

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