When two savvy investing teams engage in a one-year stock-picking competition, with few limits on selections and no trading, you might expect returns to diverge wildly after eight months.
Not this time.
Roughly two-thirds of the way through our second annual Globe and Mail Investing Club challenge, which kicked off on June 1, our two portfolios are essentially locked in a tie. If that’s not weird enough, both portfolios are killing the indexes.
The Readers’ Portfolio – culled from the 10 most popular stocks based on individual submissions from our readers last year; we’ll announce our star stock-pickers in June – has gained 30.9 per cent as of Feb. 10. This return does not include dividends or factor in currency differences.
That is a spectacular return that is about double the gain from the S&P 500 and the S&P/TSX Composite Index over the same period.
But our own Hot List – compiled from the efforts of our team of intrepid reporters, who selected an entirely different slate of 10 stocks drawn from different investing themes – is up 31.1 per cent.
There is a slim gap of just 0.2 percentage points between the two portfolios, which suggests that this competition is way too close to call. And it’s a real head-scratcher, too, given the curiously similar – and outstanding – performance of the two portfolios.
Will dividends decide the winner?
Maybe. Include the quarterly distributions from the likes of BCE Inc. BCE-T and Toronto-Dominion Bank TD-N and the Readers’ Portfolio nudges ahead with a gain of 32.6 per cent so far.
But you might want to hold off on ordering the champagne just yet.
Add distributions from the likes of Toronto-based Northland Power Inc. and Nutrien Ltd. of Saskatoon to the Hot List, and the portfolio’s return rises to 31.6 per cent. With dividends, the gap between the two portfolios widens to – wow – one full percentage point.
Perhaps investing themes will have a bigger impact over the next four months.
Readers jumped on technology stocks at the start of the competition, betting that the promise of artificial intelligence, which dominated the stock market from 2023 to the start of the competition, will continue to deliver gains.
Eight months in, Celestica Inc. is up 144.6 per cent. The Toronto-based company, which has benefited from the rollout of AI data centres, is the top-performing stock within the two portfolios. Shopify Inc., the e-commerce software company based in Ottawa with its own AI ambitions, is also firing on all cylinders with a gain of 112.7 per cent.
Other, more direct plays on AI, though, have been a drag on the portfolio. Nvidia Corp., which makes AI-related chips, is up 21.8 per cent – a market-beating return that nonetheless has lagged the portfolio’s average return.
Worse, Microsoft Corp. MFST-Q has been zig-zagging throughout the competition and is down slightly. For the Readers’ Portfolio to take a significant lead in the competition, these blue-chip U.S. tech giants may have to step up.
For the Hot List, the best-performers have had nothing to do with AI.
Artizia Inc. ATZ-T, the Vancouver-based women’s clothing retailer, has been generating strong online growth and driving a successful expansion into the United States. Brampton, Ont.-based MDA Space Ltd. has been winning major contracts to manufacture satellites, including an additional $750-million deal with Globalstar Inc. announced this month.
If AI, satellites and women’s slacks continue to deliver the biggest gains in the competition, the next four months just might deliver a photo-finish finale – in which we all emerge as winners.