Caris tops local stock pickers in turbulent year


POSTED: Sunday, March 01, 2009

The stock market was a bloodbath in 2008.




Norm Caris

Caris and Co.




Managing director for institutional sales


12/31 return:




Barry Hyman


FIM Group Ltd.




Vice president of management team


12/31 return:




Dwight Melton


Hawaii Stocks and Options Group






12/31 return:




Richard Dole


Dole Capital LLC




Chief executive


12/31 return:




And, so far in 2009, the pain hasn't let up.

It's no surprise then that the winner of the seventh annual Star-Bulletin stock-picking contest had a losing record for the first time in the competition's history.

Still, all things considered, champion Norm Caris' 13.2 percent decline wasn't too shabby considering that the Dow Jones industrial average fell 32 percent, including dividends, while the Standard & Poor's 500 index dropped 37 percent and the Nasdaq composite index tumbled 40 percent.

Caris, managing director-institutional sales for Caris and Co., finished 2008 with $17,363.56 remaining in his hypothetical $20,000 portfolio. It was the first time he has ever won the contest.

Barry Hyman, vice president-managing team for the Maui branch of Michigan-based FIM Group Ltd., was second with a 23.4 percent loss to $15,324.32.

Dwight Melton, co-founder of the Hawaii Stocks and Options Group, was third with a 35.9 percent loss to $12,816.97.

And Richard Dole, chief executive of Honolulu investment adviser Dole Capital LLC, was last with a decline of 46.9 percent to $10,622.19.

Caris, who calls it a stock picker's market, said investors saw “;almost unprecedented”; global turmoil in the markets last year.

“;While I pick stocks that I believe have good underlying fundamentals, you can't discount the difficulty of the environment in 2008,”; he said.

Caris' selection of textile manufacturer Unifi, whose price had doubled after nine months, saw most of the gain evaporate in the fourth quarter but still realized a 16.5 percent increase for the year. Continental Airlines, which Caris picked up after the third quarter, paid big dividends and posted a three-month return of 8.3 percent. However, Microsoft, another selection that he chose after the third quarter, turned out to be a disappointment and fell 26.7 percent.

Hyman said he wasn't surprised that 2008 was a down year since his outlook for the year was pretty bleak to start.

“;I predicted all three major indicies to end the year lower,”; said Hyman, who was the only one of the four experts to do so. “;What I did not anticipate was the level of risk taking and mismanagement of the global financial institutions which, when they were exposed, caused a credit freeze, a liquidity crisis, and panic selling. Nor did I foresee the erratic, to put it kindly, reaction the government would have to the ensuing crisis.”;

Hyman said the complete loss of access to financing was devastating to the smaller companies in his portfolio.

“;Fortunately, my cautious outlook led to picking some hedge investments which provided enough cushion to avoid the level of losses seen in most global stock indicies.”;

Hyman's best performer by a long shot was the ProShares UltraShort QQQ, which jumped 77 percent because it moves double the inverse of the Nasdaq 100 index.

His worst performer was the RMR Asia Real Estate Fund, which fell 56.4 percent.

Melton, whose aggressive approach backfired in the down market, revamped his portfolio for the final quarter with all index short funds to try to take advantage of the economic slump.

His best performer - even though he held it for just three months - was the same ProShares UltraShort QQQ selection as Hyman. Melton realized a 21.4 percent gain during the quarter for that pick. He also earned an 18.1 percent return from ProShares UltraShort Basic Materials and a 15.9 percent gain from ProShares UltraShort S&P 500.

Melton said the market last year was hit on all fronts from the trauma in the housing and energy markets, high-profile failures and forced marriages in the banking and brokerage industries, an unprecedented credit crisis, the need for financial bailouts, and a recession which he said “;threatens to be the worst in more than a generation.”;

Dole ended a difficult year with all losers in his portfolio. Real estate investment trust iStar Financial suffered the worst decline with a 90.2 percent drop.

“;(It) collapsed with the sector,”; Dole said.

His one local stock, Alexander & Baldwin, fell 50 percent while Procter & Gamble, a consumer products company which he picked up after the third quarter, never paid off as it fell 10.7 percent.

Dole said stocks might be more attractively priced now than a year ago because the risks appear to be priced in the market.

“;No one can tell when the market will turn around, but as in the past, it will be when investors least expect it,”; he said.

Next week: The stock pickers offer their top selections for 2009.


Best investment ideas of 2008 (final results)

Hawaii stock experts began the year with a $20,000 hypothetical portfolio:

CompanyTickerSector12/31 CloseShares12/31 Total return12/31 value
UnifiUFITextile / apparel$2.821,600+16.5%$4,512.00
Continental AirlinesCALAirlines$18.06400+8.3%$7,224.00
Taiwan Semiconductor*TSMSemiconductor equipment$7.9049-23.6%$405.80
MicrosoftMSFTApplications software$19.44266-26.7%$5,205.300
Cash*     $16.46
Total     $17,363.56 
CompanyTickerSector12/31 CloseShares12/31 Total return12/31 value
ProShares UltraShort QQQQIDDouble inverse Nasdaq-100 index$57.35105+77.0%$7,057.71
SPDR Gold TrustGLDGold fund$86.5245+1.7%$3,893.40
Nalco HoldingNLCWater treatment systems$11.54226-45.2%$2,620.63
RMR Asia Real Estate FundRAFAsia real estate$6.57265-56.4%$1,740.55
Cash*     $14.39
Total     $15,864.47
CompanyTickerSector12/31 CloseShares12/31 Total return12/31 value
ProShares UltraShort QQQQIDGrowth-large cap short fund$57.3537+21.4%$2,457.84
ProShares UltraShort Basic MaterialsSMNBasic materials short fund$38.8877+18.1%$4,841.86
ProShares UltraShort S&P 500SDSGrowth-large cap short fund$70.9414+15.9%$1,330.39
ProShares UltraShort FinancialsSKFFinancials short fund$103.0131-34.1%$3,198.86
ProShares UltraShort Emerging MarketsEEVEmerging markets short fund$52.5413-45.9%$683.02
Cash*     $305.00
Total     $12,816.97
CompanyTickerSector12/31 CloseShares12/31 Total return12/31 value
Procter & GamblePGConsumer products$61.8250-10.7%$3,112.04
PfizerPFEMedical / drugs$17.71200-16.9%$3,096.75
PowerShares QQQQQQQIndex fund$29.7470-41.7%$2,089.28
Alexander & BaldwinAXBOcean transportation / real estate$25.0675-50.0%$1,936.12
iStar FinancialSFIReal Estate Investment Trust$2.23150-90.2%$381.50
Cash*     $6.50
Total     $10,622.19

*Cash received the highest rate listed by Bankrate.com, Zions Bank (2.53 percent), at the end of the quarter. Note: Total returns and stocks that are sold include reinvested dividends