Assessing my 2018 Stock Picks

Last January I chose three stocks as recommendations for 2018. Here’s how they performed after one year:

The Context

After solid gains in early 2018, the stock market closed the year with a series of massive declines, due to a range of factors including a U.S.-China trade war, political instability in Washington, questionable guidance from the Fed, and softness from companies capable of driving market sentiment (looking at you, Apple).

Overall, “the market” (as defined by the S&P 500) declined 6% in 2018. Therefore, any stock that did better than a 6% decline can be considered to have outperformed — including stocks that were flat and stocks that declined by 5% or less. Now that the context for performance has been framed I’ll review each of my recommendations.

Visa (+16% in 2018):

Visa is a ‘mature’ company that’s been as visible as they come, yet the stock continues to feel like a best kept secret. It astounds me how seldomly the media covers Visa, despite it outperforming the market year in and year out. That’s fine by me — if the government overlooks the fact that Visa and Mastercard are psuedo-monopolies, they will continue to generate outsized returns. For 2018, Visa was one of the top 5 stocks in the entire Dow Jones, so I feel pretty good about having recommended it last year.

Amazon (+26% in 2018):

Unlike Visa, one could never say Amazon’s performance goes unnoticed. Currently the most valuable company in the world, Amazon had a banner year in 2018. At one point the stock price eclipsed $2,000 and the company reached a trillion dollars in value. Like most stocks Amazon was affected by the broader market selloff in late 2018, but its overall performance should be rewarding to anyone who purchased it last January.

Alibaba (-25% in 2018):

This one is harder to spin positively. I expected Alibaba’s performance to cool after 97% growth in 2017, but did not anticipate the magnitude of the Trump administration’s trade war. As one of the premier vehicles for investing in the growth of China, Alibaba is particularly vulnerable to negative news selloffs — which occurred frequently in 2018 — in addition to slowing growth expectations for China’s economy. I certainly don’t feel great about recommending a stock that lost a quarter of its value. That said, if you invested equally across these 3 stocks, you would still have earned a positive return of 6%, and outperformed the broader market (and most professional money managers) by more than 12%.

What about 2019?

I only invest in companies I believe have clear competitive advantages and considerable long-term growth prospects. Currently I’m researching trends in video games, food delivery, artificial intelligence, and other emerging areas. I’m confident that AirBnB and GRAB are worth putting money into, but they aren’t publicly traded companies (yet). So in the meantime I would recommend doubling down on the stocks mentioned in this post. I expect all three to ‘outperform’ the market this year, again 🙂

— Jan. 20, 2019