Reviewing 2016 Predictions

It’s time once again for the Year in Review! In year’s past, I simply find the first article I can regarding 2016 predictions and see how finely tuned the crystal balls were, but as a special treat this time around I actually kept a copy of Fortune magazine’s “Investor’s Guide 2016” from December 2015. It’s been sitting in my desk for twelve months aging like a fine wine. Every time I would open my drawer and see its shiny cover with that big gold brick popping out, the anticipation built a little more. So while children around the country could hardly wait until December 25th this year, I was looking forward to these first weeks in January when I would finally throw open that cover and find out which stocks and ETF’s I should have purchased a year ago!



Let’s dive in…

“Overpaying Doesn’t Pay. In volatile times, ‘alternative’ investments strategies are supposed to provide an edge that justifies their high fees. But hedge funds have underperformed stocks for 2015 so far.”

What is this!? I don’t save a copy of Fortune for an entire year to get sober, prudent advice. There’s a gold bar exploding off the front cover for crying out loud! Let’s flip forward a couple pages, shall we.

“The world is rife with turmoil and volatility. But we’ve found 16 investments…

That’s what I’m talking about! That’s the good stuff, right there.

“For decades, the U.S. airline industry was the corporate equivalent of the Chicago Cubs—a loser of historic proportions.”

Uh-oh. Making fun of the historical incompetence of a team who then went on to win the World Series ten months later is probably not the best sign for your 2016 predictions. I think I have to score that as the first missed call.

“A diversified way to play the sector is the U.S. Global Jets ETF…For individual stocks, the best choices are Delta and Virgin America.”

Virgin America was definitely a homerun, gaining over 50% in 2016 thanks to their merger with Alaskan Airlines. JETS was up 12.48% and Delta was down -1.63%, neither of which seem like devastating results until you realize the Russell 3000 (a good approximation of the entire US market) was up 12.74% for the year. We can call JETS a push and Delta a loss.

Next up: health care!

“If you’re seeking safety, health care is probably the best prescription.”

What were the odds that the prescription metaphor was leading off this section? 99%? 100%? The article goes on to recommend the Health Care Select SPDR (an ETF holding many health care companies), Merck and Biogen. Their 2016 returns were -2.76%, 14.96%, and -7.43% respectively. Judging by those calls, “more cow bell” would have been a more effective prescription.

For the sake of not getting too long, we get ten more stock picks that end up with varying success. The big winners were Dupont (up 44.20%) and Transcanada (up 43.77%) while the big losers were Volkswagen (down 3.47%) and Google (up just 1.71%). Dupont and Volkswagen were chosen as “comeback companies” after each had a rough 2015. You win some and you lose some.

Overall, this was one of the more successful prediction issues I’ve seen in my time, which is a shame—not nearly as many jokes to be made—although it does say something that a successful experience was simply recommending as many winners as losers. That seems to be a low bar. Nevertheless, the biggest disappointment for me was that I couldn’t find even a few words about gold. You have a gold bar exploding off your cover and I can’t get one hot take on inflation or the collapse of the dollar?! Disappointing Fortune, very disappointing.

The lesson, of course, is short-term predictions are worthless. In general, most should get about half right and half wrong and be worse off for having moved all that money around. So I leave you with the annual reminder and gift that you don’t need to guess to be successful in the market. The best strategy for 2017 (and every year), is to invest your long-term money in a low-cost, globally diversified portfolio of stocks and leave it alone. I hope 2017 treats you well!