Chasing Value: 2008 picks -- the last nail

Loews Corporation (NYSE: L) was hurt by its insurance interests and helped by its 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that did well until the oil market tanked. There was talk of a barrel of oil dropping below $100 when it peaked at $147 but few proclaimed it would actually drop by more than two thirds. And who believed them anyway?

Loews was down but also beat the market although in a convoluted way. During the year Loews split off its tobacco interests creating Lorillard Inc. (NYSE: LO).

Lorillard, which was named Carolina Group until June 10, 2008, accounted for about 22% of sales for former parent company Loews. Loews established Carolina Group in 2002 as a tracking stock for its tobacco holdings and owned 62% of its shares until it spun off Lorillard to Carolina Group and Lowes shareholders. This value is added to Loews in the tabulation. This was not a simple deal: To divest its holdings in the Carolina Group, which equaled 38 percent of that company, Loews offered its own shareholders a 0.70 share of Lorillard stock in exchange for a share of Loews stock. The company would then retire the shares of Loews stock that investors trade in. "That would effectively act as a share repurchase," Mr. Adelman (Morgan Stanley) told The Times. He noted that 38 percent of Carolina Group's shares would equal 25 percent of Loews' market capitalization, thus shrinking it by 25 percent.

Through the end of the year the average return for my eight picks amounted to a loss of -51.97% -- a major collapse and need I say, very painful given I was unhappy at -3.36% in an earlier report. This substantially underperformed the average return of the indices: -38.09%.

One surprise, or maybe not, this year's stalking horse, Berkshire Hathaway (NYSE: BRK.B), which was hurt like everything else, dropping further during June and July and falling way behind the indices' average finished down but ahead of the pack down -31.4%.

When including dividends for my picks -- that averaged an overall 3.91% yield through the first quarter. However, NCT reduced its dividend so the average yield dropped to 2.99% for the rest of the year. Factored together I added 3.47%. The loss was -51.97 + 3.47 = -48.50%. Using 1.8% for the average dividend reduces the average loss for the indices to -36.29%.

2008 ended up being about who lost the least and I lost 12.21% more than owning the indices. The following are my eight picks with the starting share price as of December 28, 2007, closing on December 31, 2008:

• Anglo American plc (ADR) (NASDAQ: AAUK) from $30.79 is Down to $11.62 for a loss of -62.26%.
• Bunge Limited (NYSE: BG) from $119.03 is Down to $51.77 for a loss of -56.51%.
• Huaneng Power International (ADR) (NYSE: HNP) from $41.75 is down to $29.18 for a loss of -30.11%.
• Loews Corporation (NYSE: L) from $49.35 it was reduced by 25% in consideration of the LO transaction to 37.01 is Down to $28.25, for a loss of -23.67%.
• Newcastle Investment Corp. (NYSE: NCT) from $13.08 is down to $0.84 for a loss of -93.58%.
• Raytheon Company (NYSE: RTN) from $61.51 is down to $51.04 for a loss of -17.02%.
• Reliance Steel & Aluminum (NYSE: RS) from $54.32 is down to $19.94 for a gain of -63.29%.
• Valero Energy Corporation (NYSE: VLO) from $70.55 is down to $21.64 for a loss of -69.33%.

The Indices:

• Dow Jones Industrial Average: 13,365.87 dropped to 8776.39 for a loss -34.34%
• NASDAQ Composite Index: 2,674.46 dropped to 1577.03 for a loss -41.03%
• Standard & Poor's 500 Index: 1,478.49 dropped to 903.25 for a loss -38.91%

This year's "stalking horse" Berkshire Hathaway (NYSE: BRK.B) saw its B shares down from $4,685 to $3,214 for a loss of -31.4% .

Well, Nothing to brag about here for me. 2007 was far better. 2008 saw the demise of most financial stocks and disappearance of many more. Oil prices shocked the world on the way up and surprised us all again when the collapsed by year end. The Fed rate is basically zero. We have a new president in Barack Obama to lead the nation. I hope his decisions are better than my 2008 stock picks.

Despite being up and down during my tenure at Blogginstocks I continue to move forward sharing my successes and failures as candidly as is practical. This year I hope to improve my 50/50 batting average with Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more.

Year 2008 Recap:

• 2008 picks: -48.50% loss
  
• Major Indices: -36.29% loss
• BRK.B: -31.4% loss

Good luck to all in 2009.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of AAUK, BRK.B, HNP, NCT, and VLO.