Chasing Value: 2010 Picks Triple Market Returns

Eight of my picks were up and two down. The eight successful picks bested the indices individually and collectively, with the lowest of them still returning twice as much as the indices. To accurately reflect the appreciation, I included Dividends for the Ten Stock Picks.

The following are the results from December 28, 2009 to March 31, 2010 listed from best to worst returns.

Stock Picks: The average return was 13.28% + 0.61% dividend (0.25 x 2.43% annual) = 13.89%

Grubb & Ellis (GBE): Then $1.33, now $2.20 (gain: +65.41%)

Berkshire Hathaway (BRK.B): Then $65.75, now $81.27 (gain: +23.6%)

E-Trade 'Naked Put' (ETFC): Then $1.35, now $1.65 (gain: +22.22%)

EZCORP (EZPW): Then $17.35, now $20.60 (gain: +18.73%)

General Electric (GE): Then $15.34, now $18.20 (gain: +18.64%)

Home Depot (HD:) Then $29.27, now $32.35 (gain: +10.52%)

Raytheon Company (RTN:) Then $52.18, now $56.75 (gain: +8.76%)

Williams Company (WMB): Then $21.25, now $23.10 (gain: +8.71%)

Archer Daniels Midland (ADM): Then $31.63, now $28.90 (loss: -8.63%)

Brasil Telecom (BTM): Then $29.45, now $19.09 (loss:-35.18%

Primary Indices': The average return was 3.76% + 0.43% dividend (.25 x 1.72% annual) = 4.19%

NASDAQ ($COMPX) (0.79 Yield) Then 2,291.08, now 2,397.96 (gain: +4.67%)

Standard & Poors 500 Index ($INX) (1.69% Yield) Then 1,127.78, now 1.169.43 (gain: +3.69%)

Dow Jones Industrial Average ($INDU) (2.69% Yield) Then 10,547.08, now 10,856.63 (gain: +2.93%)

My picks more than tripled the indices for the quarter, coming in 9.8% ahead. If you would like to go back and review my initial thoughts on each of the stocks the following links will provide that opportunity. By chance and my good fortune the top two picks actually ended up the top two performers, while the worst performer was my 9th pick, which is actually the last because #10 E-Trade is an option position.

#1 Berkshire Hathaway: As anticipated BRK.B did follow through with a 50 to 1 stock split making it more affordable for small investors seeking to tag along with "my pal Warren". Berkshire also was added to the S&P 500 replacing the Burlington Northern Santa Fe Railroad (BNI) boosting it still more.

#2 Grubb & Ellis: The brokerage business did not show great improvement in the first quarter, but as the company continued to contain cost, and make strategic acquisitions in it's Commercial and Medical REITS it is looking more and more like it's survival is no longer in question. It was beaten down so much there was only one place to go: up -- and it did.

#3 EZCORP: EZ Corp did what it does best, focusing on the methodical expansion of its enterprises in pawn shops, cash advance outlets, and small loans. As I consider it the "McDonalds" of pawn shops, but still in its infant stage -- even using the same red and yellow color scheme -- I expect it to do the same thing, keep growing for at least the next decade. EZPW was also one of my 2009 picks and sticking with it paid off.

#4 Home Depot: HD was one of the top Dow performers based on the home sales and improvement market starting up in earnest. There seems to be more hope than evidence at this point, but eventually pent up demand will kick in, and even banks having foreclosed will need to keep up the homes they add to their balance sheet.

#5 Williams Company: Gas prices remain low but WMB makes its money on transporting the stuff, not selling it. In the mean time it has consolidated its master partnerships rolling them up into a more focused enterprise and still looks to improve as the company continues to adapt to the needs of the current market.

#6 General Electric: The second best performing Dow stock (behind Bank of America (BAC) is finally getting some love after going nowhere while the rest of the market was heating up in 2009. GE is pushing ahead aggressively into expansion of its water, power, energy, and health enterprises, while trimming back its financial arm, returning to its industrial roots. GE was the other of the two holdovers from last year. I thought patience would pay off and so far that has held true.

#7 Archer Daniels Midland: Although fuel prices are on the rise they are still depressed from the time ADM's ethanol business was growing by leaps and bounds. In the mean time the agriculture business has not kept pace with the rest of the economic rebound, or at least stock market gains.

#8 Raytheon Company: RTN just raised its dividend 20% displaying confidence in its growth while maintaining a strong balance sheet and cash flow. The company continues to prosper from its Patriot missile sales (very expensive razor blades, if you like) and radar systems in support of governments and private clients around the world.

#9 Brasil Telecom: An unforeseen business transaction slammed BTM when a larger acquirer did not follow though on a commitment. However, this past week JP Morgan upgraded BTM to overweight with a $26 target. I do not put much credence in these guesstimates, but I do expect the stock to rise before the year is up.

#10 E-Trade 'Naked Put': This was the first time that I had included any options among my picks but I'm glad I did. There is plenty of room for this one to continue paying off all year long. The trade was selling to open, January 2011 "puts" with a $2.50 strike price, paying $1.15 per share up front. This is often referred to as a "naked put". I have been writing more and more about these as I have been using this opportunity broadly as a part of my current investment strategy.

The next report will be in July. Absent any unusual market activity I expect my market leading picks to hold up for the year. However, if they do not, you can be sure I will report that too.

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: Among the positions discussed in this post, I own shares of BRK.B, GBE, EZPW, WMB, GE, RTN and ETFC options.