The Analysts

December 26, 2019    Portfolio Idea Predictions Analysts

For the last portfolio of the year, I’m going to look at the analysts that are now publishing their “top stocks to watch in 2020”. The selection criteria is a bit different than usual. But I think it’s going to be interesting to validate whether or not trusting all those analysis’s and forecasts makes any sense.

Predictions

It’s famously known that predicting the stock market is a fool’s errand. Every one is advised to avoid predicting, yet every one is doing it.

Many financial publications live by a constant stream of analyst forecasts. It looks like it’s an easy way to get eyeballs. Even though studies show there isn’t a single person that can consistently predict the market. It’s almost impossible to tell what companies are going to be a good short term investments.

But what if there is wisdom in the crowds? What if you could combine all predictions and extract an “über-prediction” of what is going to happen? Let’s try it out with a few popular sites.

I’ve picked 5 of the bigger sites and their tips for next year:

  • Fortune interviews 5 experts. In total, they recommend 13 shares: Aspen Technology (AZPN), Autodesk (ADSK), Danaher (DHR), Disney (DIS), General Electric (GE), Intuit (INTU), MercadoLibre (MELI), Prudential Financial (PRU), Thermo Fisher Scientific (TMO), Union Pacific (UNP), United Airlines (UAL), United Parcel Service (UPS), and Walmart (WMT).
  • On CNBC, Michael Farr tips the following stock: Disney (DIS), FedEx (FDX), Valmont Industries (VMI), Lowe’s Cos (LOW), Becton, Dickinson & Co (BDX), CVS Health (CVS), Johnson & Johnson (JNJ), Microsoft Corp (MSFT), Chevron (CVX), and Truist Financial Corp (TFC).
  • Barron’s 10 picks are: Alphabet (GOOGL), Amerco (UHAL), Anthem (ANTM), Berkshire Hathaway (BRK), Comcast (CMCSA), Dell Technologies (DELL), Pfizer (PFE), Royal Dutch Shell (RDS/B), United Technologies (UTX), and ViacomCBS (VIAC).
  • Kiplinger has 20 suggestions: AstraZeneca (AZN), Bright Horizons Family Solutions (BFAM), Chemours (CC), Copart (CPRT), Costco (COST), CVS Health (CVS), Diamond Offshore Drilling (DO), Disney (DIS), Energy Transfer LP (ET), Linde (LIN), McDonald’s (MCD), Medtronic (MDT), Motorola Solutions (MSI), Nvidia (NVDA), Okta Inc. (OKTA), Shell Midstream Partners LP (SHLX), SPDR Gold MiniShares (GLDM), Trip.com Group (TCOM), U.S. Bancorp (USB), and VISA (V).
  • Bloomberg has 50 companies to watch. To keep the numbers comparable to the other’s above, I sorted them by earnings per share growth and took the first 20: CD Projekt (OTGLY), American International Group (AIG), Netflix (NFLX), Nidec (NJDCY), Tullow (TUWOY), AIA (AAGIY), Anta Sports (ANPDY), Siemens (SIEGY), Facebook (FB), Toyota (TM), Lululemon (LULU), Just Eat (JSTTY), Global Payments (GPN), Schlumberger (SLB), T-Mobile (TMUS), Motorola Solutions (MSI), MPLX (MPLX), Goodman Group (GMGSF), Keyence (KYCCF), and Bayer (BAYN.DE)

This Month’s Portfolio

This month’s criteria is looking for companies that the analysts picked:

  • First I took all the companies that were picked by more than one analyst: CVS, DIS and MSI.
  • All the other companies, I ordered by estimated EPS for next year and took the top 7.
Symbol Name Current price Estimated EPS Next Year
GOOGL Alphabet Inc. 1,347.82 54.13
ANTM Anthem, Inc. 304.33 22.71
UHAL AMERCO 372.43 21.72
BDX Becton, Dickinson and Company 272.78 13.96
TMO Thermo Fisher Scientific Inc. 325.72 13.60
UAL United Airlines Holdings, Inc. 89.39 12.80
FDX FedEx Corporation 151.01 12.49
MSI Motorola Solutions, Inc. 162.13 8.57
CVS CVS Health Corporation 74.59 7.14
DIS The Walt Disney Company 145.61 6.22

You’ll notice that the 3 companies that were picked by multiple analysts have the lowest EPS of the group, so this may impact how they perform. Let’s evaluate next year if this was a good way of working.


My philosophy: If you want to invest and your goal is to try to beat the market, you need a system. You need a system that can decide for you what to buy, when to sell and not to panic when things go down. Everything starts with selecting stock. You should not just select random stock here and there based on whims or things you read. No, create a system that suites your style and follow it. These posts give you example of what such a stock selection could look like.

Unless otherwise noted, I do all my research through the Uncle Stock screener. It's a great tool to have in your belt. (note: this is an affiliate link, if you sign up, I get a commision)

Disclaimer: Don't believe anything I say or write. Always do your own research before making any investment decisions.