Do the stock predictors know what they’re doing? Let’s see.

Posted on by

By December 21, 2021, I had invested almost all of my savings into the stock market over the previous 6 months, when the S&P 500 was climbing to record highs. (I believe it increased by at least 28% that year.) In 2021, I began delving into the FIRE movement (Financial Independence, Retire Early), and I began investing in Index Funds, as most of the sensible financial independence gurus recommend. Of course, if you’ve followed the market over 2022, you know that it took a big dip from its high at the end of 2021, but we are (as of this writing, January 27, 2023) about where we were two years ago, Feb 1, 2021, which was a record high, one of many that were hit during 2021’s extraordinary climb. (Obviously, I, like everyone, wish I’d put everything into the market at the beginning of 2021 and took it out at the end of the year. Alas, no magic crystal ball told me to do so.)

To my point: In December 2021, I began seeing articles about which stock picks would grow in 2022. As an experiment, I thought I would save a couple of those articles to see how they turned out. Here’s an example from businessinsider.com: 

That’s a lot of stocks to track, but let’s list them:

  1. Activision Blizzard, ATVI
  2. T-Mobile, TMUS
  3. Comcast, CMCSA
  4. Discovery, DISCA
  5. Electronic Arts, EA
  6. Penn National Gaming, PENN
  7. Norwegian Cruise Line, NCLH
  8. Gap, GPS
  9. Las Vegas Sands, LVS
  10. Hess, HES
  11. Citigroup, C
  12. Invesco, IVZ
  13. Medtronic, MDT
  14. Zimmer Biomet, ZBH
  15. Biogen, BIIB
  16. Teleflex, TFX
  17. Alaska Air, ALK
  18. Southwest Airlines, LUV
  19. Delta Air Lines, DAL
  20. Generac Holdings, GNRC, 
  21. Global Payments, GPN
  22. Paypal, PYPL
  23. Skyworks Solutions, SWKS
  24. Fidelity National, FIS
  25. Fleetcore Tech, FLT
  26. Qorvo, QRVO
  27. Western Digital, WDC

Some of these companies are familiar to me, and some are not. I can hardly believe what this article is saying is the expected 2022 return on some of these stocks. 42% on Skyworks!? 47% on PayPal? 53% on Global Payments? 49% on Delta? 57% on Alaska Air? 43% on Gap? 56% on Norwegian Cruise Lines? What the hell are these people drinking? How many more cruises do they think people are gonna take!?! And finally, 87% on Penn National Gaming. Wow. But hey, if internet gambling is totally legalized, maybe that one makes sense. You can click on the link to the article to read the other expected 2022 returns. 

So what really happened? Well, Russian invaded Ukraine, but even before that, the stock market started to dip just a couple of days into 2022. 

I’ll compare the prices from December 28, 2021 to December 28, 2022. I’m not gonna do them all, because it’ll take me forever. 

  1. Activision Blizzard, ATVI
    1. At 66.67 on December 28, 2021, a year later it was at 76.05. That’s an 14% increase in a year that was pretty bad! But ATVI jumped up that first month and slumped a little bit downward for the rest of the year. (I assume that jump was in response to the news that Microsoft was planning to buy it.) Of course, Goldman Sachs projected at 52% return for ATVI in 2022. 
  2. T-Mobile, TMUS
    1. Expected: 41%, Reality: 118.16 to 138.98, for a 17.6% return. Not bad, considering the returns on the indexes.
  3. Comcast, CMCSA
    1. Expected: 32%, Reality: 50.51 to 34.62, for a negative 31.4% return. Yikes. Maybe Goldman forgot to put the minus sign before their projection?
  4. Discovery, DISCA
    1. This was delisted, because it was bought by Warner Brothers? Or bought by AT&T and combined with Warner? I’m not gonna do much research on this, because I’m dumb about this stuff.
  5. Electronic Arts, EA
    1. Expected: 35%, Reality: 133.47 to 119.54, for a negative 10.4% return. 
  6. Penn National Gaming, PENN
    1. Expected: 87%, Reality: 49.34 to 28.31, for a negative 42.6% return. Well that’s quite a bit off. 
  7. Norwegian Cruise Line, NCLH
    1. Expected: 56%, Reality: 21.91 to 12.14, for a negative 44.6% return. There must be some articles out there about how millennials are destroying the cruise industry.
  8. Gap, GPS
    1. Expected: 43%, Reality: 17.41 to 11.29, for a negative 35% return. 
  9. Las Vegas Sands, LVS
    1. Expected: 38%, Reality: 37.65 to 46.18, for a 22.6% return. I guess the house always wins? But over a 10-year period, this stock has some crazy highs and lows. I don’t know how people can stomach trading individual stocks like this. 
  10. Hess, HES
    1. Expected: 42%, Reality: 75.28 to 138.64, for an 84% return! We’ve got a winner! I’m assuming this was a good year for (non-Russian) energy stocks, considering the attempts to get away from buying Russian oil and gas, after the invasion.
  11. Citigroup, C
    1. Expected: 36%, Reality, 60.62 to 44.62, for a negative 26% return. 
  12. Invesco, IVZ, down
  13. Medtronic, MDT, down
  14. Zimmer Biomet, ZBH, same
  15. Biogen, BIIB, up, after a crazy jump in August. I don’t know what that’s about. 
  16. Teleflex, TFX, down
  17. Alaska Air, ALK, down
  18. Southwest Airlines, LUV, down
  19. Delta Air Lines, DAL
    1. Expected: 49%, Reality: 39.63 to 31.99, for a negative 19% return. 
  20. Generac Holdings, GNRC, down a lot
    1. Expected: 48%, Reality: 348 to 96, for a 72% decrease. Whoa. 
  21. Global Payments, GPN, down a good bit
  22. Paypal, PYPL
    1. Expected: 47%, Reality: 190.1 to 67.55, for a negative 64% return. What the hell happened here!? It was at a high of 301.77 in July of 2021! Yikes. 
  23. Skyworks Solutions, SWKS
    1. Expected: 42%, Reality: 155.94 to 86.8, for a negative 44% return. 
  24. Fidelity National, FIS, down by almost half
  25. Fleetcore Tech, FLT, down
  26. Qorvo, QRVO, down by about half 
  27. Western Digital, WDC, down

(I assume I have my math right, but please correct me if I’m wrong.)

So there you have it, folks. What does this tell me? The prognosticators don’t know what the hell they are doing. Crazy stuff happens (like the attempted genocide of the Ukrainian people), and markets will react in a multitude of ways. Needless to say, if you invested in all of these stocks at the beginning of 2022, you would NOT have received a 32% return at all. 

VTSAX was at 116 at the end of 2021, and at the end of 2022, it was at 91.6, for a negative 21% return. I actually don’t think my returns were that bad, but that’s because I didn’t invest it all at the end of 2021. I invested it over the course of the last 6 months of 2021, so I experienced some gains before the downturn.

I’ve been hearing a lot of noise about another downturn or recession in 2023, but I’m skeptical. Who knows what will happen? Hopefully Ukraine will make gains against Russian aggression. Of course, the Republicans in congress will likely provoke a showdown over the debt ceiling. If the US defaulted on its debts, that would likely shake things up. We don’t know what will happen.

I keep saving and investing as much as possible, because I want to reach financial independence as soon as possible, because financial independence equals a certain level of freedom from having to work and live in a particular location. I want the option to move if I want to, wherever I want to, especially after my daughter graduates from high school in 11 years. 

Anyway, this was an exercise I planned to do a couple of weeks ago, and I’m glad I finally sat down to get it done. I hope it’s helpful to whoever might read it. 

Peace,

Brad

Advertisement