MAKING YOUR MONEY LAST


Hits and Misses of 2012

Investing

Initial public offerings

HIT: Annie's Inc. (symbol BNNY), a distributor of natural foods, opened March 28 at $36 and now fetches $46—for a tidy 28% gain (prices and returns are through October 4). The Berkeley, Cal., company makes organic and healthier versions of comfort foods, such as macaroni and cheese, and is expected to generate robust annual earnings growth of 25% over the next few years, thanks to trends toward healthy eating. But the stock has gotten pricey, trading at 45 times estimated earnings for the fiscal year that ends March 2014.

SEE OUR SLIDE SHOW: Fabulous Freebies 2012

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MISS: There were newly minted stocks that lost investors more money than Facebook (FB)—at least on a percentage basis—but none were more costly in raw dollars. After going public at $38 last May, Facebook saw its shares peak at $45 on the first day of trading, briefly giving it a market value of more than $100 billion. But insider selling and disappointing results have pushed the stock down to $22, slicing the Menlo Park, Cal., company's value by a cool $47 billion.


Stocks

HIT: The year's best and worst performers (not including penny stocks) were rags-to-riches and riches-to-rags stories. Arena Pharmaceuticals (ARNA), a money-losing San Diego biotechnology company, saw its stock soar 369% in 2012, from less than $2 to $9, thanks to its anti-obesity drug Belviq, which won U.S. Food & Drug Administration approval in June. But don't expect a repeat performance. The company still needs to clear hurdles before marketing the drug, and analysts expect Arena to continue to lose money through 2013.

MISS: The worst performer of 2012 was a familiar name: Groupon (GRPN). The ubiquitous Chicago-based provider of daily deals went public in November 2011 amid great fanfare, but it has since been buffeted by increased competition from the likes of Amazon, Google and Living Social. Worse, merchants are increasingly dissatisfied, saying that Groupon customers spend too little and don't come back. The stock, which traded for more than $19 in January, now trades for less than $5.


Mutual Fund Managers

HIT: Will Danoff has his hands full running $87 billion Fidelity Contrafund (FCNTX). But during his 22 years at the helm, he has demonstrated an agility that belies the fund’s immense size. Contra's 13.1% annualized return over the past 20 years beats the S&P 500 by an average of 3.6 percentage points per year. In the mid '90s, Danoff trailed the index for four straight years. The large-growth fund held 700 names, and critics called it fat at $20 billion. But Danoff adjusted. He now holds fewer stocks (some 337 at last word) and he lets his winners ride: Apple recently accounted for 9.9% of the fund's assets.

MISS: Then there's Henry Van der Eb Jr., the perpetually bearish manager of Gamco Mathers AAA (MATRX). His pessimism paid off in 2008, when Mathers eked out a 0.2% return while the S&P 500 plunged 37%. But in six of the past ten calendar years (including 2012), his fund spilled red ink. As a result, Mathers lost an annualized 1% over the past ten years, which puts it at the bottom of the conservative-allocation category.


Online Brokers

HIT: E*Trade. Its revamped Web site wows. You can customize the view of your account page by clicking and dragging windows around. For example, want your market news at the top and portfolio summary on the right? Just click a button. Plus, stock quotes update as they change, in streaming real time. The firm wins, too, because of its numerous investment offerings, including 50,000 bonds.

MISS: ING Direct ShareBuilder makes it easy to start investing—there's no minimum to open an account and you can buy individual stocks and ETFs for as little as $4 per trade. But it sank to the bottom of our latest broker survey. The biggest drawback: You can't buy or sell bonds.


Newsletters

HIT: Value Line Investment Survey ($598 per year) gives you access to research on 1,700 U.S.-listed stocks. Value Line's reports include pithy syntheses of analysts' opinions, plus a wealth of data on companies' balance sheets, profitability and stock-price valuation. On average, the letter's model portfolios gained 5.4% annualized over the past ten years through September. Other letters returned more, but few give subscribers more value.

MISS: Had you stashed $1,000 in the picks of Doug Fabian's ETF Trader over the past decade, you would have just $76 today. Trader's whopping 22.7% annualized loss over the past ten years makes it the worst performer among all letters tracked by the Hulbert Financial Digest. Fortunately, the $995-a-year newsletter recently changed hands and is now called Chris Versace's ETF PowerTrader.


Kiplinger Calls

HIT: Kiplinger's began 2012 with a bullish call on stocks, predicting a 9% return—a markedly optimistic prediction at a time when volatility ruled and nearly everyone had soured on stocks. Midyear, we bumped our prediction to 15%, and worried that we might still be too conservative. Year to date through October 4, the S&P 500 stock index was up 16%, and dividends added another two percentage points to the return.

MISS: We said that the yield on ten-year Treasury bonds could approach 3% by year-end—the second year in a row we forecast a rise in long-term rates. Wrong. Ten-year Treasuries now yield 1.7%.

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