As we wrap up the year, it’s time to see how my selection in the Best Stocks for 2015 contest. But first, congratulations are in order to Paul La Monica for his selection of Alphabet (GOOGL), formerly Google. La Monica ran away with it this year buying one of the few stocks showing any real momentum in the entire S&P 500. This was was the “Year of the FANGs,†in which Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google spent most of the year rallying while the rest of the market languished.
This time last year, I looked at shares of Prospect Capital (PSEC) and saw a real gem of a value stock. Well, Mr. Market seemed to have other ideas in 2015. The combination of crashing energy prices and the looming threat of Fed tightening had a chilling effect on “alternative†stocks like business development companies, master limited partnerships and real estate investment trusts. Essentially, anything that regularly accesses the capital markets got clobbered this year. The entire BDC sector got hammered, and PSEC got hammered a little harder than average.
That said, the best defense against a fickle market is to buy at a reasonable price, and that is precisely what I did when I recommended Prospect Capital. Â And even though PSEC lost money this year, my conservatism in a rough market put me in the top half of the contest.
As I wrote a year ago, “I don’t expect much from U.S. equities in 2015. It’s not that I’m a bear — I’m not — but valuations look stretched, and U.S. stocks are priced to deliver flattish returns over the next 5 to 7 years. Rather than buy, hold, and pray that this bull market has another good year left in it, I’d prefer to get my returns up front in cold, hard cash.â€
It was the right call to be wary of the stock market. However, my preference for dividends and value wasn’t such a good call. Value sectors stocks have massively underperformed growth this year.
