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Sharek’s 2013 Review


2013_review2013 was a stellar year for the stock market and my clients as well. The Growth Portfolio, which composes the most assets under management, rose 49% for the year, the Aggressive Growth Portfolio returned 50%. The S&P 500 (the market) rose 30%.

Last year was my third year of greater than 40% returns in an eleven year career as a stock portfolio manager. A $100,000 investment in the Growth Portfolio at inception would have generated a profit of $210,000, compared to a profit of $110,000 in the S&P 500.

2014 started weak, and scary from my perspective. The Growth Portfolio returned only 2% in both 2012 & 2013, and mid-way through 2014 it was up only 7% year-to-date. The market was up a solid 13% in 2013’s first half, and I was concerned clients would move on as I wasn’t delivering returns. I was afraid for my business, and owe you gratitude for believing in me. After halftime the Growth Portfolio posted monthly returns of 10%, 4%, 7%, 4%, 7% and 3% from July through December. I feel like I left the doghouse and then won Westminster.

Going into 2013 I predicted the stock market would grow 21% for the year, and a total of 46% by 2014. The market was selling for only 14 times earnings late in 2012 and in low inflation environments like this the market is worth 18 times earnings. I felt the market’s P/E would rise from 14 to 16 in 2013 and from 16 to 18 in 2014. The market ended 2013 with a P/E of 17. Conservative dividend paying stocks were on sale then, they rose and now have little upside. With many big stocks like Microsoft ($36 and worth $32 this year, $36 next year) and Proctor & Gamble ($76, worth $72 this year, $79 next year) now fairly valued it will be hard to get the market’s P/E from 17 to 18. With a 17 P/E the market will gain 9% this year, an 18 P/E nets a 15% return. I’m guessing the market rises 12%.

Although I am less optimistic on the market, I’m very bullish on prospects for our portfolios. My Top Ten for 2014 has upside to Fair Value of 54%. I’m most bullish on Facebook, Michael Kors, Priceline (as usual) and Chinese Internet stocks, which boosted our performance in the second half of 2013 and I expect them to do so again in 2014.

In conclusion I wish to thank you for your business. I wouldn’t be here today if it wasn’t for your trust and faith. In 2014 I hope to increase my research more on young stocks, and continue to uncover tomorrow’s stock market winners today.

David Sharek David Sharek is stock portfolio manager and CEO of DavidSharek.com. David believes a company's profits ultimately drive the price of its stock. His book The School of Hard Stocks can be found on Amazon.com.