2007 stock picks: Mortgage mess...tech success

Our bank stock bets bombed, but we hit it big with bullish calls on Big Blue, RIMM, Apple and Microsoft.

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By Paul R. La Monica, CNNMoney.com editor at large

How will the stock markets perform in 2008?
  • Better than last year
  • Worse than last year
  • About the same as last year

NEW YORK (CNNMoney.com) -- Happy New Year. We at CNNMoney.com resolve to be better stock pickers in 2008.

It's time to take a look back at how the stocks we profiled in our biweekly Stock Spotlight feature fared last year. Let's just say that we're thankful we're not money managers.

We had a promising start to last year touting IBM (IBM, Fortune 500). Shares of Big Blue returned 11 percent since we wrote about it. But a bullish call on CBS left us with a black Eye. That stock, like many of its media brethren, had a rough 2007 and fell 8 percent since our recommendation appeared.

We fared a little better with our Valentine's ode to stocks we love. We picked five stocks worthy of our devotion and three of them rose in value. The average return for the five stocks in this portfolio -- Schlumberger, Guess?, Altera, Kohl's and Goldcorp -- was 7 percent.

Despite healthy gains for oil services company Schlumberger and mining company Goldcorp, a 36 percent decline in shares of retailer Kohl's brought down the group's overall return.

But then came a stretch of picks we'd rather forget. We wrote in late February that comic book publisher and movie studio Marvel was fairly valued. The stock's performance was anything but heroic, falling 12 percent.

We then made two very bad calls on financial stocks. In the beginning of March, just as the subprime crisis was starting to reach a full boil, we incorrectly predicted that Goldman Sachs (GS, Fortune 500) would face a "rocky road." Fortunately, we didn't determine Lloyd Blankfein's bonus. The stock rose 8 percent.

We also made a big blunder, our biggest of the year in fact, by declaring that investors were overreacting to concerns about Countrywide's (CFC, Fortune 500) exposure to the mortgage meltdown. We thought the worst was over. Ouch. The stock plunged another 75 percent after our story ran.

We redeemed ourselves in April by making our best pick of the year, a bullish call on Blackberry maker Research in Motion (RIMM). The stock soared nearly 140 percent since we pointed out that RIM would not be hurt by the launch of Apple's iPhone.

This was soon followed by several more bad picks. We thought struggling airliner JetBlue, fresh off the news that George Soros increased his stake, would gain altitude. The stock has plummeted 48 percent.

We also told investors in early May not to buy Tyco International before it broke up into three companies. At the time of our story, Tyco was trading at $110.27. The three companies it has since split up into finished 2007 with a cumulative value of $121.07, a return of 10 percent.

Our grumpy ogre tendencies finally bore fruit though when we said that DreamWorks Animation, the producer of the popular "Shrek" series was due for a bad Hollywood ending despite the box office clout of "Shrek the Third." The stock fell 10 percent.

But we made a bad bet on Starbucks in June. We thought the coffee king would soon rediscover its buzz. That turned out to be a Venti-sized mistake, and the stock fell 26 percent.

Next took a bite out of Apple (AAPL, Fortune 500)...to our benefit. We said the stock might be volatile around the launch of the iPhone but that earnings estimates were probably too low and that the stock was a buy. Shares surged 60 percent.

We also had better luck with another company known for caffeinated beverages: Coca-Cola. The stock has gained nearly 20 percent since we wrote in July that the stock still had some "pop" left.

Unfortunately, we waded back into the financial services sector in the summer -- with mixed results.

As part of a sector piece in August, we pointed out that JP Morgan Chase, Citigroup (C, Fortune 500), Wells Fargo and Bank of America might be oversold. JP Morgan Chase is down only 2 percent since then, but Wells and BofA are each off more than 10 percent -- and Citi has plunged nearly 40 percent.

A profile on a conservatively-run regional bank in New Jersey, Hudson City Bancorp, has paid dividends though. The stock is up 9 percent since we dubbed it the "anti-Countrywide."

But we erred in September by being too negative on investment bank Lehman Brothers. The stock is up 10 percent since we said we were "lukewarm" about Lehman.

Two tech picks in the summer turned out better for us though. We wrote in August that Dell still had a long way to go before reclaiming its "darling of Wall Street" status despite some improvements. And the stock has fallen 5 percent since then.

But we praised Microsoft's (MSFT, Fortune 500) revitalized growth prospects in late August. The stock is up more than 20 percent since then.

We ended the year with a look at a mixed bag of companies, including toy maker Mattel, gold mining stocks and Nintendo, the manufacturer of the popular Wii console.

We thought that Mattel would bounce back from its public relations nightmare following a spate of recalls of toys made in China. But the stock has fallen 16 percent since our October story.

Some of our gold picks glittered, including two gold ETFs and mining stock Newmont. But two metal sector mutual funds, as well as miners Harmony Gold and Gold Fields are all down since we profiled the sector in November.

Finally, shares of Nintendo are up 4 percent since we predicted more good news ahead for the company in mid-November.

All in all, it was a good year for many of our tech and consumer picks, but we got burned badly by underestimating how bad the credit crunch would get on Wall Street. We obviously weren't the only ones to make bad bets on banks, but it still hurts nonetheless.

So stick with us in 2008 and we hope to do a better job than we did in 2007 in picking winning stocks and identifying overvalued companies ripe for a fall. To top of page

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