I started writing for the Motley Fool Blog Network in June 2012 because I enjoy sharing my passion for investing in great companies. As someone who comes from an entrepreneurial background, I find it exciting to own even a small piece of a business that is changing the world, even in subtle ways. With every stock I have recommended, I either already owned the company and/or I initiated a position at the time of publication so my interests are always aligned with individual investors that might act on my recommendations. I focus on companies that I believe are disruptive, powerful brands that are part of a long-term trend, are often misunderstood by markets, which provides an opportunity to buy at attractive levels.
The internet provides many investment voices keen to tell you about the next hot stock or investment strategy, so accountability is important. To that end, today I look back on all of my picks from 2012, their respective performance in relative to the S&P 500, and what I think of those choices today. Below is a chart that depicts the performance of each company, followed by a short summary about each business and the status of my investment thesis.
Google Inc (NASDAQ:GOOG) (56% Gain versus 25% Gain in SPY))
BorgWarner Inc. (NYSE:BWA) (52% Gain versus 25% Gain in SPY)
I channeled Peter Lynch with my investment in Borgwarner-an easy to understand business tied in to a long-term trend, trading well below its growth rate. While regarded as a cyclical company, BorgWarner Inc. (NYSE:BWA) is an innovator tied to a long-term global trend toward better fuel efficiency and more powerful (but smaller) engines. It is rare to find a company that is part of a trend that serves regulatory concerns, macro-trends, industrial wants, and consumer needs. It was trading at .73 PEG ratio, mostly because of fear regarding Europe (50% of revenue) providing a great opportunity for the long-term investor. I have not sold any shares, but would not add after the latest jump due to an earnings beat and raised guidance for fiscal year 2013, but I will add on market pullbacks.
Denbury Resources Inc. (NYSE:DNR) (20% Gain versus 21% Gain in SPY)
Denbury’s focus on enhanced oil recovery (EOR), utilizes carbon dioxide injections acting as a solvent, mixing with oil, releasing it from the bedrock, while also trapping the majority of the carbon dioxide. Conventional drilling yields 40% of the potential oil, while EOR can increase recovery to approximately 50-60%. Denbury Resources Inc. (NYSE:DNR) is unique in that they own two low-cost sustainable sources of carbon dioxide in wells both in the Gulf (the only significant local source) and the Rockies, and deploy it via a pipeline infrastructure. They recently sold their prolific, conventional oil assets in the Bakken shale to raise capital to invest in building out their pipeline infrastructure, which will yield increasingly higher rates of high gross margin oil over the next few years. Despite the attractive return since my initial investment, I believe it remains a strong buy at current levels.
Baidu.com, Inc. (ADR) (NASDAQ:BIDU) (17% Gain versus 20% Gain in SPY)
When I wrote about Baidu it was especially compelling given the P/E of 21.7 on next year’s earnings. At $117.50/per share, the company had a .75 PEG ratio on (5 yr projected earnings). The stock plummeted from there on China growth concerns. Akin to Google Inc (NASDAQ:GOOG), there were concerns about increases in R&D and headcount expenses. The stock has since rebounded on strong earnings. It is good example of the power of market psychology and why patience is necessary for long-term investment success. Baidu.com, Inc. (ADR) (NASDAQ:BIDU) continues to be a strong long-term investment in Internet expansion, online marketing, and mobile growth in China, all of which remain in the early stages of growth. It is a buy.
Westport Innovations Inc. (USA) (NASDAQ:WPRT) (14% Loss versus 18% Gain in SPY)
At the time that I recommended Westport I noted that this was a long-term investment and that I did not expect profitability for 1-2 years. However, it was disappointing that the company experienced gross margin pressure due to slower than expected sales, delays in infrastructure build-out and increased expenses, primarily due to investments. Despite the meandering stock price, and expected volatility, I think the story remains strong. Westport Innovations Inc. (USA) (NASDAQ:WPRT) has expanded their partnerships with OEMs, and I think the company will see improved margins over the next few quarters and a tipping point within the next 2 years in terms of profitability. I believe an investment now will provide attractive returns in the long-term as long haul truckers increasingly adopt Nat Gas engines. Consider that a barrel of oil contains the energy equivalent of 6 MCF (thousand cubic feet) of Nat gas and one MCF is now trading at $3.32 versus a barrel of oil at $103.84 per barrel, the equivalent amount of energy for $19.92. While liquid natural gas (LNG) and compressed natural gas (CNG) vary from the aforementioned price, by any metric both are significantly cheaper (and cleaner) than oil making it an attractive option for long-haul truckers and large shipping companies like UPS and Fedex.
EOG Resources Inc (NYSE:EOG) (44% Gain Versus 18% Gain in SPY)
EOG Resources Inc (NYSE:EOG) is a perennial performer for my portfolio- it is a compelling growth story that is a combination of vision, operational ability, technical expertise, and a source for high quality crude and natural gas assets that will play a role in making the U.S. energy independent. I have not sold any shares, but I think a lot of growth is priced in to the stock. If it trades down due to oil price volatility, I would look to add to my core position.
IPG Photonics Corporation (NASDAQ:IPGP) (7% Gain Versus 23% Gain in SPY)
IPGP streamlines, and enables advancements in a broad swath of the manufacturing industry including high growth areas medical and electronic devices. IPG Photonics Corporation (NASDAQ:IPGP) has underperformed the S&P, but continues to grow at 20%. Because of conservative guidance, the stock is trading below its growth rate, which offers a great opportunity to get in now (be greedy while others are fearful). It may pay-off for your portfolio in the long run.
Netflix, Inc. (NASDAQ:NFLX) (194% Gain Versus 18% Gain in SPY)
When I recommended Netflix the stock was left for dead. I wrote two articles, one relating why Netflix, Inc. (NASDAQ:NFLX) was an attractive take-over target for Facebook, and a subsequent article describing why Reed Hastings focus on content generation and exclusive deals like Disney was a game changer for the company. I recently sold 30% of my position at $264, but I will look to add at lower levels as the company continues to evolve. With Reed Hastings leadership, I continue to believe that the future for Netflix will be defined by content generation, the evolution of TV, successfully executing global expansion, and further applying competitive pressure to the conventional cable television business model.
In 2013, I have written two investment recommendations, including Range Resources Corp. (NYSE:RRC) (10% Gain), and LeapFrog Enterprises, Inc. (NYSE:LF) (22% Gain), each outpacing the SPY. Please stay tuned for future companies that will provide market-beating returns.
James Fantaci owns shares of GOOG, BWA, DNR, BIDU, WPRT, EOG, IPGP, NFLX, RRC, and LF. Please follow James on twitter for more market beating stock picks, and updates on new Motley Fool articles.
The Motley Fool recommends Baidu, BorgWarner, Google, Netflix, and Westport Innovations. The Motley Fool owns shares of Baidu, Denbury Resources, Google, Netflix, and Westport Innovations.
The article My 2012 Report Card originally appeared on Fool.com.
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