Winners, washouts in the 2012 market
TheMarker looks back to see how analysts' stock predictions from a year ago fared over the next 12 months. Babylon was tops, Clal Biotechnology flopped.
Since the Temple was destroyed the gift of prophecy has been taken from prophets and given to fools and children, according to a noted Talmudic sage.
But this has little bearing on the annual ritual of toting up the past year's winners and losers on the market and forecasting next year's outcome.
Everyone gets caught up in these rites, from economists, analysts and bankers to government ministries.
But even though there's a tendency to deride predictions, capital markets and investments are always driven by expectations for the future. After all, nobody buys Apple stock because of the company's wonderful past achievements.
The past is water under the bridge, and pricing stocks should ultimately be based on cash flows expected in the future. Making assumptions about the future and trying to formulate some type of forecast is therefore unavoidable.
Investors can also adopt forecasts made by others, and this is obviously why people want to know what the experts and professionals have to say. So on this forgiving note, we recall the recommendations provided last year by several investment houses to see how they panned out.
The Tel Aviv Stock Exchange was, on the whole, kind to investors in 2012. The benchmark TA-25 index climbed 12% while the TA-100 has gained about 9%.
The MidCap 50 index rose about 26% in value for the year with several days of trading still to come. The strongest sector was banks, where the index has climbed about 28%, while the worst was communications which shed 31% of its value.
Meitav Investment House
A year ago Meitav warmly recommended shares of The Israel Corporation, parent of Zim shipping lines, Israel Chemicals, and Better Place. The stock gained 11%, slightly less than the TA-25 index.
Picking Clal Industries turned out to be an even sorrier choice. It dropped 12%, but control of the company was transferred from IDB group to the American entrepreneur Len Blavatnik for much more than its market value, which suggests that TASE was undervaluing the company. Meitav also recommended Bank Leumi stock which climbed 21% but failed to keep pace with the TA Banking index.
The investment house, however, hit paydirt with Fox fashions, which soared 41%. Meitav rightly expected the retailer's license for operating the American Eagle chain in Israel to shore up its stock. Even more prescient was choosing Kamada, which topped the biomed index by rising 75%.
Leader Holdings & Investments
Bank Hapoalim, Leader's choice last year for the financial sector, didn't disappoint. A 35% increase in its share price, far better than the banks index, restored Hapoalim to being the top ranking Israeli bank in terms of market value.
Azrieli and Nitsba Holdings, Leader's two real estate picks, each climbed just 7% while the Real Estate 15 index chalked up a double-digit gain. Among oil & gas stocks Leader backed the wrong horse: Delek Group's Cohen Development, which barely moved.
For communications, Leader didn't fare well on its choice of Bezeq for an "effective dispersal to counter regulation." The stock didn't do as badly as the TA Com index but lost 21% of its value nonetheless.
Migdal Capital Markets
Migdal opted for three stocks of real estate companies: Y.H. Dimri Building & Development, which climbed 11% but lagged behind its MidCap 50 index; Mishorim Development, which dropped 6%; and Gazit Globe, shot up 39% to beat the TA Real Estate 15 index.
Migdal also indicated Clal Biotechnology as having strong potential, but its stock price in fact crashed by 47% since the beginning of the year while the biomed index registered a double-digit gain.
Among technology stocks Migdal chose Spectronix, maker of fire detection systems, which rose 16% in price, not much less than its related index.
Excellence Nessuah Brokerage
Excellence hit the jackpot with its choice last year of Isramco, 29% owner of the Tamar natural gas field. The stock jumped 37% this year, leading the oil & gas index. A 35% gain recorded by Hapoalim stock, the brokerage's pick among bank shares, outdid all its competitors with the exception of First International Bank of Israel.
Excellence also chose Bezeq which, as mentioned, fell 21% but didn't do as poorly as other telecom companies. It also chose Clal Industries, which dropped 12%. Part of the reason it focused on the latter, Excellence explained, was the potential seen in subsidiary Clal Biotechnology whose stock, as it turned out, took a nosedive.
Excellence's technology pick was Priortech, developer of inspection systems for printed circuit boards. The stock gained 15% but lagged behind the TA Blue-Tech 50 index.
Anyone following the advice of Clal Finance a year ago would have profited quite handsomely. The firm identified the two stocks that would go on to lead the TA-100 index: Babylon, Noam Lanir's translation software developing enterprise, and Mellanox Technologies, a developer of microchips for communications headed by Eyal Waldman. Babylon and Mellanox shares soared 153% and 87% respectively since the beginning of 2012.
Both companies boasted skyrocketing revenues and profits throughout the year, with their show of remarkable results igniting investor interest. Both shares have lost substantial ground over recent months but are still expected to end 2012 well above all others.
Another outstanding choice was Intec Pharma which soared 53%, beating the biomed index by a huge margin.
Among bank shares Clal Finance also picked Hapoalim, which outperformed both the TA-25 and banks indices. For real estate it chose Nitsba citing its "ridiculously-low price-earnings ratio," but the stock finished up just 7%, falling behind the TA Real Estate 15 index.