With many holiday traditions suspended this year, it may be comforting to know one custom remains: Vista’s annual review of experts’ market predictions.

Admittedly, relative to past years, a number of prognosticators fared well this year. Did Wall Street suddenly become skillful at predicting the unpredictable?

Likely not. Rather, the inclusion of turbocharged stocks like Tesla or Moderna—each up more than 600% as of this writing—is what fueled the winning records of many publications’ “Top Stocks for 2020.” If either of those two stocks made your 2020 list, it hardly mattered what else was on it.

Even with the advantage from a few extraordinary outperformers, many of the crème de la crème stock pickers still struck sour notes this year.

Merrill-y We Roll Along

Bank of America (B of A) Merrill Lynch published a somewhat dour outlook for investors in 2020, suggesting “business-as-usual investing” would come to an end.

The “conventional” 60% stock, 40% bond portfolio, the bank claimed, was “unlikely to survive.” With a balanced portfolio delivering 10% so far this year, we’d say buy-hold-rebalance (our version of “business as usual”) worked pretty darn well this year.

B of A’s analyst team at Merrill Lynch, which offered 11 stock picks to beat the market in 2020, didn’t fare much better. Seven of the 11 recommendations fell double digits, with energy giant Exxon Mobil (-35%) falling the most. All told, Merrill Lynch top picks lost 12%, while the total U.S. stock market index—no picking required—rose 16%.

Grin and Barron’s It

With stocks hitting record highs at year-end 2019, where could investors turn in 2020? To Barron’s list of Top 10 Stocks for 2020, of course!

While six of Barron’s 10 recommendations posted positive returns for the year, the full list rose just 4%, underperforming the U.S. stock market by 12%.

Ironically, the worst performer of the bunch, Royal Dutch Shell, was the stock about which Barron’s seemed most enthusiastic. Experts saw at least “50% upside in the shares, which trade no higher than they did in 2009.”

We can only assume Barron’s now sees even more upside, as Royal Dutch Shell shares plummeted nearly 40% in 2020 and now trade no higher than they did in 1999.

Wrong on the Money—Again

As in years past, Money magazine relied on three stock-picking mutual fund managers to assemble their list of six hot stocks for 2020. This new crop of stock pickers, Money assured readers, have proven “they know how to beat the market.”

Unfortunately for followers of Money’s advice, this batch of experts fared no better than past years’ stock pickers (ever wonder why their experts keep changing year to year?).

Three of Money’s six picks fell more than 20%, with Rolls-Royce (-70%) plummeting the most. All told, Money’s “best stocks” were down 18%, while the global stock index was up 12%.

Traditions Worth Repeating

All in all, 2020 provided a reminder of something we’ve long known: it’s a tiny number of stocks that have historically accounted for the lion’s share of the stock market’s return.

While this year some of the market’s biggest stocks were also some of its best performers, a longer view of history suggests there’s no telling which tiny basket of stocks will take the prize in any given year.

This leaves an investor with two choices: Bet you can consistently find the needle in the haystack, or just buy the whole haystack.

We prefer the investment strategy that relies far less on what’s possible (finding the needle) and far more on what’s most probable (diversification, asset allocation, low costs, and discipline).

We believe that’s a tradition worth repeating.

Sources

1. Ogg, Jon C. “11 Top Merrill Lynch Stock Picks for 2020.” 24/7 Wall Street. December 31, 2019.

2. Bary, Andrew. “Barron’s 10 Stock Picks for 2020.” Barron’s. December 15, 2019.

3. Derousseau, Ryan. “The Best Stocks for 2020, According to 3 Investing Pros Who Outsmarted the Market.” Money. December 16, 2019.