Laurent Condon, a retired trader in Saint-Rambert-en-Bugey, France, won my stock picking contest, Dorfman’s Three-Stock Derby, for 2019-2020. This was the fourth time Condon has won honors in one of my contests. He won my short-selling contest in 2017-2018, and finished third the following year. Last year, he finished third in stock picking.
His outlook now? Gloomy. “I think the stock market is not going to print a new high price before a very long time, probably several years,” he says. “The virus was the catalyst to a long-awaited bear market. Stock prices were so far away from the fundamental values.”
Institutions, both government and private, are now “fragile” in his view, and he concludes, “Now we can’t escape the recession.”
Condon’s performance in the latest contest, which requires contestants to pick three stocks, was spectacular, with a 267% return. He had a 619% gain on Kodiak Sciences (KOD), an 89% gain on a short sale of Ocean Power Technologies (OPTT) and a 94% gain on a short sale of Yangtze River Port and Logistics Ltd. (YRIV).
A short sale is, in essence, a bet that a stock will decline.
When he picked Kodiak Sciences, he called it a “young biotech stock” that was “promising but speculative,” with a few products in Phase One and Phase Two clinical trials. Based in Palo Alto, California, Kodiak is working on new ways to treat diseases of the eye, specifically the retina.
Looking forward, he would bet on inflation hedges such as gold producer B2Gold (BTG). He also likes some real estate investment trusts in the hospitality industry, such as Park Hotels and Resorts (PK). But he sees little hope for banged-up airline and cruise-line stocks.
The second-place and third-place finishers also think the market faces at least a couple more months of rough going, though they are more optimistic than Condon.
Bob Kraft (no relation to the Robert Kraft who owns the New England Patriots) is a psychologist in Omaha, Nebraska. He finished second with a 12.4% overall return. Gains on Apple (AAPL) and Tesla (TSLA) helped him overcome a loss on Berkshire Hathaway (BRK.B).
“I have a hard time thinking that the market will get much better as long as the epidemic continues,” Kraft says. “Once the curve flattens and we get a lot of testing, some people might loosen up and invest again.”
Kraft says he owned Apple and Tesla, sold them early in the Covid-19 crisis, and expects to buy them back again at lower prices.
The bronze medal went to David Bowden, a retired saw mill worker in Carrsville, Virginia. He achieved an 11.6% return overall, with gains in Avon Products (which was acquired) and PetMed Express (PETS) overcoming a big loss in Occidental Petroleum (OXY).
He thinks the market will trend down for another six months or so, “unless they find a drug” that counteracts the coronavirus pandemic. But he thinks the worst part of the decline is over. “I like energy stocks right now,” he says, in a contrarian bet. Also, “I bought a little bit of cruiseline stock, probably too early.”
Twenty people entered Dorfman’s Three-Stock Derby in 2019-2020, and fifteen of then sustained losses on their picks. That’s not surprising, as the Standard & Poor’s 500 Index dropped 18.5% during the contest period, April 12, 2019 through March 20, 2020. The average contestant suffered a loss of about 15%, which was a bit better than the S&P 500.
Want to Play?
For his victory, Condon will receive a $100 gift certificate at the restaurant of his choice. The same prize will go to the winner of the next contest.
To enter Dorfman’s Three-Stock Derby, send three stock picks to me at [email protected]. If you prefer, mail your entry to John Dorfman, Chairman, Dorfman Value Investments, 379 Elliot Street, Suite 100 H, Newton Upper Falls MA 02464.
Be sure to include:
1. Your name.
2. Your physical address.
3. Your email address.
4. Your occupation.
5. Your phone number at work and home (so I can interview you if you win).
6. Your three stock picks, preferably with a brief rationale for each.
The next contest runs from April 21, 2020 through April 21, 2021. Your entry must be time-stamped or postmarked by midnight, April 20, 2020.
You do not need to own any of the stocks you select, but it’s fine if you do. Stocks must be traded in the U.S., but need not be based here. Short sales are allowed but not encouraged, since I have a separate contest for short selling.
Disclosure: I own Apple shares personally and for most clients. Some of my clients own Berkshire Hathaway.
John Dorfman is chairman of Dorfman Value Investments LLC. His firm or clients may own or trade securities discussed in this column. He can be reached at [email protected].