Can You Beat The Market?

Think you’re a great stock picker?

Prove it! Enter my stock-picking contest, Dorfman’s Three-Stock Derby.

Contestants pick three stocks and the average gain on the three is their score. The winner gets a moment of fame, plus a $100 gift certificate to the restaurant of their choice.

John Colodny, a hedge-fund manager and semi-retired electrical engineer from Coral Springs, Florida, won my 2022-2023 contest.

First Place

Last May, Colodny picked three exchange-traded funds issued by ProShares, each of which bet on energy prices to decline. The funds use leverage to increase their gains (or losses). His most successful bet was that the price of natural gas would decline.

That bet achieved a 174% profit. His other two picks had a 3% gain and a 34% loss. Overall, he had a 47% gain.

What led Colodny to believe that natural-gas prices would decline? “It was a combination of chart reading and climate issues,” he says.

Colodny’s hedge fund is still in incubation: The only investors so far are his partner and himself. Colodny is the administrative officer. His partner, Geoff Liddy, does the stock picking. The fund does short-term trading. Its typical time horizon is “minutes, not hours or days,” Colodny said.

He thinks the stock market will be stuck in a trading range between 3,800 and 4,200 on the Standard & Poor’s 500 Index for most of this year. (The index stood at 4,169 as of April 28.) But he thinks it will “break through 4,200 by the end of the year.”

His favorite personal investment at the moment is the Vanguard S&P 500 Growth Index Fund (
VOOG
). Its biggest holdings are Apple
AAPL
, Microsoft
MSFT
, Nvidia (NVDA) and Alphabet
GOOGL
.

He sees the national debt as the market’s biggest problem. He thinks major stock-market gains aren’t likely “until we get a handle on the deficit and federal spending.”

Second Place

Ken Hagen, a dentist and real-estate developer in Omaha, Nebraska, grabbed second place with a 35% gain. He picked three Chinese stocks that trade in the U.S.—Didi Global (DIDI), UP Fintech Holding Ltd. (TIGR) and DADA Nexus Ltd. (DADA).

Two of the three had losses, but Didi Global rose 130%, giving Hagen a 35% gain overall. Didi is China’s leading ride-hailing company.

Hagen says he doesn’t focus on the overall market, but looks for opportunities in individual stocks or exchange-traded funds. He is sweet on the semiconductor industry now.

Third Place

Taking the bronze medal was Gordon Faison, a flooring wholesaler from Virginia Beach, Virginia. His 28% return came mostly from Netflix
NFLX
, which surged 76% in the contest period. His other two picks, Moderna (MRNA) and Skyworks Solutions
SWKS
, had small gains.

Faison expects the market to be “dead flat until 2024.” He dislikes the Biden administration, and is “worried” that Congress may be unable to compromise on the federal debt and spending.

His favorite stocks are Pioneer Natural Resources
PXD
and Devon Energy
DVN
.

Tough Year

This year 37 contestants joined the Derby. Nineteen finished with losses, and 18 had gains. The average loss was about 1%. The Standard & Poor’s 500 Index rose 7.6% during the contest period, including dividends.

You Can Play

To enter Dorfman’s Three-Stock Derby, send me the six items below.

1. Your name

2. Address

3. Occupation

4. Email address

5. Phone numbers for work and home.

6. The three stocks you choose. You don’t have to give your rationale but I like it if you do.

Email me your entry at [email protected]. Or mail it to John Dorfman, Dorfman Value Investments, 101 Federal Street, Suite 1900, Boston MA 02110.

Entries must be postmarked or time stamped by midnight May 21, 2023. The contest will run from May 21, 2023 to the market close on April 20, 2024.

If you finish in the top three, I will want to interview you on short notice and possibly on a weekend, so the phone numbers are vital.

You do not need to own the stocks you select, but it’s fine if you do. Stocks must be traded in the U.S., but need not necessarily be U.S. companies. Short sales are permitted but not encouraged, since I have a separate short-selling contest. Exchange traded funds (ETFs) are permitted.

There is no fee to enter. The winner will receive a $100 gift certificate to the restaurant of her or his choice.

Disclosure: I own Apple, Alphabet and Pioneer Natural Resources personally and for most of my clients. I own Moderna personally and for some clients. My wife, a portfolio manager at my firm, owns Microsoft and Nvidia personally and for clients.