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Outside the Box
Dec. 8, 2010, 12:01 a.m. EST
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By Jeff Reeves
ROCKVILLE, Md. (MarketWatch) "” Investors love trends, charts and numbers. We have to "” because if somehow we can plot a trend from a mess of candle graphs and historical data, we can convince ourselves that our portfolio will be profitable in the months ahead.
Right now, investors are being overloaded with a myriad of year-end recaps highlighting the best stocks and sectors from the past 12 months, but make sure you read all of these stories with a grain of salt. They tend to offer little insight on the stock market's future performance, and acting on them can do more harm than good to your portfolio
At the end of 2009, investors were thrilled with the way the stock market had bounced back from the March lows and was humming into a new year. The typical "year in review" story in December 2009 would have highlighted these stocks as among the Dow Jones Industrial Average's /quotes/comstock/10w!i:dji/delayed (DJIA 11,368, +9.01, +0.08%) top performers:
"¢American Express Co. /quotes/comstock/13*!axp/quotes/nls/axp (AXP 45.56, +0.78, +1.74%) , up 126% in 2009
"¢Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 27.18, +0.31, +1.15%) , up 60% in 2009
"¢IBM /quotes/comstock/13*!ibm/quotes/nls/ibm (IBM 145.48, +1.46, +1.01%) , up 59% in 2009
"¢3M Co. /quotes/comstock/13*!mmm/quotes/nls/mmm (MMM 84.44, +0.25, +0.29%) , up 49% in 2009
"¢Alcoa Inc. /quotes/comstock/13*!aa/quotes/nls/aa (AA 14.18, +0.03, +0.22%) , up 47% in 2009
The average gain in this group is 68% "” more than three times the broader Dow's gain of almost 19% on the year. Even the "worst" of this group doubled the index's returns. Read about six stocks you don't want to own in 2011 on InvestorPlace.
So how have the best of 2009 fared this year? In a word "¦ badly.
"¢American Express, up 13% in 2010
"¢Microsoft, down 10% in 2010
"¢IBM, up 13% in 2010
"¢3M, up 8% in 2010
"¢Alcoa, down 11% in 2010
With the Dow up 8%, only two of these top-five picks have outperformed the market "” and just barely. When you take the average return of the five stocks, you'd barely do better than break even on the year.
To add insult to injury, two even made the list of the Dow's five worst performers of 2010: Microsoft and Alcoa.
Netflix proves it has the juice with streaming Disney deal, writes Jon Friedman.
10:16 a.m. Today10:16 a.m. Dec. 8, 2010
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