Revisiting My 2011 Predictions

 | Sep 30, 2011 | 11:30 AM EDT  | Comments
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Now that we are three quarters of the way through 2011, it's once again time to revisit some of the year-end prognostications I made in late 2010. Because I don't have a crystal ball, I'm typically not too big on making these types of calls, but it is interesting to look back at the thought process I was using at the time, and see what plays have been in the ballpark, and what have not.

I believed that gold would trade higher from the $1,400 per-ounce range where it ended 2010 and end 2011 at $1,800 per ounce. Well, the yellow metal certainly got to $1,800 and beyond, but whether we'll end the year at that level remains to be seen. September has been a bad month for gold, but I'm not sure its run is over. There's still too much uncertainty.

I remain bearish on General Motors (GM). I believed at the beginning of 2011 that shareholders would be disappointed by the company this year. With shares down nearly 44% year to date, it's a safe bet that those hoping for a nice run in 2011 have been severely disappointed. With the shares trading at less than 5x trailing and forward earnings, the value investor in me is supposed to be excited about this name, but I am not. The company has too much baggage, too many commitments and has yet to prove that it can thrive longer term.

My caution on restaurant stocks for 2011, and particularly some of the higher multiple names listed in the original column, has been a flop so far. While P.F. Chang's China Bistro (PFCB) is down 40% year to date, Chipotle Mexican Grill (CMG) is up 47%, and BJ's (BJRI) is up 26%.The fourth name, California Pizza Kitchen (CPKI) was acquired by Golden Gate Capital earlier this year for $18.50 per share, which put its year-to-buyout performance up 7%. I also believed that Wendy's (WEN) would be involved in a transaction in 2011, although the sale of Arby's was not exactly what I was referring to. I believed that Wendy's might be taken out, but that appears unlikely for the balance of 2011.

I thought that timber-related names would do well in 2011, with a resurgence in lumber demand and prices. The economy has unfortunately gotten worse, not better, since the beginning of the year, and the demand is not yet there, devastating hurricane and flood damage aside. Shares of Plum Creek Timber (PCL) are down 2% year to date, while Weyerhauser (WY) is down about 13%.

I also expected that oil would trade in the $80-$120 per barrel range for the year, which is pretty close to what we have seen. However, I thought it would end 2011 at the higher end of that range. As it stands now, with oil at about $82, it appears unlikely that we'll see a 50% spike in the next three months. At least I hope we don't. That is one call on which I don't mind being wrong.

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