Staying afloat: with uncertainty plaguing the market, our stock pickers play it safe in 2013.

AuthorCampbell, Spencer
PositionFEATURE

Bobby Edgerton can't predict the stock market's behavior. Luck, he claims, plays a bigger role than most analysts admit. So the president of Raleigh-based Capital Investment Counsel Inc. clings to certainties where he can: "I do the numbers so I can buy a company on the cheap." That worked well last year, when he edged out Frank Jolley to win BUSINESS NORTH CAROLINA'S Hot Stocks competition, and he's sticking with the strategy this year.

The rules go like this: Five professional stock pickers select three companies from BNC's Top 75, the magazine's annual ranking of the largest publicly traded ones based in the state. The panelist whose trio of stocks has the highest average total return wins. In last year's contest, which ended Nov. 25, Edgerton's picks posted a 36.7% return, bettering Jolley by 0.2 percentage point. The thin margin of victory shows how much the panel improved compared with the previous year, when three of the five members finished with negative returns. Nobody did this time, with four beating the S&P 500.

Edgerton owes his victory to Mooresville-based Lowe's Cos., whose stock price increased nearly 60%. "Lowe's had fallen to around $20 per share, meaning the market was valuing the entire company at around $20 billion. Its property, plant and equipment was worth more than that." He's hoping that Matthews-based Harris Teeter Supermarkets Inc. offers the same sort of value in 2013. "The stock market values it at $1.8 billion. Its PP&E is at $2 billion. I've only got a year, but I figure at some point I'm going to make money on Harris Teeter."

Jolley is high on Harris Teeter, too. The president of Rocky Mount-based Jolley Asset Management LLC likes its value, but he also chose it for the security the grocery industry provides. "I'm playing defense right now." So is his competition--most members of the panel selected safe, high-dividend stocks.

That might sound counterintuitive considering their banner returns last year, but though most Top 75 companies boast strong balance sheets, our pros are uncomfortable with the amount of uncertainty in Washington, D.C. So in addition to commenting on their stock selections, we asked each to explain what the recent elections mean for investors. "We have some issues out there that are tempering optimism," Jolley says. "And they're more visible today than they were last year."

PANELISTS' PLCKS FOR 2013 company Ticker Headquarters Industry Mkt. Price on 11/26/12 * BB&T Corp. BBT Winston-Salem Financial NYSE $28.70 services Cree Inc. CREE Durham Semiconductors Nasdaq 31.92 Duke Energy DUK Charlotte Energy NYSE 61.31 Corp Harris Teeter HTSI Matthews Grocery stores NYSE 36.49 Supermarkets Inc. Hatteras HTS Winston-Salem Real estate NYSE 26.42 Financial Corp. Krispy Kreme KKD Winston-Salem Doughnut shops NYSE 9.33...

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