Grading the investment advisor

It’s becoming an annual migration. During the first week of February, a Who’s Who of the Columbia business community flocks to the Reynolds Alumni Center at MU to hear the annual predictions of Scott Colbert, the chief economist for Commerce Bank.
So, how have his forecasts fared, in retrospect?
Last year at this time, the CBT checked on Colbert’s 2008 predictions and stock tips.
He said the country was entering a recession, which was true, but he didn’t expect the downturn to be as steep as it was. As for his stock picks, Cisco fell from close to $25 a share to about $15.60 a year later. Sallie Mae fell from $20 to $11.25, Microsoft dropped from $29 to about $18, and GE plummeted from $35 to $11.50.
Last February, he said his “best guesses” were that the stock market had hit bottom and the economy would rebound in July. He nearly nailed the first part. The stock market hit bottom the following month — March 2009. He said the chance that the country would enter a mild depression was very low, about 20 percent. Correct again.
Colbert recommended against “jumping in (the stock market) with both feet” but told audience members that he believed there were stocks worth investing in. His advice was to invest in municipal and corporate bonds, and he listed a few stocks he liked, including General Electric (again), Hewlett Packard and Visa.
If you acted on his tips last year, you would have made money. GE fell to $5.73 in March ’09, but on Feb. 9 of this year, the day of Colbert’s appearance, it was up to $15.53. Hewlett Packard? Up from a low of $25 to $53. Visa? $57 to $83. And what if you held onto the stocks he picked in February 2008? When the markets closed Feb. 9, Cisco was selling at $23.89 and recently hit a 52-week high that equaled its value in February 2008. Same goes for Microsoft, which closed at $28 and was recently up to $31.50. (Of course, most investors would have made money during the past year if they made their picks by throwing darts at the market page.)
So, what about the current predictions from Colbert and colleague Joseph Williams, the director of equity management at Commerce?
There will be a gradual recovery, with no chance of a second downturn and no significant hike in inflation or the interest rate for at least six months.
The stock market is “a bit overvalued right now,” Williams said. But investments in developing countries such as China, India and Brazil are pretty good bets. So are companies that help build infrastructure in those countries, such as Caterpillar, maker of big work machines (CAT, $53 a share), and health care companies.
Once again, they like Visa. And once again, if these predictions are close to correct, count on the local investors to return to the Reynolds Alumni Center next February.