The winner of this year’s Heard on the Street stock-picking contest, at least in spirit, appears to have been the Sheriff of Nottingham.
The competition, in which Heard on the Street columnists and ordinary Wall Street Journal readers make virtual picks to see who fares best—on paper—between early August and late December, took place this year against a particularly fitting backdrop. Real-life stock picking caught fire early in 2021 as many small-time investors picked up tips from online forums such as Reddit. They then flocked to retail-oriented brokerage platforms like the promisingly named Robinhood Markets HOOD 2.83% to place fee-free trades.
Return on recommendations by Heard columnists
Robinhood Markets
Deliveroo
FormFactor
Ajinomoto
Advance Auto Parts
Steris
D.R. Horton
Warner Music
GameStop
Robert Half International
Airbnb
New Residential Investment
Coinbase Global
Royalty Pharma
Caterpillar
Future PLC
Mission Produce
Pool Corp.
QuantumScape
Freyr Battery
Herbalife Nutrition
Adyen
Air China
Victoria’s Secret
Trupanion
GrowGeneration
LOST MONEY
MADE MONEY
Note: Return on recommendations based on price change from the date of each pick through Dec. 17. Picks were made Aug. 9-26.
Source: FactSet
Return on recommendations by Heard columnists
Robinhood Markets
Deliveroo
FormFactor
Ajinomoto
Advance Auto Parts
Steris
D.R. Horton
Warner Music
GameStop
Robert Half International
Airbnb
New Residential Investment
Coinbase Global
Royalty Pharma
Caterpillar
Future PLC
Mission Produce
Pool Corp.
QuantumScape
Freyr Battery
Herbalife Nutrition
Adyen
Air China
Victoria’s Secret
Trupanion
GrowGeneration
LOST MONEY
MADE MONEY
Note: Return on recommendations based on price change from the date of each pick through Dec. 17. Picks were made Aug. 9-26.
Source: FactSet
Return on recommendations by Heard columnists
Robinhood Markets
Deliveroo
FormFactor
Ajinomoto
Advance Auto Parts
Steris
D.R. Horton
Warner Music
GameStop
Robert Half Intl.
Airbnb
New Residential Invest.
Coinbase Global
Royalty Pharma
Caterpillar
Future PLC
Mission Produce
Pool Corp.
QuantumScape
Freyr Battery
Herbalife Nutrition
Adyen
Air China
Victoria’s Secret
Trupanion
GrowGeneration
LOST MONEY
MADE MONEY
Note: Return on recommendations based on price change from the date of each pick through Dec. 17. Picks were made Aug. 9-26.
Source: FactSet
Return on recommendations by Heard columnists
Robinhood Markets
Deliveroo
FormFactor
Ajinomoto
Advance Auto Parts
Steris
D.R. Horton
Warner Music
GameStop
Robert Half International
Airbnb
New Residential Investment
Coinbase Global
MADE MONEY
Note: Return on recommendations based on price change from the date of each pick through Dec. 17. Picks were made Aug. 9-26.
Royalty Pharma
Caterpillar
Future PLC
Mission Produce
Pool Corp.
QuantumScape
Freyr Battery
Herbalife Nutrition
Adyen
Air China
Victoria’s Secret
Trupanion
GrowGeneration
LOST MONEY
Source: FactSet
Return on recommendations
by Heard columnists
Robinhood Markets
Deliveroo
FormFactor
Ajinomoto
Advance Auto Parts
Steris
D.R. Horton
Warner Music
GameStop
Robert Half International
Airbnb
New Residential Invest.
Coinbase Global
MADE MONEY
Note: Return on recommendations based on price change from the date of each pick through Dec. 17. Picks were made Aug. 9-26.
Royalty Pharma
Caterpillar
Future PLC
Mission Produce
Pool Corp.
QuantumScape
Freyr Battery
Herbalife Nutrition
Adyen
Air China
Victoria’s Secret
Trupanion
GrowGeneration
LOST MONEY
Source: FactSet
While retail punting is nothing new to the stock market, it occurred in such huge volumes this year that a few popular “meme” stocks like GameStop GME -1.21% and AMC AMC -0.56% were pushed to stratospheric valuations that professionals sneered at. But meme stock enthusiasts saw themselves as building a movement not unlike that of the mythological thief of Sherwood Forest—robbing rich Wall Street tycoons on behalf of ordinary, amateur investors. Short sellers, who make money betting against stocks, came to occupy a prominent place in the movement’s pantheon of villains.
Heard on the Street columnists have been largely skeptical of the market’s Reddit revolution, and it showed in many of our picks. One columnist even opted for a “sell” on GameStop itself. She scored a somewhat modest but still positive 4.8% return. The top three columnist picks were all sell recommendations on pandemic-era winners, including Pinterest and British food delivery company Deliveroo, which yielded returns of 36% and 41% respectively.
The single best columnist pick was Telis Demos’s sell rating on Robinhood, which had just gone public on July 29. Equity trading volumes had been falling since the big, Reddit-driven first quarter, Mr. Demos wrote, leaving Robinhood largely dependent on cryptocurrency trading for growth: Gag currency Dogecoin alone accounted for around a quarter of Robinhood’s revenue per user in the second quarter. Should that falter, Robinhood shares look pricey, he warned.
He was right. Robinhood shares fell 61% from when Mr. Demos made his pick to the end of the contest on Dec. 17. Many of our readers had the same idea: 109 of them picked Robinhood as a sell. But even more, 263, picked it as a buy and didn’t fare so well.
Still, the Reddit crowd wasn’t without some scalps in the contest. The fourth best reader pick overall, with a 172% return, was Avis Budget Group. CAR 3.24% True, car shortages have pushed up rental car prices and profitability this year, but Avis became a genuine meme stock, as day-traders at one point pushed it up from $37.30 at the end of last year to over $300 a share at one point in October. Out of some 15,000 reader picks, the single best one, scoring a 192% return, was for Aehr Test Systems, AEHR 7.34% which makes test equipment for the semiconductor industry.
Still, from at least one point of view Heard columnists’ relative pessimism won the day: The average return for Heard writers was negative 0.5% over the period, while the average reader pick lost 5.8%. Note, however, that the S&P 500 over the same period rose 4.2%, meaning in essence that investors would have been best off sitting out the entire meme wars and hugging the averages.
These results are yet another indication that plain old index funds, not online message boards, have been the biggest democratizing innovation in finance. The original Robin Hood himself might even approve of that.
Write to Aaron Back at aaron.back@wsj.com
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