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How many of the top 20 stocks outperformed in 2013?

As the stock market rolls towards the end of December, investors have experienced a 10.7% rise in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) year to date. It’s a reasonable one-year return, which excludes dividends and is not too far from the long-term average return investors have experienced from the stock market.

Of course many investors don’t actually own the index but rather they own individual stocks. This means good stock selection is critical to an investor’s overall portfolio return and ultimately determines whether an investor’s portfolio outperforms or underperforms an index.

With just 14 trading days left in the calendar year, as things currently stand, of the 20 largest corporations (those which make up the S&P/ASX 20 and are widely owned by many investors) there are 14 stocks that have outperformed the S&P/ASX 200 Index while six have underperformed.

While the calendar year is not quite over, here are the six large-cap stocks investors would have been better off avoiding in their quest to beat the index.

BHP Billiton (ASX: BHP) is down nearly 1%, while fellow diversified miner Rio Tinto (ASX: RIO) is up just 0.8%.

QBE Insurance (ASX: QBE) and Woodside Petroleum (ASX: WPL) are up 10% and 10.4% respectively, meaning both stocks are very narrowly underperforming the index.

Westfield (ASX: WDC) has fallen 2.3% partially in sympathy with the tweak consumer discretionary retail environment.

Newcrest Mining (ASX: NCM) is down a whopping 67.5% on account of the fall in the gold price

Foolish takeaway

Outperforming the market is far from easy to achieve, particularly over a long time frame. For this reason, billionaire investor Warren Buffett has counselled that many people are better off utilising index funds rather than actively picking stocks. However for those who choose to pick stocks, approaching the selection process with rigorous analysis is a must.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.

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