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UBS’s top 10 shares for 2018 in review

Towards the end of 2017 investment bank, asset manager, and sell-side broker UBS Australia publicly named its top 10 S&P/ ASX200 (ASX: XJO) shares for 2018 based on its forecasts for earnings per share growth, versus then valuations.

UBS rated all of the stocks below a “buy” in November 2017 based on its analysis, so let’s take a look at how they did for the period January 2 2018 to January 2 2019, compared to the S&P /ASX200’s  return of -7.2%. Note returns exclude dividends received.

AGL Energy Ltd (ASX: AGL) – Closed at $24.52 on Jan 2 2018 and sells for $20.60 today, which is a negative return of 16%. AGL does pay some decent dividends, but has come under pressure in 2018 due to its high valuation and regulatory pressure.

Aristocrat Leisure Limited (ASX: ALL) – Closed at $23.57 on Jan 2 2018 and sells for $21.78 today, which is a negative return of 7.6% for the electronic gambling machine business.

BHP Group Ltd (ASX: BHP) – Closed at $29.68 on Jan 2 2018 and sells for $34.45 today, which is a 16% gain. BHP is also set to pay an approximate A$1.40 per share special dividend with the stock going ex-dividend Jan 10. It’s also benefited from a share buy-back after the US$10.4 billion plus sale of its onshore US shale energy assets.

Brambles Limited (ASX: BXB) Closed at $9.97 on Jan 2 2018 and sells for $10.09 today, which is a 1% gain. A flat return reflecting a difficult year for the logistics business.

Janus Henderson Group (ASX: JHG) Closed at $48.71 on Jan 2 2018 and sells for $29.05 today, which is a 40% loss. JHG has been hit by Brexit uncertainty and a terrible last quarter of calendar year 2018 for equity markets.

Link Group (ASX: LNK) – Closed at $8.49 on Jan 2 2018 and sells for $6.72 today, which is a 21% loss. Link has also fallen on valuation grounds.

Origin Energy Ltd (ASX: ORG) – Closed at $9.44 on Jan 2 2018 and sells for $6.43 today, which is a 32% loss. Origin has been hit by a plunge in oil prices over December 2018 on the back of rising supply soaking up demand. The structural shift in oil markets means I’d personally avoid energy stocks forever.

Qantas Airways Limited (ASX: QAN) – Closed at $5.05 on Jan 2 2018 and sells for $5.82 today, which is a 15% gain. Qantas has benefited as falling oil prices reduce its fuel bill, which is a key cost for the airline.

Star Entertainment Group Ltd (ASX: SGR) – Closed at $6.05 on Jan 2 2018 and sells for $4.49 today, which is a 26% fall. Star has not met some of the high expectations built into its share price this time last year.

Woolworths Limited (ASX: WOW) – Closed at $27.31 on Jan 2 2018 and sells for $29.29 today, which is a 7.3% gain. Woolworths’ return to same-store sales strength (even at the expense of margins) has impressed some investors in 2018 at least.

Foolish takeaway

On my maths that’s an average return of -8.8% which is a marginally behind the market, although if you’re generous and adjust for dividends, UBS probably finished flat on the market at least.

This goes to show that even the tips of famous names like UBS commonly fail to outperform the market and that following the crowd will almost always lead to crowd-like or average returns, which is ‘ok’, but you could just buy an index fund to achieve returns on a cheaper fee-adjusted basis.

I’ve also covered in other articles how being a sell side lemming can lead to ‘mum and dad’ investors buying high and selling low, as they’re effectively trading after the crowd.

Investors looking to beat the market should make their own conclusions around company quality, value and long term prospects (1 to 2 years minimum) this article I cover how my own top 10 share picks for 2018 performed.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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