Agonies, Ecstasies in Stocks for 2006

Every few years, I embarrass myself by providing a critique of Warren Buffett and his stewardship of Berkshire Hathaway (BRKA Quote). This year, it came on March 8, when I recommended that investors in search of a high-return, low-transparency conglomerate consider Brookfield Asset Management (BAM Quote) or Leucadia National (LUK Quote) instead. Powered by the charming gecko spokesreptile at subsidiary Geico, Berkshire went on to gain 23% since. That wasn't as good as Brookfield, up 33%, but it was very respectable and did beat Leucadia, which only gained 6%. I still like Leucadia and Brookfield a lot, but this time I'll just keep my mouth shut about Berkshire.

On March 22, I picked up early on the idea that low-risk, large-cap consumer products stocks might storm to the front of the line in 2006 and recommended you consider buying shares of companies like foodmakers H.J. Heinz (HNZ Quote), Coca-Cola (KO Quote), Kraft Foods (KFT Quote) and smokeless-tobacco maker UST Inc. (UST Quote). All went on to outperform by a ton over the rest of the year, rising between 16% and 45%, vs. 9% for the broad market. You just need one big idea like this per year to get ahead. These all have a great shot at outperforming again in 2007 if economic growth slows as expected.

April

On April 5, I observed that sugar had been one of the best investments over the prior 15 months due to its expanding role as a fuel in automobiles. Unfortunately, the price of the commodity proceeded to sour along with the price of crude oil, and the stock I recommended, Imperial Sugar (IPSU Quote), has lost 16% of its value. It appears to be stabilizing now, but I wouldn't rush to put a spoon back into this one.