Stock-Pickers' Market Returns

NEW YORK (TheStreet) -- Holy moly, we actually have a stock pickers' market again. I know -- in a sense, it's always a stock-pickers' market. Almost anyone with a dart could throw it and hit a winner last year. As the market has traded sideways of late, we are seeing a much more stock-independent market.

What do I mean by this? We will see a clear view of the winners and losers.

Last year, entire sectors gained on news. This year will be one in which the company that truly performs gets rewarded, and those that don't will actually be punished. I can't tell you how many times in the last year you would see a company miss its earnings numbers and make new highs the following month. They were swept up in the overall market sentiment.

We are already seeing clear cases of this: Pandora (P) is getting drilled due its rising costs and slower growth. At IPO, King (KING) actually traded down 15% the first day because investors had learned their lesson from Zynga (ZNGA). (Fool me once....) Companies like Linn Energy  (LINE), Citigroup  (C), Groupon (GRPN), Twitter (TWTR), etc. are being switched out for companies like Microsoft  (MSFT), Apple  (AAPL), or even Johnson & Johnson  (JNJ). These companies have much lower earnings-per-share ratios, and dividends that are sustainable.

Some might say that this is risk-off. I would say it's a return to quality and rationality.

Pandora is a great example of blind buying. It is not profitable, encountering a ton of competition, and slowly losing growth. This was all true when it was trading at $8, too. That didn't stop enthusiastic buyers from bidding it up to $40.

Sure, many people enjoy its service, but that doesn't make it a profitable business model! It has since traded back down to $30, and it will likely be in the single digits unless it completely changes its strategy. This is just one of the many examples of irrational exuberance we went through in the last year.

We'll always be subject to international turmoil such as Russia and the Crimea conflict, but the U.S. economy is improving. The age-old art of stock picking is actually important again as rationality takes hold.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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