Northwest Stock Picks for 2011, From the “Guess the Dow” Club

So, yes, last week I was sitting at a large table in a banquet room at the Metropolitan Grill, savoring a hunk of bloody Wagyu, and thinking that if I had it all to do over again, stock broker is the way to go. I know, it’s a cliché, but there was also an iceberg-sized iceberg lettuce salad for starters and a Meyer lemon meringue tart. So I think we got all the food groups. (The Met is strong in the grape group, too, with a string of Wine Spectator Awards of Excellence.)

The occasion was the 28th Annual Guess the Dow luncheon, which is hosted by the Met; they invite ten brokers from Morgan Stanley Smith Barney, RBC Dain Rauscher, McAdams Wright Ragen, Summit Capital (to name a few) to do much more than guess the Dow’s year-end close, actually.

They pick three Northwest stocks, one stand-out publicly traded stock, and prognosticate on the rate for 10-year Treasury bills. Over the past decade, with the notable exception of 2008, the group’s average tracks right along with how the market performed.

The Dow picker for 2010 was Morgan Stanley’s Lynn Lindsay, who had 11,581 versus the actual 11,577. (The Met invites “civilians” to join in, too. Jennifer Noveck, a UW graduate student, won with 11,497, which she predicted back on April 1, 2010.)

Last year’s overall winner was Mary Ann Heeren (RBC Dain Rauscher), whose Northwest portfolio gained almost 170 percent, so let’s highlight her top three Northwest stocks: Seattle Genetics (SGEN), Starbucks (SBUX), and Boeing (BA). Nationally, she expects good things from Citigroup (C).

Her outlook for the coming year is colored by cautious optimism: a stock market rebound to 13,282 thanks to a favorable tax policy and investors gradually returning to the hunt for equity returns.

Other Northwest stocks of note from the pool: Seabright (SBX), Micron Technology (MU), Clearwire (CLWR), Itron (ITRI), Cray (CRAY), Northwest Pipe Co. (NWPX), Costco (COST), L&L Energy (LLEN), Omeros (OMER), Amazon (AMZN), Coinstar (CSTR), Motricity (MOTR), Microsoft (MSFT), Nordstrom (JWN), Amgen (AMGN), Emeritus (ESC), Plum Creek Timber (PCL), Washington Federal (WFSL). (Boeing of course showed up on a number of short lists.)

According to the bullish members of the group, the Dow will finish the year around 13,000 to 13,500, though a more bearish subset can see only 12,000 to 12,500. Matt Rudolf, from Summit Capital, staked out his own bear cave at the mid-11,000s, forecasting that while the market should get a boost from the third year of a Presidential term, the market could still “chop and flop” due to ongoing fiscal concerns worldwide. Most predicted 10-year T-Bill rates would rise to between 3.5 and 4.2 percent (with an outlier high of 4.5 and low of 3.25).

The general sentiment at the table seemed to be that 2011 might be the year that we’d see less braking effects on the investment economy. As bad as housing and employment have gotten, and as anemic any general economic recovery has been to date, there is still plenty of money to be invested by people and corporations hoping to make more than a four-percent return.

One of the bolder prognosticators was Bill Smead of Smead Capital Management, who came across with a torrent of predictions (and unsolicited corporate guidance). Smead compared China’s reputed position to Japan before their lost decade, predicting “an economic slowdown of massive proportion” that should redound to the U.S.’s favor. He also, speaking off the cuff, suggested that Microsoft could learn something from Coinstar’s focus on core competencies (spinning off anything that isn’t in their “automated retail” wheelhouse) and said that the recent leadership exodus reminded him of Disney under Eisner. His sector pick? Pharmaceuticals.