This year, the longest-serving members of the Met Grill‘s annual Guess the Dow panel found themselves wondering where 30 years had gone.
But it wasn’t all fond nostalgia: some were concerned that the inflationary ’80s were poised to reappear. (Though even that grim specter prompted reminiscences of how back then you could plow your six-percent student loan into commercial lending returning 16 percent.)
More than one suggested that the U.S. might in fact welcome some level of inflation so as to help pay down public debt, now north of $16 trillion. I believe that it was Morgan Stanley’s Matt Kelleher who asked whether an inflationary rise had already begun, and we just weren’t tracking it correctly. (We can only pray it doesn’t affect the price of the Met’s American Wagyu.)
The ostensible goal of the Guess the Dow competition is just that: to guess the close of the Dow on December 31. The panel’s Diane Daggett of McAdams Wright Ragen took the honors this time, predicting 13,000 (actual Dow close: 13,104). The “civilian” winner — you can enter by eating at the Met — guessed on February 24 that the Dow would close the year at 13,056. However, as he’s a vice president at UBS, he’s not an untutored rube.
But there are other laurels: the three Northwest stocks suggested by Matt Rudolf, of Summit Capital, delivered a scorching 58-percent rate of return. (Northwest Pipe Co. – NWPX, Cray – CRAY, and Stillwater Mining Co. – SWC, since you’re curious.) Shaun Dennehy, also of McAdams et al, won the national stock pick for selection Lousiana-Pacific (LPX). And Bill Smead of Smead Capital was the overall winner, as were his investors — Smead’s Value Fund had an annualized return of 28 percent for 2012.
Looking ahead, the Northwest favorites included the usual suspects — Boeing (BA), Paccar (PCAR), Nordstrom (JWN), Starbucks (SBUX), even Microsoft (MSFT). Jeffrey Atkin of Kunath, Karren, Rinne & Atkin thinks Northwest Pipe still has room to run (chillingly, adding that water is “becoming a scarce commodity”). Dennehy thought the same of Cray. Three panelists picked Zumiez (ZUMZ) — presumably because their kids are into the clothing — and cancer-fighting Dendreon (DNDN). Biotech firm Omeros (OMER) got two nods as well.
If you wanted to invest in a Northwest bank, the panelists wouldn’t look askance at that, either: Washington Federal (WAFD) and Columbia Banking (COLB). Dennehy picked Banner Bank (BANR) last year, which rang out 2012 with a 79-percent rate of return.
The consensus was that huge amounts of money have remained, still, on the sidelines, but that with bonds refusing to provide interest rates that aren’t eaten up by inflation, people will gingerly return to equities, even if it’s just for the thrill of a dividend check. All things being equal, this would help the Dow gain another ten percent, though everyone expects to see a few bumps on the way. And the longer the U.S. goes without a housing recovery, the bigger that impact is expected to be when new housing starts trend up again. Bill Smead was worried that it’s been so long, there’ll be a shortage of skilled labor relative to the demand for electricians and plumbers.
Before all of this, it was time to learn what Blucora is. CEO Bill Ruckelshaus (not that Bill Ruckelshaus) explained that Blucora is what happened to InfoSpace. InfoSpace still runs meta-search engines –Dogpile, MetaCrawler, WebCrawler — but their focus has shifted to serve web publishers. They can provide white-label search functions that blend in paid search, so that clicks result in revenue. It’s not sexy, but it’s profitable, which helps.
Blucora’s other property at the moment is TaxACT, which, ironically, it sounds like they were able to purchase thanks to their own tax advantages from a significant net operating loss. (Henry Blodget can explain some of this.) TaxACT, Ruckelshaus explained, is tax preparation the for the DIY market. It’s less expensive than TurboTax, if less full-featured. H&R Block had tried to snap TaxACT up, but were blocked because of antitrust concerns. Blucora snapped the company up for about $287 million (two-thirds cash, one-third financing).
It proved to be a smart move as both properties have been strong money-makers. Ruckelshaus says the Blucora makes a great home for these kinds of businesses that aren’t built on the hyper-growth that leads to IPOs. He says Blucora, with its stable of online veterans, provides guidance with the challenges common to the online space: problems of scale and data management.
