The Zen Ten – My Top Picks for 2020

2019 was an outstanding year for the Zen Top 10.

I’ve been publishing this list each December since 2008.

I pick my favorites and stick with them all year – no trading.

Before I reveal my new stock picks for next year, a quick review of last year’s picks is in order. Table 1 has the details.

As you can see, my 2019 picks beat the S&P 500 by 12.5%. And they beat the much broader VTI by nearly as much. Why am I showing a 30.5% gain for the S&P 500 when the official YTD gain is 28.5%? Because of the date range I used (see the top of the table).

I didn’t cherry-pick the start and end dates, I simply used the actual start and end dates for all securities, including the S&P 500 and VTI, based on the date I published the list.

Why you should pay attention to this list

I have been trading and managing money for 30 years. I'm still a stock picker at heart, but now I only do it for my own account, my family, and for consulting clients who ask me to pick stocks for them.

I do not claim to have a special gift for spotting the next Google or Amazon. I don't have a crystal ball. I’m skilled, but it takes more than skill to get the results I get - it also takes a little help from Lady Luck.

I've managed to beat the market by an average of 9.7% per year over the past 10 years. Since I began using this list with clients in 2000, I’ve beaten the market by an average of 9.6% I’m consistent.

Table 2. My full track record back to 2000

My winning record isn't all down to luck. I do have a system, and it's been working since 2000. The problem, of course, is that any system can stop working at any time and without warning. I'll explain how my system works in a minute, but first take a look at the results of my picks from 2000 (the first year I used them with client money) to 2019.

In addition to skill and some hard work, my success with picking stocks is also due to a strict methodology that I follow - no matter what. I don't just throw darts at the Wall Street Journal stock tables. There's a method behind what I do. But anyone who beats the market repeatedly, as I have done throughout my career, must have some kind of an edge. My edge is my methodology.

My Methodology

Table 3. My top picks for 2020

The advantage of using this three-step screening process is that each screen focuses on a different aspect of what makes a stock attractive. It's a Bayesian approach to stock selection. You begin with a prior probability (the Zacks rank has a history of identifying winning stocks), and you further refine the list by adding layers of non-correlated screening criteria.

I didn't spend months analyzing financial statements and visiting these companies in person. I'm relying on the analyst community to do that for me. My methodology takes into account a consensus of top analysts and how their earnings estimates have changed over time.

Final Thoughts

I can be reasonably confident that these are solid companies producing solid and growing earnings, and they can be a powerful addition to your own watch list as long as you do your own due diligence. I do not recommend that anyone blindly follows my picks - always do your own research.