By Aaron Back

Heard on the Street's annual stock-picking contest never fails to be interesting, even when our columnists come up a little short.

In the five months since the latest contest kicked off in mid-August, our picks on average posted a negative 0.7% total return through the end of last week. That compares to a 5.5% return for the S&P 500.

Some other key takeaways:

-- As usual there was a wide gap between our winners and losers-almost 80 percentage points in fact. Two big factors seemed behind the dispersion: Higher-than-expected interest rates, and the threat of coming tariffs under Donald Trump.

-- The two top picks are up for reasons all their own. FTAI Aviation-selected by Heard aviation specialist Jon Sindreu-has soared 46% as the aviation industry continues to struggle with jet-engine shortages, making FTAI's business model of being a one-stop shop for engine leases and repairs look prescient.

-- In second place is Heard luxury writer Carol Ryan's pick, Burberry. The faded British icon has been the beneficiary of takeover speculation, as Ryan predicted, rising 31%.

Beyond those idiosyncratic winners, the dominant themes are interest rates and international trade. When the contest kicked off in August, the Federal Reserve hadn't yet started lowering interest rates, but most of our columnists expected September to mark the start of an extended easing cycle. The Fed has cut rates three times since the contest started, but increasingly hawkish signals from the central bank, along with warm readings on jobs and inflation, now have Wall Street expecting just one or perhaps no more rate cuts in 2025.

For some of the same reasons, long-term rates have remained stubbornly high: The 10-year Treasury yield stood at 4.77% at the end of last week, up from 3.89% at the start of the contest.

This has not been to the benefit of two building-supply companies, Builders FirstSource and Stanley Black & Decker, that Heard Editor Spencer Jakab and Deputy Editor Aaron Back respectively bet on. Stanley Black & Decker also warned in November of a $200 million pretax hit to operating income from tariffs on goods imported from China.

Conversely, appliance maker (and Jinjoo Lee's pick) SharkNinja said at a conference last month that it is on track to produce about 90% of its U.S. products outside of China by the end of the second quarter, about six months ahead of schedule. That gave its stock a lift, and it is now in third place with a 20% gain.

Finally, higher rates have led to a stronger U.S. dollar. Because returns in the contest are tabulated in dollar terms, this has been to the detriment of stocks listed outside the U.S. Declines in Switzerland's Nestle, Spain's Grifols, and Australia's Treasury Wine Estates all look worse as a result.

For more on the contest and the latest standings, read more here.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

January 13, 2025 14:33 ET (19:33 GMT)

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