NEW YORK (AP) — It's a stock picker's market.
For 1 1/2 years, individual stocks moved with the broad market with little regard for the prospects of the companies behind them. Would they make big profits? Were they in industries that were shrinking or growing? Was the CEO a bumbling idiot? It didn't seem to matter.
But now some stocks are zigging while others are sagging, and knowing something about the companies, themselves, is important if you don't want to lose money.
"You can't shove all your chips on the roulette table anymore and expect to win," says Nicholas Colas, chief market strategist at BNY ConvergEx Group, a stock brokerage. "You have to watch your portfolio carefully."
Until a month ago, for instance, you could have bought all manner of consumer-products companies and made money. Stocks of companies that make soap and cereal and other staples rose in lockstep with stocks of makers of discretionary goods like jewelry and perfume and cigars. So far this year, though, stocks of the staple makers have barely budged while those of discretionary companies have risen 2.1%.
To some on Wall Street, the new disarray is welcome.
"When everything is up, it's frustrating," says Charles Blood, senior equity strategist at Brown Brothers Harriman. "You do all the work, you figure out what's better and worse, and there's no reward."
The folks who run stock funds pore over financial statements for hours, parse CEO comments like Kremlinologists, project profits down to the penny — and get paid a lot to do so.
But why pay them if the stocks they pick do no better than the broad market? The typical mutual fund that's actively managed by a pro charges $1 or so annually for every $100 invested. That might not seem like much until you consider that $100 stocks have gained $8 or $9 in value annually on average over the long run. Index or exchange-traded funds that passively mimic the market often cost 50 cents or less so you get to keep more of your money, and allow it to compound those returns each year.
