Stocks That Outperform Gold

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Gold. For heaven's sake, Gold. It's shiny, it's yellow. It's been valuable for a long time. Good for gold.

But how good? It's always been clear to me that, to a certain extent, the value of gold is very overblown. There are certain elements of the investment universe that value gold above all things. I'm not entirely certain that value is rational. Some people, not all, but some, place an almost mystical faith in gold.

There's certainly marketing behind that faith, heaven knows. It seems you can't watch cable news these days without some elderly gentlemen telling you how good gold feels, how safe gold is, and, of course, how you can buy gold from his firm. But if history tells me anything, the more a product is advertised, the less actual value there is it that product. Heck, can you tell the difference between a Chevy Impala and a Honda Accord? They're all heavily advertised and there's little difference. Same's true to Miller Beer and Budweiser.

Anyway, back to gold. I heard yet another shill pitching gold on the news this morning and decided to check into how gold has done recently. Turns out that gold gained 3.7% over the course of 2012. It went from $1598 per ounce to $1657.50 per ounce. Well, that's better than nothing, I suppose. It's not a loss.  But it's nothing to get excited about.

For heaven's sake, I just went and checked the major indices. The S&P was up 14.1% in the last year and the Dow was up 8.0%! You'd have done better just putting your money into index funds and walking away than stashing troy ounces in your safety deposit box somewhere.

It's my unbounded faith that, going forward, a savvy investor can make more money in equities than in gold. The focus on gold is a silly thing, just waiting to trap the unwary and tie up their money without generating a proper return. So here's a list of five stocks that would have done your portfolio better over the past year than holding gold.

The Gap (NYSE: GPS): The clothing company, which is a little young for me, had a great year in 2012. Beginning with a share price of $18.06 it's now sitting at $31.20. That's a gain of 72.75% over twelve months. The firm also gives an OK, if not great, dividend of 13 cents per share. Contrast that with gold's 3.7% return in 2012 and I know which way I'd prefer to go.

US Airways Group (NYSE: LCC): The air carrier, based around a Washington, DC location, has been great guns this year. It set records for passengers carried in December and is working on a merger with bankrupt American Airlines. Management is strong and confident and it shows in the performance. The firm's stock has been trending up all through 2012, starting a year ago at $5.72 and ending at $14.84 yesterday. That, my friends, is a return of 159%. Against gold's 3.7% and the answer is clear.

Sprint (NYSE: S): Another truly high-flyer, this telecom company has been a solid buy in my mind for a while now. The firm has been aggressively pursuing partnerships and new products around the world. Expansion overseas drives share growth for spring, as well as getting into the iPhone and Windows phone markets. 12 months ago the firm's stock was at $2.20 per share and today it will open at $5.96 per share. Another stock with a great 12-month return; this time of 171%. Again, stocks=3, gold=0.

USG (NYSE: USG): USG produces building materials through several subsidiaries. The firm has been in the news from time to time as a favorite of superstar investor Warren Buffett but I think it's growth is more because of its business than the media hype. In a growing economy and an expanding housing sector, USG is well-positioned to make gains. Last year the firm's stock grew 145%, going from $11.79 a year ago to $28.90 this morning. I think it'll do well in the next year, as well.

Gildan Activewear (NYSE: GIL): Another stock that casual investors might not pick up on, Gildan makes some fine apparel in a non-flashy fashion. The firm has expanded its sales base throughout the world and is well-run. While not as well-known as the other stocks on this list, the company's stock has returned its investors 91% on their money over the last year, going from $19.44 to $37.14. The company increased its dividend by a penny last year, too.

So that's a list of five stocks that would have absolutely hammered gold in the last year. I'm not even talking about beating the metal by a bit … I'm talking beaten it like Alabama beat Notre Dame. It wasn't pretty and it wasn't all that entertaining. So think hard about what you're doing, when you're tempted to put your money into gold. There are better things to do with it … if you're after a return and not some sort of security blanket.

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Nate Wooley has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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