Episode Summary
Executive Summary: The episode reviews the FT’s annual stock-picking competition, highlighting that 2025 rewarded concentrated bets on precious metals, European defense, memory chips, and big tech, while shorts on overextended names often worked. The hosts also reflect on their own portfolios, with Katie and Rob doing well via defense and Alphabet, and Alan winning overall through gold/mining plus a couple of shorts. The show ends with short-term macro views and a warning against prediction markets.
Main Topics: FT stock-picking competition results (Priority: 5/5): The hosts recap which portfolios performed best and worst in the annual contest, emphasizing that gains came from thematic concentration rather than diversified caution. Precious metals and mining outperformance (Priority: 5/5): The standout winner was a portfolio heavily exposed to silver and precious-metals miners, with Fresnillo and other mining names delivering huge gains amid a strong year for metals. Winning themes: quantum, semis, defense, and Europe (Priority: 4/5): Several participants benefited from momentum trades in quantum computing, semiconductor memory, European defense, banks, and broader European equities. Shorting big losers and the risks of bearish bets (Priority: 4/5): Short positions on NVIDIA and Alphabet failed, while shorts on Strategy and Trump Media worked, illustrating both the asymmetry and danger of bearish bets. Self-assessment of the hosts’ portfolios (Priority: 4/5): Alan topped the FT crew with gold/mining longs and shorts in Kering and GAM; Katie profited from European defense; Rob beat the index via Alphabet and a boring U.S. mega-cap/defensive portfolio. Long/short segment: macro and market skepticism (Priority: 3/5): Alan is short the dollar due to Trump’s pressure on the Fed, Rob is long Iran as a people/civilization despite its regime, and Katie is short prediction markets as speculative pseudo-markets.
Key Arguments: The best stock-picking strategy is still to buy cheap index funds and hold them; the contest is for fun, not real investing. Concentrated exposure to precious metals, especially silver-related miners, was the best theme of the year. Shorting is structurally difficult because markets drift upward over time and losses on shorts can be unlimited. Momentum matters: European defense stocks and Alphabet both kept running even after seeming expensive or overowned. ‘Boring’ companies can outperform when investors seek stability, especially in uncertain sectors like healthcare. Prediction markets are dismissed as unserious and too easily treated like real financial markets.
Data Points: Alan’s average portfolio return: 91.1% - Alan led the FT crew in the competition results. Katie’s portfolio return: 67.4% - Katie said her defense-heavy European portfolio performed strongly. Rob’s portfolio return: 23% - Rob said he beat the index but not Katie in the FT crew ranking. Alan’s winner stock return: 200%+ - A silver/mining-heavy portfolio winner gained more than 200%. Fresnillo return: 379% - Highlighted as one of the top-performing picks and a near five-bagger. Strategy (formerly MicroStrategy) return: -50%+ - Used as an example of a previously painful short that would have worked this year. Micron / Seagate / Western Digital return: ~200% each - Memory-chip companies had a very strong year due to a structural deficit and AI demand. Rob’s FT crew ranking: 23rd - Rob placed 23rd within the FT participants. Katie’s FT crew ranking: 4th - Katie said she finished fourth within the FT team. Katie’s overall ranking: ~82nd out of 1,000+ - She said she ranked around 82nd overall in the competition.
Pivotal Quotes: "The best way to invest in stocks, honestly, is to buy a big index with a cheap tracker thing and forget all about it for as long as possible." — Katie Martin: Opening disclaimer that the stock-picking contest is for entertainment, not serious portfolio advice. "Most things go up most of the time. You’re betting against that when you go short." — Rob Armstrong: Discussion of why shorting is structurally harder than going long. "This is all going to end in tears." — Katie Martin: Her criticism of prediction markets and their increasing legitimacy in finance circles.
Implications: The episode reinforces that 2025 rewarded high-conviction thematic bets and momentum, especially in metals, defense, and AI-adjacent names. But it also warns that success can hinge on luck and that shorting and speculative market structures remain risky.
From the Transcript
The best way to invest in stocks, honestly, is to buy a big index with a cheap tracker thing and forget all about it for as long as possible. But just for fun, every year the FT runs a stock picking competition. You pick five stocks, you bet that they will either rise or fall, and you leave them to run for a whole year. Now, if you're actually investing your life savings in this way, then really honestly, you are doing it wrong. Stop it at once. But it's a fun game, and all you have to win or lose is your dignity. Longtime listeners may remember that this time last year, I had to sit in the corner with a dunce's hat on. I bombed pretty badly, came close to last out of literally thousands of people. It was honestly quite embarrassing. Today on the show, which bets did well, which did badly, who's looking ridiculous, and who's looking clever. This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets economist down in the basement of FTHQ in London.
That much that can really go wrong. The most you can possibly lose is 100%. If, however, you bet on something falling and it goes up, your downside is, as I found out with strategy last year, unlimited and extremely painful. So you were very brave. You had two shorts. You had caring. There's another reason, before we get to the shorts, there's another reason that shorting is hard. Most things go up most of the time. Do you know what I mean? Like the choice. Part of the stock market over time works its way up and to the right. And you're betting against that when you go short. Fine, go up. But yeah, so you were betting against Kering, the luxury group, and GAM, the asset management group. And you still did incredibly well. Alan, please tell us your secret. The secret was owning two gold stocks. I picked Junior, not tiny little explorer.
So, I am short. Listeners may be aware, I'm not a fan of prediction markets. I remain not a fan of prediction markets. I am short of them, and I think we should stop pretending or acting like they are real markets. They are not. So, these are markets where you can bet on anything. Is it going to rain tomorrow? What's this sports result going to be? Who's going to win this election or that election? And so, news today from a bunch of our colleagues: trading groups are expanding into prediction markets, hiring traders to arbitrage. Fleeting price discrepancies between contracts for events like football games and elections. Stop it. This is just, none of this is going to end well. People just betting on anything and everything and thinking that it's like a kind of almost like a regulated financial market. Honestly, knock it off. This is all going to end in tears. Lose your money betting on stocks instead. Instead of betting on this sort of nonsense. That's what I say. Listeners, we hope this has been instructive to your investment plans for 2020. 26, but please don't take our word for anything. We will be back in your ears on Tuesday, so listen up then.
About Unhedged
Katie Martin, Robert Armstrong and other markets nerds at the Financial Times explain the big ideas behind what’s happening in finance right now. Every Tuesday and Thursday. Hosted on Acast. See acast.com/privacy for more information.