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Netflix, Inc. (NFLX), Google Inc (GOOG), BorgWarner Inc. (BWA): My 2012 Report Card

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I started writing for the Motley Fool Blog Network in June 2012 because I enjoy sharing my passion for investing in great companies. As someone who comes from an entrepreneurial background, I find it exciting to own even a small piece of a business that is changing the world, even in subtle ways. With every stock I have recommended, I either already owned the company and/or I initiated a position at the time of publication so my interests are always aligned with individual investors that might act on my recommendations. I focus on companies that I believe are disruptive, powerful brands that are part of a long-term trend, are often misunderstood by markets, which provides an opportunity to buy at attractive levels.

The internet provides many investment voices keen to tell you about the next hot stock or investment strategy, so accountability is important. To that end, today I look back on all of my picks from 2012, their respective performance in relative to the S&P 500, and what I think of those choices today. Below is a chart that depicts the performance of each company, followed by a short summary about each business and the status of my investment thesis.

Google Inc (NASDAQ:GOOG) (56% Gain versus 25% Gain in SPY))

Google Inc (NASDAQ:GOOG)When I recommended Google Inc (NASDAQ:GOOG) at $573.49, many pundits were busy criticizing the company about lower revenue per click due to investments in mobile, and higher expenses. It seemed unimportant that Google continued to grow EPS at 20%, increased its overwhelming search market share, or the expansion in mobile revenue 150% (YOY). And, if that was not enough, the company was trading well below its growth rate. Many of those same doubters now applaud the Google investments in mobile. Simply put, Google is a remarkable company, an excellent long-term investment and a core personal holding because of the entrepreneurial culture, dominance in search, operational talent and the ability to continue to change the world with innovation.

BorgWarner Inc. (NYSE:BWA) (52% Gain versus 25% Gain in SPY)

I channeled Peter Lynch with my investment in Borgwarner-an easy to understand business tied in to a long-term trend, trading well below its growth rate. While regarded as a cyclical company, BorgWarner Inc. (NYSE:BWA) is an innovator tied to a long-term global trend toward better fuel efficiency and more powerful (but smaller) engines. It is rare to find a company that is part of a trend that serves regulatory concerns, macro-trends, industrial wants, and consumer needs. It was trading at .73 PEG ratio, mostly because of fear regarding Europe (50% of revenue) providing a great opportunity for the long-term investor. I have not sold any shares, but would not add after the latest jump due to an earnings beat and raised guidance for fiscal year 2013, but I will add on market pullbacks.

Denbury Resources Inc. (NYSE:DNR) (20% Gain versus 21% Gain in SPY)

Denbury’s focus on enhanced oil recovery (EOR), utilizes carbon dioxide injections acting as a solvent, mixing with oil, releasing it from the bedrock, while also trapping the majority of the carbon dioxide. Conventional drilling yields 40% of the potential oil, while EOR can increase recovery to approximately 50-60%. Denbury Resources Inc. (NYSE:DNR) is unique in that they own two low-cost sustainable sources of carbon dioxide in wells both in the Gulf (the only significant local source) and the Rockies, and deploy it via a pipeline infrastructure. They recently sold their prolific, conventional oil assets in the Bakken shale to raise capital to invest in building out their pipeline infrastructure, which will yield increasingly higher rates of high gross margin oil over the next few years. Despite the attractive return since my initial investment, I believe it remains a strong buy at current levels.

Baidu.com, Inc. (ADR) (NASDAQ:BIDU) (17% Gain versus 20% Gain in SPY)

When I wrote about Baidu it was especially compelling given the P/E of 21.7 on next year’s earnings. At $117.50/per share, the company had a .75 PEG ratio on (5 yr projected earnings). The stock plummeted from there on China growth concerns. Akin to Google Inc (NASDAQ:GOOG), there were concerns about increases in R&D and headcount expenses. The stock has since rebounded on strong earnings. It is good example of the power of market psychology and why patience is necessary for long-term investment success. Baidu.com, Inc. (ADR) (NASDAQ:BIDU) continues to be a strong long-term investment in Internet expansion, online marketing, and mobile growth in China, all of which remain in the early stages of growth. It is a buy.

Westport Innovations Inc. (USA) (NASDAQ:WPRT) (14% Loss versus 18% Gain in SPY)

At the time that I recommended Westport I noted that this was a long-term investment and that I did not expect profitability for 1-2 years. However, it was disappointing that the company experienced gross margin pressure due to slower than expected sales, delays in infrastructure build-out and increased expenses, primarily due to investments. Despite the meandering stock price, and expected volatility, I think the story remains strong. Westport Innovations Inc. (USA) (NASDAQ:WPRT) has expanded their partnerships with OEMs, and I think the company will see improved margins over the next few quarters and a tipping point within the next 2 years in terms of profitability. I believe an investment now will provide attractive returns in the long-term as long haul truckers increasingly adopt Nat Gas engines. Consider that a barrel of oil contains the energy equivalent of 6 MCF (thousand cubic feet) of Nat gas and one MCF is now trading at $3.32 versus a barrel of oil at $103.84 per barrel, the equivalent amount of energy for $19.92. While liquid natural gas (LNG) and compressed natural gas (CNG) vary from the aforementioned price, by any metric both are significantly cheaper (and cleaner) than oil making it an attractive option for long-haul truckers and large shipping companies like UPS and Fedex.

EOG Resources Inc (NYSE:EOG) (44% Gain Versus 18% Gain in SPY)

EOG Resources Inc (NYSE:EOG) is a perennial performer for my portfolio- it is a compelling growth story that is a combination of vision, operational ability, technical expertise, and a source for high quality crude and natural gas assets that will play a role in making the U.S. energy independent. I have not sold any shares, but I think a lot of growth is priced in to the stock. If it trades down due to oil price volatility, I would look to add to my core position.

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