KEY POINTS:
First New Zealand Capital has the best record among long-term participants in the Herald's annual broker survey for picking one-year winners.
An investment of $10,000 in First NZ's 2003 choices and the reinvestment of the gains - including dividends - in its choices made in subsequent years would now be worth just under $35,000 before tax.
This is equal to a compound return of 37 per cent.
First NZ - also top of the rankings in this year's Brokers' Picks - has delivered the performance with a bias to three stocks - Contact Energy, Mainfreight and Guinness Peat Group.
These companies have featured in its top five picks in three of the past four years. Its second most popular choice was Freightways, which featured twice.
But the broker has abandoned these choices for next year naming instead Fletcher Building, Tourism Holdings, Apple distributor Renaissance and CanWest MediaWorks.
ASB Securities is second, delivering a compound return of 28 per cent over the four year period.
Goldman Sachs JBWere and Forsyth Barr are the tail-enders with compound returns of 17.36 per cent and 13.6 per cent respectively - less than the NZX50 index's 19.95 per cent return over the same period.
The rankings were derived from four years' data, the longest period of comparable data for the largest numbers of participants. The rankings exclude brokers who are new participants in the survey, or have withdrawn.
A five-year analysis - which excludes Wellington broker McDouall Stuart - shows First NZ and ASB retaining top ranking.
Over this period their choices would have delivered compound returns of 34.2 per cent and 25.4 per cent respectively.
But before investors use the Herald survey to choose their preferred broker, they should recognise that the results are skewed by important features of the survey:
* The figures exclude brokerage fees.
* Brokers are asked to choose the securities that will give the best short-term performance. Had the brokers, for example, been asked to choose for a four or five-year term, the results might be different.
* The survey does not allow brokers to review choices during the year. Often, market developments demand quick reaction to current events. For example, Telecom was this year hit by regulations much harsher than most brokers expected. As a result, they may have reversed an earlier recommendation.
* The survey implies a one-size-fits-all approach. It takes no account of individual circumstances such as an investor's appetite for risk or an individual's requirement for income or special tax circumstances. These are all factors integral to a "buy" recommendation.
* The survey is not exhaustive. Hamilton Hindin Greene, Macquarie Equities, UBS and Citigroup are the most obvious omissions. Some have declined to participate, often because of the survey's limitations. Also, smaller brokers such as Esam Cushing, Gould Steele, Somerset Smith and Waddell Johnston McCarthy are not included.
* Finally, past performance is no guarantee of future performance.
