You had to work pretty hard to lose money in the stock market this year. Of the stocks in the S&P 500, only 128—barely a quarter—were down for the year when this issue went to press in early December. Over the previous 12 months, the index was up a skepticism-crushing 23.3%, including dividends, and 2017 was on pace to be the fourth-best year for stocks in this no-longer-new century.
Stocks rose, of course, on the flood current of a strong economy—and on hopes that a GOP-controlled Congress and White House would deliver corporate tax cuts. As of this writing, those wishes appeared to have come true (a tax-reform bill was being tweaked en route to President Trump’s desk). But now things get interesting, because 2018 seems likely to be the year that the rising tide stops lifting all boats. As Savita Subramanian of Bank of America Merrill Lynch noted during Fortune’s annual investor roundtable, if everybody gets a tax cut, nobody has an edge: “When you have a windfall from a lower corporate tax rate,” she says, “a lot of that benefit is actually competed away.”
Put another way: Everybody-gets-a-cookie tax reform won’t be the factor that drives great stock returns in 2018. Now that the tax opportunity is here, corporate leaders have to deliver. The ones whose strategic choices pay off will deliver the biggest gains for shareholders.
And that’s the way we like it. Fortune practices bottom-up, business-first stock picking, basing our recommendations on the underlying strengths and strategies of the companies behind the stocks, rather than on technical indicators and “quant” prognostication. Over the past year, that approach paid off: Our 2017 picks returned 34%, handily beating a hot market.
The most important challenges in business today, of course, revolve around technological change—and the companies that excel at generating it, incorporating it, or adapting to it are the ones offering investors the biggest rewards. That’s the concept that shapes our lead story, “The All-Tech Portfolio.” Senior writer Jen Wieczner makes a convincing case that the most successful companies of today’s economy are tech-driven, even if they aren’t in the tech sector—making it not just possible but savvy to invest in an all-star roster of “tech” stocks that stretches across dozens of industries.
Other stories in our guide underscore the connection between business experience and an investment edge. Jeff John Roberts’s profile of venture capitalist Alan Patricof shows a lion of the industry, at age 82, figuring out how to pick winning companies in their embryonic stages. And Wieczner’s deep, provocative dive into hedge fund Elliott Management (“How Far Will This Fund Go?”), depicts a firm that’s browbeating complacent executives into performing better for shareholders—and shattering behavioral norms along the way.
The theme these pieces share? In the long run, every great investment story is a great business story.
From the Fortune 2018 Investor’s Guide Package:
- All-Tech Investing: The 31 Best Stocks to Buy for 2018 Instead of Apple or Tesla
- The Best Investing Advice for 2018 From Fortune’s Experts
- Inside Elliott Management: How Paul Singer’s Hedge Fund Always Wins
- Investing: How the World’s Biggest Money Manager Is Preparing for 2018
- Corporate Profits Are Soaring. Here’s Why It Can’t Last
A version of this article appears in the Dec. 15, 2017 issue of Fortune with the headline “2018 Investor’s Guide.”