Citi’s recommended list for 2013 posted a total return of 40.5% year-to-date against the 31.9% return posted by S&P 500 (INDEXSP:.INX).

Tobias M. Levkovich and team at Citi in the 2013 evaluation and grade report however highlights the year-to-date 2013 S&P 500 (INDEXSP:.INX) gain of 29.1% easily surpassed Citi’s forecast.

Citi’s recommendations outpaced S&P 500

As revealed by the following table, Citi’s recommended list clocked a total return of 40.5% year-to-date by outpacing the S&P 500 (INDEXSP:.INX) total return of 31.9% as of close of 12/27.

Performance of Citi's recommendations S&P 500

Citi analysts point out that the above performance data was arrived at by measuring on a daily basis by S&P and further adjusted for additions and deletions to the list. However, given the relatively small size of Citi’s portfolio recommendation, the analysts tracked the performance using an equal-weighted index methodology.

Citi’s forecast proved to be overly conservative

In its report card for 2013, Citi analysts recall their initial year-end 2013 targets in September 2012 by setting the preliminary S&P 500 (INDEXSP:.INX) target at 1,615 and the Dow Jones Industrial Average (INDEXDJX:.DJI) target at 15,300. The analysts point out these targets at the time were well above consensus expectations. Moreover, on September 13th 2013, Citi lifted the S&P 500 target to 1,650 and boosted the 2013 DJIA target to 15,600, which reflected both the substantive inflow into equity mutual and exchange traded funds and an improved fiscal balance.

However, several factors including U.S. corporate credit conditions, better-than-expected earnings and solid economic data such as the NFIB survey and jobless claims bolstered stock indices.

Thus, while equities have remained somewhat volatile through year-end, Citi’s forecast of 1.650 proved to be overly conservative as the S&P 500 (INDEXSP:.INX) has soared nearly 30% and is on track to achieving its best year since 1997.

Style investment

Tobias M. Levkovich and team at Citi in the introspection report points out throughout 2013, Citi highlighted its preference for large cap equities over small and mid-caps which seemed appropriate as the Dow Jones Industrial Average (INDEXDJX:.DJI) and the S&P 500 (INDEXSP:.INX) lagged small and mid-caps indices in 2012. Citi anticipated the pattern of outperformance to reverse in 2013 in favor of large cap names given the potential for some overall operating margin pressure, valuation and lead indicator signals as revealed in the following graph:

Small Vs Large-Lead indicator model S&P 500

However, from a style-investing perspective, small-caps were the top-performers, as the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) was up 36.7% year-to-date against a 31.9% year-to-date rise in the iShares Russell Midcap Index Fund (ETF) (NYSEARCA:IWR) and a 29.1% gain for the S&P 500.

In the report card for 2013, Citi analysts give a grade of B- for themselves on the various recommendations. The analysts point out the raging bull mantra, a predilection for serial share shrinkers and financial stocks plus a growth style preference and strong recommended list performance provides some salve for some missed calls in large caps and the Consumer Discretionary, Utilities as well as Health Care sectors.