It was a strong year for the U.S. stock market in 2013.

But it was an even better year for local stock experts in the Honolulu Star-Advertiser’s 12th annual investment contest.

By the time the Federal Reserve announced last month it would begin tapering its $85 billion bond-buying program this year due to an improving economy, the bulls already had put considerable distance between themselves and any remaining bears.

Dwight Melton, co-founder of the Hawaii Stocks and Options Group, raced to his fifth investment championship and second in a row with a whopping 114.4 percent return as his hypothetical $20,000 portfolio turned into $42,876.18.

Nearly as impressive was Norm Caris, managing director for Los Angeles-based investment bank B. Riley & Co. and a Kauai resident. Caris posted a 91.2 percent return as his portfolio grew to $38,236.37.

Barry Hyman, vice president, private client group, for the Maui branch of FIM Group Ltd., was up 48.6 percent to $29,713.45. And Richard Dole, chief executive of Honolulu-based investment bank Dole Capital LLC, gained 29 percent to $25,797.98.

The returns of the four local experts compared quite favorably with the three major indexes. The tech-heavy Nasdaq composite index had its best return since 2009 as it rose 40.2 percent, including reinvested dividends, to 4,176.59. The broad Standard & Poor’s 500 index gained 32.4 percent to 1,848.36 for its best performance since 1997. And the widely followed Dow Jones industrial average increased 29.6 percent to 16,576.66 for its best gain since 1995.

"It was a stellar 2013 on Wall Street with the stock market putting together a wire-to-wire win," Melton said. "In all, the averages advanced from the opening bell and rarely looked back, rising on a better economic outlook, sustained earnings growth and fully supportive Federal Reserve policies."

Melton said with the Fed reinforcing the view that interest rates would stay at historically low levels for a long time and the earnings picture bright for many companies, "a strong 2014 stock market appears quite possible."

Caris, though, disagrees and is the only one of the four stock experts to rain on the party. He is calling for the stock market to be down 5 percent to 10 percent this year.

"Everyone should consider last year’s market a gift from the Federal Reserve, and that gift is probably over," he said. "We expect a pullback in the market due to the outsized gains in 2013, but it is too early to determine how large it will be."

He said the "anti-business policies" coming out of Washington are the largest obstacle facing the economy today.

"The dysfunction in the federal government has led to paralysis in the private sector, and has resulted in diminished economic growth and stagnation," he said.

Hyman expects the market to keep rising this year but sees a lot of "economic head winds."

"Profit margins are at historic highs, interest are near historic lows, stock market valuations are high, banks are still very sick, government debt is bloated and credit is still tight," Hyman said. "But with all that said, many economies are slowly healing. I think the right investments will do fine despite all the economic head winds."

Dole sees some of last year’s winners, such as consumer, social media and bank stocks, possibly continuing their momentum, but he said those sectors are subject to disappointment if expectations fail to materialize.

"Other sectors have not participated in the market rally because they tend to bloom later in the business cycle," Dole said. "This is especially true for natural resource stocks. Should the economy continue with its forward momentum, sectors that have lagged but benefit from increased capital spending and construction hold promise."

Melton’s favorite sectors to invest in for 2014 are financials, small cap and technology, and he consequently picked two small-cap index funds among his four selections for this year’s new contest.

Caris said retail is "one of the best sectors for investment" this year after getting beaten down in 2013 to depressed prices.

He particularly favors Deckers Outdoor, the maker of UGG brand boots.

"UGG boots were the most searched-for item over the holiday season and are the beneficiary of continued cold temperatures across the U.S.," he said.

Hyman said "valuation is the key" and that he would not invest in the S&P 500, Nasdaq or most other U.S. indexes because he said they are overvalued.

"International markets in general offer better value than the U.S. does," Hyman said. "There are some high-income producing REITs (real estate investment trusts) outside of the U.S. in Europe, Asia and South Africa, paying 6 to 9 percent yields with better valuations than U.S. REITs with yields twice or more, solid finances and excellent business models."

Hyman calls mining the single most beaten-down sector.

"There are some significant global opportunities in mining," he said. "It is the single most unloved sector, with valuations that are compelling, so it is poised to be a leading sector."

Hyman selected Silver Wheaton, a Vancouver, British Columbia-based precious metals streaming company, among his 2014 picks after its stock sank 43 percent last year. Silver Wheaton helps miners pay for projects in exchange for a discount on their future silver and gold output.

Dole and Caris also got onboard with the mining theme — Dole selecting iron ore producer Vale SA, which was down 23.3 percent in 2013, and Caris choosing mineral exploration company NovaGold Resources, which fell 43.7 percent last year.