Three local stock experts are expecting a correction this year, and one is cautiously optimistic.

My, how things have changed since the robust times of 2013.

It was a flat first quarter for the major indexes and a slightly better one for the four participants in the Honolulu Star-Advertiser’s 12th annual investment contest.

Norm Caris, managing director for Los Angeles-based investment bank B. Riley & Co. and a Kauai resident, led the way with an 11.5 percent return as his hypothetical $20,000 portfolio grew to $22,300.56.

Barry Hyman, vice president, private client group, for the Maui branch of FIM Group Ltd., was up 9.3 percent to $21,867.44. Richard Dole, chief executive officer of Honolulu-based investment bank Dole Capital LLC, gained 2.6 percent to $20,526.75. And Dwight Melton, co-founder of the Hawaii Stocks and Options Group and the two-time defending champion, eked out a 1.5 percent gain as his portfolio rose to $20,299.54.

"Economic results have been pretty poor by any normal standards for a recovery, and this is after we have thrown in hundreds of billions of dollars and created the highest debt level in the history of the world," Caris said. "We still expect a long-overdue correction of 5 to 10 percent."

Hyman said it would take exceptionally strong economic growth to justify current index valuations and said it appears investors are finally waking up to the fact that profit margins are cyclical and eventually revert toward their mean.

"As the profit margins of the stocks in the broad indexes begin to move back toward normal levels, prices of index stocks could correct as investors move out of indexes and ETFs (exchange-traded funds) and rotate into select bargained-priced stocks," Hyman said.

Dole said corrections along the way are "probable" but that the economy seems to be improving.

Melton called the first quarter an uneven affair.

"More uncertainty lies ahead," Melton said. "I can see that the relations between East and West now appear to be at a post-Cold War low. Also, there is no consensus regarding the slowdown in growth in China and where it ultimately will lead. There are additional concerns about growth in our country after a long and arduous winter that produced a succession of conflicting trends. Further, the outlook for earnings in the just-ended quarter is highly uncertain. I am cautiously optimistic as I look ahead."

The returns of the four local experts beat the total returns of the three major indexes. The Standard & Poor’s 500 index was up 1.8 percent during the January-March period, the Nasdaq composite index was up 0.8 percent and the Dow Jones industrial average was off 0.2 percent.

Caris’ best performer in the first quarter was gold miner NovaGold Resources, which rose 42.1 percent. He also had a double-figure gainer in semiconductor manufacturer Intersil, which increased 13.8 percent.

"We think the gold sector will continue to outperform, given continued easy money policy by the Fed and geopolitical uncertainty abroad," he said. "We are pressing our bet on gold and sticking with NovaGold, the best-performing small-cap gold miner. We are adding (for the second quarter) the Direxion Daily Gold Miners Bull 3x (exchange-traded fund), a leveraged bet on our gold thesis."

Caris said the largest obstacle to the economy in 2014 is the White House and its "reckless" anti-business policies.

"The situation in Hawaii is even worse than on the mainland due to the prohibitive cost of shipping and doing business here. Hawaii has some of the highest taxes and the highest welfare, as well as the highest cost of living in the U.S., all a courtesy of the Jones Act, a 90-year-old law that affects everyone."

The Jones Act was designed to protect the domestic shipping industry. It stipulates that only ships made in the U.S. and flying the country’s flags can deliver goods between U.S. ports.

Hyman had two double-digit gainers in the first quarter: Harris & Harris Group, a venture capital investment firm that rose 16.4 percent, and Silver Wheaton, a precious-metal mining company that was up 12.4 percent.

"Prices of many stocks in the mining sector are extremely depressed," he said. "Some of the poorly managed companies warrant those depressed prices, but many are screaming bargains."

He said it won’t make any difference to the economy that Janet Yellen, who was sworn in as Federal Reserve chairwoman in February, is now running the Fed rather than Ben Bernanke.

"Both Yellen and Bernanke are cut from the same cloth as (Alan) Greenspan," Hyman said. "She has been very clear she will continue her predecessors’ heavy-footed accommodative policies, reticent to allow Adam Smith forces of economics to take their natural course in an attempt to cushion the economy from any contraction. These policies are partly responsible for the bubbles of the late ’90s in stocks and the mid-2000s in real estate, and make future bubbles probable."

Dole, who had double-digit winners in utility services firm Exelon (up 23.8 percent) and scientific technical instruments manufacturer Newport (up 14.4 percent), said he expects a market shift this year from last year’s winners to those also-rans.

"I expect a reallocation of funds from the momentum stocks of 2013 to sectors that didn’t participate in last year’s rally," he said. "The manufacturing index rose in the first quarter, with increasing new orders. Should there be a pickup in capital spending based on strong cash flow, the technology and industrial sectors would be the beneficiaries. Currently, liquid assets held by nonfinancial companies are unusually high, particularly for software and information processing equipment. There looks to be a need to replace depreciating equipment. Other areas showing wear are manufacturing facilities, hotels and lodging facilities, power plants and communication structures."

Melton, who has won the investment contest five of its 11 years, trailed the pack in the first quarter because he is typically the most aggressive of the participants. His best pick was the Direxion Financial Bull 3x index fund, which rose 4.8 percent.

He said the unstable market has caused investors to swing toward utilities.

"This group often stands out when the markets falter, as there is a tendency at such times to shy away from risk and search out high yields, which are a core attribute of the utilities sector," Melton said.