Agonies, Ecstasies in Stocks for 2006

January

On Jan. 11, I told you about the 18 most consistently high-performing stocks over the past decade: stocks that were up in each of the past 10 calendar years. It was a strange list including two Australian banks, a Florida rock quarry, a Seattle freight forwarder and a women's apparel retailer. It turned out that the one with the most amazing record, retailer Chico's FAS (CHS Quote), bombed miserably, losing 50% of its value following questionable acquisitions and a rare streak of bad merchandising decisions. And the quarrier, Florida Rock (FRK Quote), sank by 20% amid a weak market for construction aggregate in the Southeast.

The good news: Rock-solid National Australia Bank (NAB Quote) and Australia & New Zealand Banking (ANZ Quote) rose again, by 28% and 21%, respectively. Also keeping their hot streaks alive: light maker Genlyte (GLYT Quote), up 36%; apartment developer Home Properties (HME Quote), up 47% with dividends; and pumpmaker Franklin Electric (FELE Quote), up 23%. These all remain on my list this year and are joined by Gilead Sciences (GILD Quote), Oshkosh Truck (OSK Quote), Alexandria Real Estate Equities (ARE Quote), New Jersey Resources (NJR Quote) and Expeditors International (EXPD Quote).

Before you go crazy on them, keep in mind that the bar of expectations rises every year, making it increasingly difficult for these companies to maintain their success.

On Jan. 18, I made one of my best calls of the year, arguing that big 2005 winners Apple Computer (APPL Quote) and Google (GOOG Quote) were unlikely to repeat as tech heroes in 2006, and it was time to find new blood. It turned out that Apple fell by 4% over the rest of the year, while Google dropped 2%. Meanwhile, three of my candidates as new tech supermen -- Akamai Technologies (AKAM Quote), Broadwing (BWNG Quote) and Cray (CRAY Quote) -- rose by 134%, 106% and 58%, respectively.

This year, look for continued but more-tempered success from those three, but add Internap Network Services (INAP Quote) to your list of potential big winners from the still-accelerating demand by Web users for smooth broadband connections for video and music. For a high-risk play in the same area, consider Allot Communications (ALLT Quote). Now trading at around $10, down 20% from its initial public offering last month, it has potential to rise to around $15 by year-end.

On Jan. 25, I tried to buck the trend of blasting chief executives for outlandish pay and lousy performance and alerted you to four great CEOs worth every penny. The shares of my four top managers did exceedingly well for the next five months and then collapsed, ending the year down 4.5% on average. Maybe good guys do finish last.

February

On Feb. 1, I provided my rules on the high-risk, high-reward game of playing with stocks as if they were baseball cards, flipping them for short-term gains in a practice known as "swing trading." I wrote a book on the subject a couple of years ago, and it seems to have paid off. The ideas presented went on to advance 19.7% on average over the next three months. The biggest winners were Time Warner Telecom (TWTC Quote), up 64%; forged-metal fabricator Ladish (LDSH Quote), up 54%; and rail manufacturer L.B. Foster (FSTR Quote), up 51%. My only loser in that period was retailer Guess? (GES Quote), down 5%, but then it went on to rally 50%, so it wasn't such a bad idea after all.

As a reminder, with this strategy you're looking for stocks that appear briefly stalled in a well-established uptrend, and it's best if their sectors are also in recently established but distinct uptrends. At the moment, I'm intrigued by the potential for television-station owner LIN TV (TVL Quote), which broke a three-year downtrend in the summer at the same time as the rest of the long-beleaguered media sector. Now trading at $10, it has potential to hit the $14 area over the next six months. Cigarette maker Reynolds American (RAI Quote) also shows potential for a 10% move in the next three months.

On Feb. 8, I suggested, with tongue in cheek, that the U.S. should attain energy independence by persuading the Canadian government to let us annex Alberta and its fabulous oil sands. If nothing else, I just wanted to be able to call the area "tar nation"! A lot of humorless Canadians sent me scathing e-mails, but the province's representative to Washington, D.C., sent me an amusing and friendly letter in response. Good show. The Canadian energy companies mentioned had only a modest return the rest of the year: Encana (ECA Quote), rising 12%, and Suncor Energy (SU Quote), up 5%.

On Feb. 15, I observed that skiwear and ski resort companies would benefit from renewed interest in the sport following the Winter Olympics in Turin, Italy. I focused on snowboard apparel specialist Volcom (VLCM Quote), which proceeded to tumble by 11%. But I regained my balance with picks Quiksilver (ZQK Quote), up 14%; K2 (KTO Quote), up 17%; retailer Zumiez (ZUMZ Quote), up 21%; Vail Resorts (MTN Quote), up 48%; and developer Intrawest, up 27% when it was purchased by a private equity group. Vail, Volcom and Quiksilver all still have a lot of potential for outdoors investors.

On Feb. 22, I published my favorite story of the year, mocking the craze for bird flu stocks and warning investors to avoid them like the plague. That turned out to be a good idea because most of the companies on my list of biotechs focused on this cause, such as BioCryst Pharmaceuticals (BCRX Quote), lost their beaks and feathers over the rest of the year, with many down 25% to 60%. Among the few big winners were Alnylam Pharmaceuticals (ALNY Quote), Dynavax Technologies (DVAX Quote), Vical (VICL Quote) and Quidel (QDEL Quote).

March

On March 1, I explained why companies that help to provide clean drinking water would provide great investment opportunities over the next two decades. A few of my picks, such as Brazilian utility Companhia de Saneamento Basico (SBS Quote) and equipment makers Valmont Industries (VMI Quote) and Danaher (DHR Quote), got off to a great start, up between 18% and 74%, but many of the rest treaded water or sank. Don't give up on these. Among my top picks still are Danaher, Saneamento Basico (which packs a 4% dividend), Aqua America (WTR Quote) and Southwest Water (SWWC Quote).