NYU 'All-Stars' Ride the Market Coaster With AmEx and American Eagle

The stock market slides one day, rallies the next, then bounces between positive and negative... Stock investing -- especially over the last couple of months -- can feel like a rollercoaster ride. In the time since we last looked at NYU's Investment Analysis Group (IAG), the group's All-Star portfolio has been seeing the best and worst of the current up-and-down market.

With only a couple months left before current IAG members turn their portfolios loose on a new class, how is the group stacking up against the S&P 500?

American Express: Caught In the Credit Crunch

Even the venerable IAG wasn't immune to the market downside in the financial sector. After financial stocks took their first hit, All-Star portfolio manager Neal Sangani decided to buy what looked like fundamentally "cheap" (value ) stocks. "I decided to go into financials because at the end of 2007, they were the hardest hit, and from a value perspective they were the most attractive," says Sangani. Yet, financials have still underperformed the market.

One financial stock the All-Star portfolio took a big hit with was American Express AMX. Sangani explains: "One of my bigger positions [around 15% of the portfolio] was American Express, where I saw that they had a premium name, and other credit card companies like MastercardMA were doing very well. They have a lending component, and I thought that just because they have a slightly more affluent customer base, they'd fend a little bit better. They haven't. They've seen the same late payments that everyone else has been seeing."

All-Star's position in American Express is currently down almost 15%.

American Eagle Outfitters: Revamped Retail?

One of All-Star's biggest bets was in retail, and until lately, it was paying off in spades. According to Sangani, the group decided to go the way of retail for the same reasons it took positions in financial companies like American Express -- they got hit hard previously, and were looking like cheap buys.

"We were mostly in retailers [almost half of the portfolio], and they've been outperforming since December. Even in the retailers, we were in the 'right' companies. The ideal example of that is American Eagle AEO," says Sangani.

Sangani and the IAG used a number of criteria to steer clear of retailers that might not be as good of a bargain, looking at financial measurements like net cash position (lots of liquid assets ), low P/E multiples and solid brand names.

And for a good long while, their plan was working -- the All-Star portfolio was beating the S&P by 20% as recently as the first week of March. Unfortunately, that's not the case anymore, notes Sangani.

The Market Slips Again

After American Eagle reported less-than-impressive sales on March 6, analyst projections began dropping, and so did the stock's share price.

Sangani notes pressure to mark down winter merchandise to make room for spring as one of the big factors that contributed to the company's less-than-stellar announcement.

Currently, IAG's position in American Eagle is down almost 15%. But that doesn't faze All-Star's portfolio manager. Sangani says he still sees American Eagle as a strong long-term play because of its current fundamentals and the new brands it's developing.