Editor's Note: Jim Seymour's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Jan. 15 on RealMoney.
Well, the last half of our
Super Portfolio is up now, and you can see all eight columnists' picks for 2002. (This is available only to
Choosing stocks -- especially when you can choose just a couple -- for a joint portfolio like this is a very different experience than building your own list of 10, 20 or more stocks (which, as longtime readers will recall, I've done before). With only two names, you can't do much to balance safety vs. risk, at least with any subtlety. You sense you have to pull for the team, and you tend to stay with relatively safe choices.
In other words, you go for singles and doubles, more than three- and four-baggers, to avoid the risk of strikeouts.
You can see my two picks,
, on that list and read my reasons for choosing them as well.
I thought readers might like to see the short list of other stocks I was considering for the Super Portfolio -- my "almosts." These are all generally riskier than my Super Portfolio choices. They reflect worries about "war-proof" stocks, unemployment and other economy-dampening problems in 2002, reduced capital-expenditure budgets at U.S. corporations and shifting priorities for U.S. businesses and consumers.
is my play on video games, which I think are going to explode this year. With another major console platform in the field -- the Xbox -- game makers have an expanded universe of gamers to whom they can sell. At $40 to $50 apiece, the high end of impulse buying for consumers, video games are still within the range. Good video games have a high "playability" quotient -- that is, they're perceived as pretty good buys because they get played repeatedly and have a pretty substantial resale/trade value, if you tire of them.
All that augurs well for the video game shops, and I think Electronic Arts is positioned to make the most of this opportunity. Its stock was stuck in a $50 to $60 trading range for most of last year. After a brief run-up to almost $70 around Christmas, it has now slipped back into that familiar low-$50s groove. I think it's a good time to buy it.
If I wasn't worried that Herb Greenberg would've killed me -- the stock is one of his
nemeses -- I might also have listed
. However, I am worried about a potentially dangerous fourth-quarter and fiscal-year earnings report Jan. 22 and about the storm clouds of class-action suits now forming on the horizon. (The lawsuits allege that the company materially misrepresented its actual performance from February 2000 through December 2001, which led to investors purchasing Take-Two common stock at artificially inflated prices.)
While those suits will depress the stock price a little for a while -- and may eventually lead to big settlements or judgments -- I don't think they'll hold the stock back that much over the next few months -- assuming the Jan. 22 call isn't a complete
After a disastrous dip last fall, Take-Two has now rejoined Electronic Arts in the "up 50% over the last year" club, despite the legal storm clouds. Like Electronics Arts, it has the right games on the right consoles and stands a good chance of another substantial gain in 2002.
is one of several fringe plays I thought about for the Super Portfolio. It's one of those irritating companies that does telemarketing, Web marketing, email marketing and direct-mail marketing, using massive databases to sell you magazine subscriptions and more, in a way I personally find maddening.
So why would I consider it? It has a habit of growing 50% a year -- and I think it has now achieved both critical mass on its own and standing in its unfortunate business, and it may well improve that stellar financial performance this year.
The stock is getting a little expensive: It's up from around $7 to almost $12 just since the first of the year, and I think it's a stock where you jump on the train now or sit it out. For those taking the trip, it looks like there may be a nice payoff ahead.
And maybe it won't be quite so irritating when the phone rings during dinner -- you can hope that's your company at work as you hang up on them.
I also like
chances during 2002. It provides software and consulting services to hospitals and other medical providers; the company's software is installed at more than 60% of all U.S. hospitals. During most of the 1990s, it focused on acquisitions, including some spectacularly ill-advised ones. QuadraMed acquired 28 companies, including 23 from 1997 to 1999. Beginning in 2000, it slowed down and started turning around, cutting costs, bringing in new management, ending litigation and generally dumping the junk that had grown like barnacles around the company's Main Chance.
Throughout 2001, QuadraMed struggled back up, from about a buck last January to more than $10 now. I think QuadraMed has the right focus on the right markets, with the right products and services, to go a lot higher this year.
has carved out a nice little niche in the volatile semiconductor-equipment business. It makes the utterly mundane products -- wafer shippers, wafer transports, process carriers, wafer pods and protective work-in-process boxes -- that allow semi manufacturers to move raw materials and work-in-progress goods safely through the manufacturing process. Sounds dull, I know, but for Entegris, which dominates this squirrelly corner of the semi industry, it's a darned good business.
Sales fell quarter by quarter during 2001, from about $105 million in the quarter ended in February to about $46 million in the quarter ended last November. Profits fell even faster, from $13 million in that February quarter to a loss of $6 million for the November quarter.
But now that the semi industry and its suppliers are showing signs of life, I think Entegris is due for a nice move in 2002. At around $12, its stock has almost doubled since October; like QuadraMed, this is one to buy now or forget about.
Finally, here are two much more mainstream picks.
is headed for a good year, I believe, as it finally sweeps the legal problems off its agenda. With a fresh and strong product lineup, its only serious worry this year is how many PCs its OEM partners will sell. I think Microsoft's a winner in 2002.
, about which I've
written before, is coming back strong, I think. Sure, it took a hit post-Sept. 11, when it dipped to a low of $10.10. But it's bounced back to around $16 now -- well below its 52-week high of $82 -- and I think it's headed back up, way up.
You can worry all you want about the near-term future of PCs, servers and switches. But storage, the fourth pillar of corporate computing, is rising sharply, as companies create and keep more data and find new, smarter ways to refine and mine that data. EMC's got serious competition from
and others at the top, and
is burrowing in from the bottom in storage. But Dell is also in a sense an asset for EMC: The two have partnered to help get EMC's low-end Clariion units out the door.
Besides EMC's own strong prospects, there's a nice potential acquisition play. IBM is flexing its muscles in storage and might well decide to offer a juicy premium over EMC's current market value of about $36 billion to grow its storage business overnight. If that happens, I think it will be early in the year, before EMC gets too expensive.
Even without the acquisition play, I think EMC can double this year, which makes it a nice wrap-up to this list of "almosts" -- some of the stocks I almost put on my Super Portfolio list.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to