Former Cincinnati Reds great Pete Rose once said he'd "go through hell in a gasoline suit to keep playing baseball." Nicknamed Charlie Hustle, he amassed more 200-hit seasons than any other player in history -- and he also still holds the major league records for games played and total hits, even though he hung up his spikes back in 1986.
Rose's baseball career ended in disgrace three years later with a gambling suspension, but during his prime he was still the kind of all-star you'd like all of your stocks to emulate. He showed up to play hard every single day, and in the rare event that he slumped at the plate for a few games in a row, he almost always rebounded with a consecutive-days hitting streak that left pitchers confounded and fans cheering.
Gritty determination is the Rose trait I most sought in candidates for the SuperModels 2000 All-Star Team that I'm naming this week. In a year that will be remembered for its nightmarish volatility, the 20 stocks I want to honor were the Kings of Consistency, not just Sultans of Swat. Up in every quarter, and supported by waves of buyers every time they paused or dipped, these were securities that labored all year to put a lie to rumors of a 2000 bear market. For these names, this year was pure bull.
Because it's not fair to judge a giant company's stock performance against much smaller peers, I divided my all-star team into three leagues by market capitalization: large, medium and small.
To make the squad, stocks had to advance in every quarter of the year and they had to trade on Dec. 9 within 10% of their 52-week high. The large caps had to meet a minimum year-to-date performance bar of 100%, while the mid-caps and small-caps had to be up at least 200%.
Why bother to look retrospectively at the past year's success stories? For one thing, it's a lot more fun than writing another column about what a terrible 12 months it's been for most stocks. Second, it provides a way to focus on what's undeniably working at a time when little
to be working. Third, it provides a way to think about the sorts of stocks that might end up on the list next year. Fourth, it's one more reminder that there's life after tech stocks. And most importantly, it looks like some of my all-stars might well have at least a few more months of outperformance left in them -- if not an entire year.
It probably won't surprise you to learn that there are no technology stocks on my team. It's topped by 12 health care-related names, and also has four financial-services names, three from the energy sector and one from consumer services (restaurants). Indeed, it's interesting that there is generally just one company from each vertical industry group -- confirming the winner-take-all factor that has characterized stock movement in the past decade. In the large-cap group, for instance, there's one top-ranked gas utility, one property insurer, one life insurer, one generic drug maker and one HMO. Just like, well, there was just one Pete Rose.
Let's take a closer look. (All numbers in charts are as of Dec. 9.)
It's disorienting to look at a list of all-stars that doesn't include a networking communications or software stock, but the numbers don't lie. If I had relaxed the maximum "percent below high" to 25% from 10%, the team would have embraced
Brocade Communications Systems
Check Point Software Technologies
-- but that would have defeated the point of seeking consistency. All of those tech stocks fell by 50% at least once in the past year, and some did it twice.
In contrast, the bear barely laid a glove on my five finalists this year.
, a profitable maker of generic prescription and nonprescription drugs, fell $24 on Aug. 9, but its partisans snapped it back up the next day. It spent the rest of the next month slightly below its 50-day moving average, but for the rest of the year it held well above support. Every dip to its 10-day moving average, in fact, was a buying opportunity.
, a global property and casualty insurer, was flattish with a slight upward bias for the first two months of the year. But as the
plunged more than 40% from its March 9 crest above 5,000 through last Friday, ACE tripled -- a mirror image of the tech-heavy index. Every decline was shallow; it only fell below its 50-day moving average once in the period.
Likewise, natural gas explorer, electric power producer, coal miner and pipeline owner
surged with both the energy and utility groups -- especially in the April 15 to May 15 period that saw the Nasdaq's first lukewarm bear market recovery. It also seldom sank below its intermediate-term support. And the story at life insurer
and health-maintenance organization
was the same. All remained in favor all year, though Manulife looks like it has the most staying power going forward -- particularly in an environment of declining interest rates, which usually favors the rate-sensitive insurers.
One last thing. Note that none of these stocks started the year as big-caps: The biggest in January was UnitedHealth, at a market cap of around $8.8 billion. It really was a great year for mid-caps in the right sectors at the right valuations.
Likewise, all the members of our mid-cap all-star team started the year as small caps -- and many look like they're well on their way to the big leagues. Check out
Coventry Health Care
, for instance, which still trades at a minuscule price-to-sales ratio of 0.62 and has been growing revenues at better than 25% a year. Based in Bethesda, Md., it provides managed health care services throughout the Southeast. On a purely technical level, money flow and momentum still look fine -- as they have all year. The stock has generally stayed at or above its 50-day moving average in the course of a smooth upward move.
For a year that was so tough on stocks, it's a little curious that
Investors Financial Services
did so well -- as they're all about asset management. But both made the year look easy, with occasional rest stops on their intermediate-term moving averages. Both still look good.
Laboratory of America Holdings
, which I first extolled for its consistency on June 28 when it was trading around $75, hit $150 last week and is only now finally showing signs of weariness. Not so
Pharmaceutical Product Development
, a peer in the related field of clinical drug testing, which still seems to be attracting good money flow and buying momentum -- and posting strong growth.
, which was spun off from
HCA-The Healthcare Company
following a federal fraud investigation of HCA in the mid-1990s, may have been the most consistent of the whole mid-cap bunch this year -- barely even touching its 50-day moving average en route to a sensational advance. Money flow and momentum seem to have slowed for now, though buyers in every LifePoint pause in the past 12 months have been well rewarded.
% Chg. YTD
Inverness Medical Technology
Scientific & Technical Instruments
Medical Appliances & Equipment
Independent Oil & Gas
In the small-cap category lies the top stock of the year in any category --
Inverness Medical Technology
. A micro-cap player's dream stock, this manufacturer of over-the-counter health-monitoring kits started in January at around $80 million in market capitalization and has advanced steadily -- not parabolically -- ever since. Along the way, it attracted some powerful allies, including
(owner of 721,000 shares through the Sept. 30 reporting period), hedge fund
Pequot Capital Management
(owner of 597,000 shares) and value player
The momentum still looks good, as it appears that all of the institutional activity in the stock in November was positive, including a 255,800-share purchase reported by the $22 billion Connecticut-based money manager
Aeltus Investment Management
on Nov. 15. Expectations for growth are dangerously high now, but buyers still seem to be supporting the stock at every dip.
Also interesting in this group is
, on which buyers filled up with every little decline over the past year. The company benefits from the quirky recent interest in restaurant stocks. Panera owns and operates more than 80 bakery cafes in the Midwest and franchises 100 more in 24 states. It may not be toast now, but it doesn't look like anyone's main course anymore either.
A better choice from this bunch going forward might be
, which earned the only biotech spot on the squad. Its drug Natrecor was rejected by the
Food & Drug Administration
in 1999, but a clinical trial concluded last month that a new formulation performed better than nitroglycerin at relieving the symptoms of heart failure. The company has said it plans to resubmit the drug to the FDA soon. It also has begun Phase 1 trials in a rheumatoid arthritis drug. Company insiders were buying it from December 1999 through July at prices ranging from $3.94 to $6.87; it recently traded at $21. Any return to the 15-day moving average -- around $17 -- has proved heart-warming in the past year.
I'll track all of these all-stars over the next 12 months, and report back. And using the same criteria, I'll to try to figure out at the end of each quarter which stocks have the potential to land on the list at this time in 2001. The pitching looks tough next season and we'll need every hot bat we can find.
At the time of publication, Jon Markman owned or controlled shares in the following equities named in this column or listed in the SuperModels portfolios: AES, Calpine, Cisco Systems, EMC, The Gap, JDS Uniphase, Kopin, Maxygen, Microsoft, Nokia, Nortel Networks, Qualcomm, Superconductor Technologies and Xcelera.
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