Don't miss the
first half of this column. Why the Smart Money is Buying Now" ) to start buying large-cap stocks that had been hammered recently despite 10 years of strong growth and solid cash flow also panned out. I screened for stocks fitting that profile and came up with a list of 10 stocks he endorsed. They were up 9.1% by the end of June, vs. a 5.5% decline in the broad market. Leaders were the unlikely Cabletron Systems ( CS), up 50.4%; Microsoft ( MSFT), up 49%; KLA-Tencor ( KLAC), up 45%; and Tiffany ( TIF), up 33%. I'll let the original 10 ride, but I will also track this new gang of 12. Mr. P is short-term bearish for traders, but long-term bullish -- as he thinks that even if the market tanks over the summer, you're likely to still be happy in a decade if you salt away shares of bruised but proven winners. He says his original view, first uttered in January, is still true: "These are the levels at which the smart money buys."
Make a Bundle on the S&P's Rejects" ). I noted that the result was the opposite of what S&P intended: The expelled stocks did much better than their replacements. And guess what? It's still true: Stocks added to the S&P 500 in 2000 are down even more now than they were in February, with a 24.5% decline collectively since their individual additions. The expelled stocks are up 45% collectively since their banishment. It would be presumptuous to think that Standard & Poor's took my critique to heart, but it's worth noting that they've expelled only two stocks so far this year for reasons other than mergers or spinouts: Briggs & Stratton ( BGG) on April 2 and Longs Drug Stores ( LDG) on June 29. The Briggs trade turned out as expected: It's up 14.5% since expulsion, double the market, while Longs Drug gained 7% in its first day of trading outside the index on July 2.
Ready or Not, Here Come the 2001 SuperModels" ). It's really my only growth- and momentum-focused model this year, and it was up 8.2% through the end of June, vs. a 2.3% decline in the broad market. Pow! Take that, bears. Leaders are Cardinal Health ( CAH), up 57%; Alza ( AZA), up 29%; Loews ( LTR), up 27%; and Bed Bath & Beyond ( BBBY), up 22%. Anadarko Petroleum ( APC), which was a powerful member of the surging energy group at the time, is actually down 16% since. I'll let these ride. 13 Below-The-Radar Picks with Potential to Soar" ). It was up 4.3% through the end of June, vs. a 2.7% advance in the market. Best names were Citrix Systems ( CTXS), up 42%, and Pixar Animation Studios ( PIXR), up 36%. Bombs were Tellabs ( TLAB), down 45% if not for the 20% stop loss; and Atlas Air ( CGO), down 49% if not for the stop. It's too early to create another set of these. I'll let these ride, too. Wanted: Homes for Orphaned Growth Stocks" ). A couple of value managers gave me six growth stocks they were pursuing, though, and they're up 39.6%, vs. 10% advance in the market. Top names are Network Associates ( NETA), up 107.5%; J.C. Penney ( JCP), up 77%; and Novell ( NOVL), up 40%. This will be a tough act to follow, but I'll get started in a week. There's always time to break a winning streak with a brand-new set of disasters.
Mr. P's Theory Pays OffThe suggestion from wily hedge fund manager Mr. P. on Jan. 10 ("
|Name||10-Year EPS growth %||% Change 12 Mos.*||Market Cap (in billions)|
|Sun Microsystems (SUNW)||30.61||-64.2||51 .0|
|Silicon Valley Banc (SIVB)||23.36||-49.6||1.1|
|Charles Schwab (SCH)||43.32||-51.0||22.0|
|Applied Materials (AMAT)||43.92||-45.8||40.0|
We've Learned to Love RejectionMy favorite story of the year came on Feb. 14, when I showed that Standard & Poor's had ripped more than two dozen able-bodied value stocks out of its benchmark index during 2000 and replaced them willy-nilly with growth stocks ("
Calendar Streak ContinuesMy portfolios of stocks that do well in individual months have scored solid gains this year, too. Called HiMARQ -- for "historical monthly average return quotient" -- they beat the market handily in every month except February. Top picks included Ameristar Casinos ( ASCA) in April, which is up 137%; McNaughton Apparel ( MAGI) in April, up 45%; Barnes & Noble ( BKS) in March, up 46%; Oracle ( ORCL) in June, up 31%; and MedImmune ( MEDI) in June, up 21%. Overall, I figure the HiMARQs are up 7.1% for the year. Here are the July prospects:
|Stock||Avg. July gain||# up Julys||# down Julys|
|Taro Pharmaceutical (TARO)"||8.4||6||1|
|First Virginia Banks (FVB)||3.9||11||4|