advertisement
For all of the complexity that appears to underpin investing, very often success is a matter of simply mastering the art of the obvious. The big trends that made a lot of money over the past year were so clear, in fact, it's a wonder that we aren't all billionaires already.
It was plain as day, was it not, that shares of larger companies were due for a recovery in 2006 after six and a half years of bullying by the shares of smaller companies? That the price of oil would collapse after peaking three times at around $75 by midyear? That shares of home builders and banks would rally in celebration once the Federal Reserve stopped its interest rate raising campaign in the summer?
Jeesh, come on: Where's your Porsche?
It's my job to make certain that you see the big events unfold in real time and understand quickly how to benefit from them. And for the most part this year, I was not entirely unhelpful. But you be the judge: This week, let me update you on the ideas that I provided in 2006 and tell you if it's time to add shares of the winners or take losses on losers. Then next week, I'll scan the horizon for the big surprises and themes of 2007.
January
On Jan. 11, I told you about the 18 most consistently high-performing stocks over the past decade: ones 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, news, msgs), bombed miserably, losing 50% of its value following questionable acquisitions and a rare streak of bad merchandising decisions. And the quarrier, Florida Rock (FRK, news, msgs), sank by 20% amid a weak market for construction aggregate in the Southeast.The good news: Rock-solid National Australia Bank (NAB, news, msgs) and Australia & New Zealand Banking (ANZ, news, msgs) rose again, by 28% and 21%, respectively. Also keeping their hot streaks alive: light maker Genlyte (GLYT, news, msgs), up 36%; apartment developer Home Properties (HME, news, msgs), up 47% with dividends; and pump maker Franklin Electric (FELE, news, msgs), up 23%. These all remain on my list this year, and are joined by Gilead Sciences (GILD, news, msgs), Oshkosh Truck (OSK, news, msgs), Alexandria Real Estate Equities (ARE, news, msgs), New Jersey Resources (NJR, news, msgs) and Expeditors International (EXPD, news, msgs).
More from MSN Money
On Jan. 18, I made one of my best calls of the year, arguing that big 2005 winners Apple Computer (AAPL, news, msgs) and Google (GOOG, news, msgs) 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, news, msgs), Broadwing (BWNG, news, msgs) and Cray (CRAY, news, msgs) -- 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, news, msgs) 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, news, msgs). 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 alert 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% 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, news, msgs), up 64%; forged-metal fabricator Ladish (LDSH, news, msgs), up 54%; and rail manufacturer L.B. Foster (FSTR, news, msgs), up 51%. My only loser in that period was retailer Guess (GES, news, msgs), 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, news, msgs), 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 the $14 area over the next six months. Cigarette maker Reynolds American (RAI, news, msgs) also shows potential for a 10% move in the next three months.
On Feb. 8, I suggested, with tongue in cheek, that the United States 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, news, msgs), rising 12%, and Suncor Energy (SU, news, msgs), 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, news, msgs), which proceeded to tumble by 11%. But I regained my balance with picks Quiksilver (ZQK, news, msgs), up 14%, K2 (KTO, news, msgs), up 17%; retailer Zumiez (ZUMZ, news, msgs), up 21%; Vail Resorts (MTN, news, msgs), 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, news, msgs), 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, news, msgs), Dynavax Technologies (DVAX, news, msgs), Vical (VICL, news, msgs) and Quidel (QDEL, news, msgs).
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, news, msgs), equipment makers Valmont Industries (VMI, news, msgs) and Danaher (DHR, news, msgs), got off to a great start, up 18% to 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, news, msgs) and Southwest Water (SWWC, news, msgs).Every few years, I embarrass myself by providing a critique of Warren Buffett and his stewardship of Berkshire Hathaway (BRK.A, news, msgs). This year, it came on March 8, when I recommended that investors in search of a high-return, low-transparency conglomerate consider Brookfield Asset Management (BAM, news, msgs) or Leucadia National (LUK, news, msgs) instead. Powered by the charming gecko spokesreptile at subsidiary Geico, Berkshire went on to gain 23% since. That wasn't as good as Brookfield, up 33%, but it was very respectable and did beat Leucadia, which only gained 6%. I still like Leucadia and Brookfield a lot, but this time will just keep my mouth shut about Berkshire.
Rate this Article
High