Jubak's Journal
Your vote: 6 new picks for Future 50
Some 3,000 of you voted for the up-and-coming stocks most likely to be the industry leaders of tomorrow. Can these six help us beat the past year's 56% appreciation for the Future 50 portfolio?
By Jim Jubak
The votes are in -- 3,146 of them, anyway. From the list of 10 nominees, whittled down by yours truly from the 183 names readers submitted, you picked VeriSign (VRSN, news, msgs), i2 Technologies (ITWO, news, msgs), Adobe Systems (ADBE, news, msgs), Vodafone AirTouch (VOD, news, msgs), Phone.com (PHCM, news, msgs) and Affymetrix (AFFX, news, msgs). Those stocks will replace IBM (IBM, news, msgs), AT&T (T, news, msgs), Globalstar Telecommunications (GSTRF, news, msgs), Coca-Cola (KO, news, msgs), Citigroup (C, news, msgs) and Walt Disney (DIS, news, msgs) in my Future Fantastic 50 portfolio as of today.
My thanks to everybody who has contributed to this continuing experiment in collaborative stock picking via the Internet. About a year ago, I started the Future Fantastic 50 as a way to find stocks that had a good chance to grow into the blue chips and industry leaders of tomorrow by making 30 suggestions of my own, and then asking for your nominees. (The portfolio was intended to be a more aggressive version of the blue-chip growth stock list that I created called the 50 Best Stocks in the World.) I thought this partnership could produce a better portfolio than any one of us could produce alone. That's what we all want from the Internet, I wrote then:
In chat rooms and on bulletin boards, investors hope that the exchange of opinions among individuals will result in a better meta-opinion -- one that is the shared work of the group. E-mail and discussions with individual readers even filter into a column like mine. The challenges and the new viewpoints raised in those exchanges do influence the stocks I pick and my take on specific strategies. I'd like to take that process a step further and actually build and track a portfolio that's the product of the community -- as loose as it may be -- that reads Jubak's Journal.
56% gain for the first year
We've done pretty well in our first year. For the period from July 30, 1999 through the close of the markets on July 27, 2000, the Future 50 portfolio has gained 56%. (That figure assumes equal dollar amounts invested in each of the 50 stocks and does not include commissions or taxes.) That's way ahead of the 8% gain on the Standard & Poor's 500 Index ($INX) and even beats the 46% gained by the Nasdaq Composite Index ($COMPX) over the same period.
After we picked this portfolio last year, we left it alone for 12 months. I intend to follow the same procedure this year. I'll ask for your help in revising this portfolio -- turning over about 10% of the stocks in it once again -- in July 2001. Until then, no buying or selling. This is intended to be a buy-and-hold portfolio -- holding period five years or more, for the most part -- for the aggressive long-term investor. (Just as the 50 Best Stocks in the World portfolio is intended for the middle-of-the-road long-term investor.)
But that's only one way to use this portfolio. Since putting it in motion, I've revisited the list every month or so to suggest the 10 stocks on the list that are most attractively priced for purchase now. The buy recommendations you'll see on the Future 50 portfolio page currently date from July 7.
I did all this because I have a theory I want to test. What would happen if, instead of trying to research the 8,000 or so equities we track on MSN MoneyCentral, we limited our research universe to just 50 stocks that we'd already vetted for their potential excellence? What if, instead of constantly trying to find the "new" opportunity, we used our in-depth knowledge of just 50 stocks to make the most of buying and selling opportunities in stocks we already knew? Would that be a winning strategy? Would it help an investor beat the indexes and other less focused portfolios?
Details
----------------------------------------------------------
It's taken me about a year to get comfortable with the 50 Best Stocks in the World and the Future Fantastic 50 portfolios, and to iron out some of the kinks in the process. I've continued to make ten "buy" recommendations for each portfolio on something like a monthly basis, but I didn't start to track the results of that subset of picks until I set up the "Core & Edge" portfolio strategy described in my June 27 column, "Stay centered without losing your edge." Right now you can go to a set of 20 recommendations -- 10 from the 50 Best in the World and 10 from the Future 50 -- in the MoneyCentral recommendations area under the catchy moniker of Jubakscore&edge and see exactly how this strategy of actively managing a small universe of blue-chip and potential blue-chip stocks is doing.
How to check on the experiment
Each month, around the 25th of the month for the 50 Best and around the 10th for the Future Fantastic 50, I'll be updating these portfolios by making new buys, and perhaps continuing some. You can check the progress of this experiment at any moment you like by going to the recommendations page I've listed above. (And you can post any comments on this strategy or these picks in the Market Talk with Jim Jubak community using the Core & edge topic tab.) I'll be benchmarking this experiment in three different ways: against the appropriate indexes, against the "unmanaged" 50 Best and Future 50 portfolios, and against Jubak's Picks, which roams the larger 8,000-equity universe looking for the best opportunities.
And, of course, investors seeking a balanced equity portfolio can use the total Core & Edge list to combine blue-chip growth stocks with more aggressive potential blue-chip growth stocks in a single portfolio. They can even fine-tune their risk/reward profile by changing the mix from 50/50 to some ratio that suits them better.
Next month, around Aug. 10, I'll make a new set of buy recommendations for the Future 50 that will take into account the six new stocks that I've added today. For investors who don't want to wait so long, here's my best estimate of a good buying target.
VeriSign: The stock's recent range has been between $200 and $150. I'd like to buy this one near the low end of that channel, perhaps $165 or so.
i2 Technologies: In recent dips, i2 has repeatedly bounced off the 200-day moving average. I'd like to get in near that level -- $106 or so -- if August turns out to be as weak as it looks to be now.
Adobe Systems: This one hasn't been below its 50-day moving average, currently $123, since February. But the gap between that average and the 200-day line continues to widen. I'd certainly like to get this one closer to that level -- $94 -- than it is currently. At $110 or so, the gap between the two moving averages would resemble the more reasonable gap that existed in the spring.
Vodafone AirTouch: The recent price of $44 and change isn't bad, but the market looks like it's determined to cut the multiples on acquirers in the telecommunications sector. I'd give this one a while to see if the base near $45 that has been forming since early June gets stronger.
Phone.com: I'd like to get this one near the 50-day moving average -- currently around $78 -- and I think that might be possible on August weakness. But I'd watch this one carefully for signs of a breakout. I think this stock is likely to run strongly sometime in the next six months as we see more and more evidence that wireless companies are selling a few Internet-ready phones. And I don't want to miss that run.
Affymetrix: This stock seems to be facing major resistance at $200 and enjoying major support at $150. At the least, I'd want to buy close to that support level. But I'd be watching carefully in August to see if this stock drops below that support. The biotech sector seems very volatile and susceptible to weakness at the moment. A break to $120 is certainly possible.
As you can probably tell from reading between the lines in those buying targets, I expect August to be another tough month. In Jubak's Picks, I'm going to try to free up some cash now by selling Schlumberger (SLB, news, msgs) so I can make a buy on anything that looks especially attractive by the end of the month. That could include one of these six stocks or any indeed some of the nominees that didn't make the final cut for the Future 50. In my next column, I'm going to take a look at the most interesting five stocks from that group.
Changes to Jubak's Picks
--------------------------------------------------------------------------------
Sell Schlumberger
I'm selling Schlumberger (SLB, news, msgs) to free up cash for better opportunities that I think are likely to materialize in August. I continue to like the oil-service and drilling sector -- Jubak's Picks holds Global Marine (GLM, news, msgs) and Transocean Sedco Forex (RIG, news, msgs) -- but I think the sector is now far enough into its cycle to make Schlumberger a modest performer over the next year. I've gained about 6% on this position since I added the stock to Jubak's Picks on July 9, 1998 at a price of $67.375. That appreciation does not include the 3% annual dividend paid by Schlumberger.
Updates on past columns
------------------------------------------------------------
Time for a little discipline
Anyone looking for a reason to set a stop-loss in order to take a little risk out of the market doesn't need to look any farther than LSI Logic (LSI, news, msgs). On July 25, the company came in $25 million light on revenue, according to some analyst estimates, even as it matched earnings projections of 29 cents a share. The stock dropped $7.75 a share, almost 20% on the news. That seems excessive to me -- I added to my personal position in LSI Logic on the news -- but that's the kind of punishment this market is handing out these days to any company that disappoints in the least. The rest of the news out of LSI Logic was great, in my opinion. For example, the company had earlier this year told analysts that it expected revenue from its communications-chip business to grow by 50% in 2000. On the 25th, the company upped that figure to 65%.
Jubak's Archive
------------------------------------------------------------
Recent Jubak articles:
• Ouch! What the second quarter taught me, 7/11/00
• Help Jim pick six for his 'Fantastic 50, 7/21/00
• The 'best' stock is the one that's best for you, 7/18/00
More?/a>
Stocks moving at the speed of light
Nortel Networks (NT, news, msgs) knocked the ball out of the park when it reported earnings on July 25. The company beat the Wall Street consensus estimate of 15 cents a share by 3 cents. The 18 cents per share before charges represented an increase of 64% from the same quarter in 1999. Revenue grew by 48%. But the good news didn't stop there. Thanks to a huge 85% increase in orders, the company raised its projections for sales growth in 2000 to the low 40% range from the previous estimate of 30% to 35%. The company also indicated that it expects earnings per share (from operations) to grow in the high 30% range for all of 2000. I'm upping my target price for Nortel to $96 by December from the previous $76.50.
No place to hide in tech stocks
I recently purchased shares of BroadVision (BVSN, news, msgs) for my personal portfolio.
At the time of publication, Jim Jubak owned or controlled shares in the following equities mentioned in this column: BroadVision, Global Marine, i2 Technologies, LSI Logic and Nortel Networks.
Jubak's Picks
moneycentral.msn.com |
