Interesting article...
cbs.marketwatch.com
Nasdaq 100's bear slayers
Ten stocks have grown in a tough three-year period
By Deborah Adamson, CBS.MarketWatch.com
Last Update: 10:52 AM ET March 12, 2003
NEW YORK (CBS.MW) -- The Nasdaq's monumental collapse since its peak three years ago belies a surprising development.
Thirty of its 100 largest current members -- as represented by the Nasdaq 100 -- saw their share price rise in the three years ended Monday, while the tech-heavy index overall fell by 75 percent.
And 10 of those 30 current climbers have been in the index since the peak in 2000. The other 20 moved up since then, as some of the high-flying companies of the late 1990s fell off the list. The CBOE Nasdaq 100 Index ($NDX: news, chart, profile) changes every December to represent the 100 companies with the largest market capitalization at the time.
Health-care companies dominated the advancers, followed by retail. Some tech stocks even advanced. The winners also included education, oil and gas, industrial, transportation and entertainment companies.
Indeed, the current crop of best performers aren't the "Fast and the Furious" crowd of tech highfliers anymore. They're more like the "Grumpy Old Men" stocks that cater to the aging baby boomer. In the bear market, defensive stocks overtook technology.
"The big tech companies with big market caps but little earnings and built more on hope than fundamentals ... have fallen off the list," said Frederic Ruffy, index strategist at Optionetics.com, an options Web site. "They have been replaced by less glamorous companies."
The best performer in 1999 was wireless tech company Qualcomm (QCOM: news, chart, profile), up 2,600 percent that year. The top stock in the three-year period ending March 10 of this year? Apollo Group, according to Morningstar.
Before you snicker and say "Apollo who?" look at the stock's performance: It's up 363 percent in the last three years as the Nasdaq 100 fell 80 percent. The stock closed at $46.13 Tuesday.
The Apollo Group (APOL: news, chart, profile) runs the accredited University of Phoenix higher learning centers for working adults.
"It's a fantastic company. It's very well run and highly profitable," said Natalie Walrond, an analyst at Pacific Growth Equities.
The stock also is "counter-cyclical," she said. When the economy dives, Apollo Group's business actually increases as people enroll in classes to learn new skills and become more competitive.
Walrond is forecasting a 19 percent rise in revenue for 2004 to $1.57 billion from 2003, and a 15 percent bump in profits to $1.34 a share. But the stock is trading richly, at 40 times her 2003 estimates.
"The fundamentals are outstanding, but the valuation reflects the quality of the stock," said Walrond, who doesn't own any shares and whose firm doesn't have any investment banking deals with Apollo.
Apollo is one of the 10 stocks now leading the Nasdaq 100 that have been in the index for the past three years.
Compared to early 2000, today's Nasdaq 100 lacks 38 mostly tech stocks. Those missing in action include 3Com, CMGI, CNet, RealNetworks, Lycos, Level 3, Novell and the scandal-rocked trio of WorldCom, Global Crossing and Adelphia. See Scandal Sheet.
The top three stocks in the index -- Microsoft (MSFT: news, chart, profile), Intel (INTC: news, chart, profile), Cisco (CSCO: news, chart, profile) -- have lost 54 percent, 73 percent and 81 percent, respectively, in the bear market.
Retail and health care
The remaining 29 of the 30 advancers would have made tech-phobe Warren Buffett proud: They include dental companies, drug makers, retailers and manufacturers of uniforms, chemicals and trucks.
Second in the list is Petsmart (PETM: news, chart, profile), the pet products retailer. The stock has soared by 221 percent during the bear market and recently closed at $10.72.
"It's been a very strong turnaround" story, said Gary Giblen, director of research at C.L. King & Associates. "In many ways, they started emulating (rival) Petco, which had the better business model."
Petsmart improved distribution and procurement procedures and copied Petco's (PETC: news, chart, profile) smaller-store, higher-service style.
Express Scripts (ESRX: news, chart, profile), the nation's third largest pharmacy benefits manager, takes the bronze. The stock is up 201 percent in the last three years, recently closing at $50.36.
While Express Scripts is the subject of an inquiry by the Securities and Exchange Commission over its handling of retail pharmacy co-pay revenue, A.G. Edwards analyst Andrew Speller said in a note that he thinks it's a non-issue because a restatement would increase its revenue growth rate. He has a "buy/aggressive" rating and a $65 price target over the next 12 to 18 months.
Lincare Holdings (LNCR: news, chart, profile), a provider of home respiratory services, comes in fourth. The stock is up 168 percent over three years; Lincare closed at $28.98 on Tuesday.
"They've got a very reliable track record. The company is very disciplined," said Balaji Gandhi, an analyst at Deutsche Banc who sees Lincare's market growing by 6 to 8 percent yearly.
But he has a "hold" on the stock for two reasons: Its rich valuation and the potential for the federal government to cut Medicare reimbursement rates for home respiratory services.
Bed, Bath & Beyond (BBBY: news, chart, profile) rounds out the top five, with a gain of 156.5 percent. The stock recently closed at $30.67.
The home products retailer benefits from the current "nesting" theme -- where people preferring to stay home fix up their abode -- according to Joan Storms, an analyst at Wedbush Morgan Securities.
"Overall, we maintain our favorable view of the company's merchandising skills and operational execution," she wrote in a note released Tuesday. "The company has executed with precision and has met or exceeded Street expectations for 42 consecutive quarters."
Bed, Bath & Beyond is another among the 30 gainers that has been in the index all through the crash. Here are the remaining 25 stocks on the list; those with an asterisk (*) have been part of the Nasdaq 100 since 2000 or before:
6. Patterson Dental (PDCO: news, chart, profile), up 156 percent.
7. Whole Foods (WFMI: news, chart, profile), up 155.5 percent
8. Henry Schein (HSIC: news, chart, profile), up 155 percent
9. Biomet* (BMET: news, chart, profile), up 114 percent
10. Gilead Sciences (GILD: news, chart, profile), up 111 percent
11. Ross Stores (ROST: news, chart, profile), up 105 percent
12. Dentsply (XRAY: news, chart, profile), up 102 percent
13. First Health Group (FHCC: news, chart, profile), up 89 percent
14. Sigma-Aldrich* (SIAL: news, chart, profile), up 88.5 percent
15. Expeditors International (EXPD: news, chart, profile), up 88 percent
16. Teva (TEVA: news, chart, profile), up 64 percent
17. Paccar* (PCAR: news, chart, profile), up 62 percent
18. RyanAir Holdings (RYAAY: news, chart, profile), up 56 percent
19. Fastenal (FAST: news, chart, profile), up 48 percent
20. Pixar (PIXR: news, chart, profile), up 35 percent
21. Fiserv* (FISV: news, chart, profile), up 27 percent
22. Starbucks* (SBUX: news, chart, profile), up 26 percent
23. C.H. Robinson (CHRW: news, chart, profile), up 24.39 percent
24. Patterson-UTI Energy (PTEN: news, chart, profile), up 24.38 percent
25. CDW Computer Centers (CDWC: news, chart, profile), up 22 percent
26. Electronic Arts* (ERTS: news, chart, profile), up 15 percent
27. Cintas* (CTAS: news, chart, profile), up 14 percent
28. Symantec (SYMC: news, chart, profile), up 8.5 percent
29. Genzyme* (GENZ: news, chart, profile), up 8 percent
30. USA Interactive (USAI: news, chart, profile), up 0.66 percent
Deborah Adamson is a reporter for CBS.MarketWatch.com in Los Angeles.
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