Time to look back
The past half-year's stock picks
By Roy M. Blumberg,
CBS MarketWatch
NEW YORK (CBS.MW) -- One of the most important things a portfolio manager does is constantly review his holdings. The objective is to sell the stocks in the portfolio with the worst prospects and replace them with better names.
This includes (1) stock purchases that are lower and appear to be having problems and (2) companies that have done well and may have gotten ahead of their prospects on a price basis. With that in mind, I would like to review all of the stocks I have mentioned in the last few months, excluding those that were mentioned last month, since these recommendation are too new to have had any major changes.
On Feb. 16, I mentioned energy stocks and specialty chemicals as two cheap groups worth looking at. Most stocks in both groups have moved higher. I still think energy stocks have more upside potential and should be held. Most specialty chemical stocks appear to be ahead of their fundamentals, and I suggest selling them.
On March 1, I said Conseco (CNC: news, msgs) would be a good way to play the consolidation in the insurance industry, since it would probably be one of the companies doing acquisitions. The stock has done little since then. I would continue to hold Conseco. (The chart at right compares Conseco's six-month stock performance with that of the Standard & Poor's 500.)
On March 31, I commented on three stocks that had declined sharply in recent months on news-related events. I said all three would take at least six to 12 months to show good results. Service Corp. International (SRV: news, msgs) has advanced about 20 percent since that day. Traders should take profits here; investors should continue to hold. Rite Aid (RAD: news, msgs) continues to have problems that may take a lot longer to work out than I originally thought. This stock, which is selling close to its March 31 price, should be sold. RPM Corp. (RPM: news, msgs) is also near its March 31 price. RPM has part of its sales overseas and thus should be helped by the recovery in the Third World. This stock should be held.
On April 15, I followed up my Feb. 15 comment on energy stocks with two recommendations: Schlumberger (SLB: news, msgs) and Global Marine (GLM: news, msgs). Both stocks jumped sharply that day. Schlumberger is modestly higher than its April 14 close, while Global Marine has moved up sharply. Both stocks should continue to be held. (The chart above compares the six-month performance of Schlumberger, represented in green, and Global Marine, shown in blue, with the Amex Oil and Gas Index.)
On May 3, I suggested investors use further weakness to buy four health-care stocks: Merck (MRK: news, msgs) in the $63-to-$67 range, Pfizer (PFE: news, msgs) between $34 and $35 (adjusted for a 3-for-1 split), Abbott Labs (ABT: news, msgs) in the $43-to-$46 range and Eli Lilly (LLY: news, msgs) between $65 and $68. All four stocks traded into the suggested purchase range. Abbott and Lilly have remained close to those levels, Pfizer is a little higher, and Merck has traded back into the 70s. I suggest selling Lilly and Abbott and using the proceeds to increase positions in the other two companies.
On May 17, two smaller stocks were recommended: Ames Department Stores (AMES: news, msgs) and The Scotts Co. (SMG: news, msgs). Both have move higher and should continue to be held. Ames continues to show very strong sales comparisons and improving profit margins.
On May 25, I recommended two stocks that should benefit from the aging population, General Nutrition (GNCI: news, msgs) and Park Place Entertainment (PPE: news, msgs). General Nutrition is being acquired by Royal Numico NV and should be sold. Park Place is still near its recommended price and should be held, as business in Las Vegas remains strong.
On June 9, I though that many Internet stocks were close to their bottoms and recommended four names, if they reached technical support levels. Three of the four names, American Online (AOL: news, msgs), CMGI (CMGI: news, msgs) and Yahoo (YHOO: news, msgs), reached the suggested buy zones and have moved sharply higher since. I see additional upside for these stocks in the next few months. The fourth stock, Sun Microsystems (SUNW: news, msgs), never drop as far as I expected. If you bought it, continue to hold.
Investors should regularly review their holdings, with an eye toward upgrading their portfolios whenever possible, by selling their losers and adding to the positions that have the best prospects.
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