Janjigian's Growth Picks

11/08/2002 12:00 am EST

Focus:

Vahan Janjigian

Editor, Bottom Line's Money Masters Stock Report

Forbes Growth Investor relies on a proprietary quantitative computer model that ranks stocks based on some 70 variables. When backtested, the model outperformed the S&P 500 by 362% over a ten-year period. A team of growth stock analysts, led by Vahan Janjigian, then provide fundamental analysis on the top-ranked issues, to isolate the best 50 stocks and help investors build well-diversified equity portfolios.

“How do you use quantitative analysis? One of the main things we are trying to do with our Growth Investor newsletter is not simply to identify the growth stocks that are expected to do the best, but in addition, take diversification into account. We are looking to find the best stocks that are expected to grow within each of eight different sectors. We start off with a quantitative model that has about 72 variables in it and these variables have been constantly back-tested to identify the variables that seem to be the best in predicting future stock price performance. So in addition to growth, we are also trying to capture momentum and quantify that momentum. Now ‘momentum’ may be a dirty word these days, but there is a lot of academic research that shows that momentum investing works, and that stocks tends to have positive or negative momentum that lasts for periods of up to 12 months. So if you can identify that momentum and act on it, you can do pretty well.

What are our current favorite stocks? Although we stress the importance of a fully-diversified portfolio, we currently like Gymboree (GYMB NASDAQ), which is a retail apparel company that sells clothes primarily for infants and toddlers. These are very high-quality clothing items. One reason we like this company a lot, is that we believe there is a mini baby boom going on, post Sept. 11th, and we think this may be a good place to be. 

“Another company I’d like to mention, which is a real contrarian play, is Xerox (XRX NYSE). Xerox has some real serious problems, which makes this a risky investment. But the stock price reflects all that. Most recently, they announced that they are filing a shelf registration and may actually issue some combination of debt and equity over the next two years, which of course may result in some dilution, which is why the stock price has really fallen. However, at the same time, GE Capital has said they are willing to lend the company up to $5 billion over the next eight years. So we think there is a really good chance they may never actually issue the equity, so therefore it’s a good time to get into the stock now.”

Editor's Note:  All excerpts from the Forbes editors in this issue of The Money Show Digest are from a panel discussion held at the New York Money Show on Friday, October 25th.  Quoted stock performance, portfolio performance, etc., have not been updated to reflect changes in the market since that date. 

For information on the Forbes group of newsletters, visit www.forbes.com/newsletters.

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