m100: Infotech and Biotech

01/16/2004 12:00 am EST


Ken Kam

CEO, Marketocracy, Inc.

The m100, which are the best stockpickers among the 60,000 people who manage model portfolios on marketocracy.com,  returned 51.5% in 2003. Says Ken Kam, "Now that the m100 has shown that it can beat the market both in bears (like 2002) and bulls (like 2003), we're confident we can handle whatever 2004 has to dish out."

"Although many investors are looking to large caps for 2004, we are still finding the best opportunities among the small caps. We do not invest in the market, a sector, or a style as a whole, but rather, in individual companies. We continue to find companies that show the potential for strong growth at rock bottom prices. Here are some highlights on stocks we are adding to the portfolio right now:

"Information technology has been a driving force for our m100 portfolio all year, currently making up 25% of our total portfolio value. We've been selling big gainers during the rallies. However, we still hold significant positions in companies poised to benefit from the expected increase in corporate spending during 2004. Sensytech (STST NASDAQ), a microcap electronic equipment manufacturer, weighs in at a market cap of $85 million. Sensytech specializes in technologies for the defense and intelligence markets, a prosperous area in the wake of 9/11 and the Iraqi war. This company may be small, but they are profitable and growing, with favorable value characteristics such as a low forward P/E (11.94) and attractive PEG ratio (0.64.)  Our two other infotech picks this month are mid-caps. Atmel (ATML NASDAQ) is a semiconductor manufacturer currently trading at $6.01, hovering at its 52 week high. Finisar (FNSR NASDAQ) is a communications equipment manufacturer specializing in the fiber optic systems for high speed data transfer.

"In 2003, many biotech companies saw significant increases in their market caps. Investors will need to be very selective in 2004 to get the same types of increases. But we continue to actively seek investments in this area, especially companies with product launches on the one-two year horizon, which may not be fully reflected into the price of the stock. Small biotech drug developers, especially those with strong offerings that may not be 'blockbusters' and have therefore been passed over by the market, are of particular interest.

"Bradley Pharmaceuticals (BDY NYSE) regained its top spot in the portfolio in December, as we scooped up the shares during a recent price dip.  Biolase (BLTI NASDAQ) returned 35% during December, and we continue to buy this small-cap healthcare equipment company. Biolase manufactures lasers primarily for the dental industry. We are also purchasing another laser producer, Candela (CLZR NASDAQ), a firm that manufactures lasers used in various cosmetic procedures, which has been climbing steadily all year, and we have been buying-in on dips. Mi crocap Genome Therapeutics (GENE NASDAQ) boasts a market cap of just $94 million. We purchased more stock after the recent acquisition of Genesoft. GENE has several drugs in Phase II and III trials, as well as R&D alliances with several major pharmaceutical companies. This company fits the profile of what we look for in biotechs: small biotech drug developer with drugs in late stage testing that are not getting tons of press, and affiliations with big pharmas that can help bring their products to market."

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