The "Best" from the "Rest"
01/28/2005 12:00 am EST
Over the past three years, Marketocracy has tracked over 65,000 virtual model portfolios, monitoring 12,000 stock positions and five million trades in order to isolate the best non-professional stock pickers. Here, Ken Kam highlights some of their latest favorites.
"We segment all the stock pickers we follow, calling the top quartile the ‘best investors’ and the bottom three quartiles ‘the rest.’ A stock receives our ‘strong buy’ rating when the best investors are buying a stock and the rest are selling. A strong buy indicates that the best investors see fundamentals the rest of the market has yet to identify, but will. Don’t expect an immediate jump. 'Strong Buy' stocks often continue to fall in price until the rest of the market catches on. Once the market does catch on, prices take off.
"Vasco Data Security International (VDSI NASDAQ) develops and markets open standards-based hardware and software security systems that manage and secure access to information assets. After a sharp decrease in their position to a low in late October, the best investors have increased their holdings by a factor of over 14. That includes a 29% increase in the position during the last two weeks, bringing the position to an all-time high for the portfolio. Prior to the holdings increase, the stock price traded within a flat range close to $2. Since the late-October increase in holdings, the stock price has broken through $2.50 and currently trades just under $7. During the same period, the rest decreased their holdings by 11%.
"Cleveland-Cliffs (CLF NYSE) is a producer of iron ore pellets and operates six iron ore mines located in Michigan, Minnesota, and Eastern Canada. On November 9, 2004, the company announced a two-for-one stock split and on January 3, 2005, the stock split before the opening bell. The best began increasing their position in CLF in August and have increased to almost three-fold since that time. Over the same four months, the stock price has increased from $68 to $105 (pre-split prices). In the last 14 days alone, the best have added an additional 17% to their position in CLF. Meanwhile, the rest have been reducing their position in the company by 4%.
"Korea Electric Power (KEP NYSE) and its subsidiaries generate, transmit and distribute substantially all of the electricity consumed in Korea. After decreasing the position in KEP from August through November, the best investors have returned to their buying ways, increasing their position in the company by 12% over the last two weeks. During the month of December, the stock price continued to establish new 52-week highs, a sign of strength for the best investors. The rest sold 1% of their position in the company over the last two weeks.
"Kos Pharmaceuticals, Inc (KOSP NASDAQ) specializes in the development of prescription products that treat chronic cardiovascular and respiratory diseases. The company manufactures and markets Niaspan and Advicor. In early January, KOSP was removed from our watch list because the best investors were decreasing their position. However, since that time, the best investors have once again become interested. In the last two weeks they have increased their position by 26% at prices ranging from $33.42-$35.26. KOSP now ranks within the top 9% of all holdings in the best investors' portfolio. During the same period, the rest decreased their holdings by 14%.
"The Sands Regent (SNDS NASDAQ) operates casino/tourist-based facilities through its wholly owned subsidiaries, which own and operate the Sands Regency Casino Hotel in Reno, Nevada, and the Gold Ranch Casino and RV Resort in Verdi, Nevada. After retreating from a 52-week stock price high of $19.04 in December, SNDS has landed on the radar of the best investors. The group increased their position in The Sands Regent by 20% during the first two weeks of January, at prices ranging between $10.62 and $12.76. SNDS now ranks within the top 12% of all holdings in the best investors' portfolio. Meanwhile, the rest have been reducing their position in the company by 1%.
"China Yuchai International, Ltd. (CYD NYSE) is a holding company that owns a 76.4% interest in Yuchai through six wholly owned subsidiaries. Yuchai manufactures diesel engines, diesel power generators, and diesel engine parts. After holding a relatively flat position in CYD for the last half of last year, the best investors have sharply increased their holdings in the company by 22%. The stock price has been approaching a 52-week low, and the best investors have been purchasing shares at prices ranging between $10.71 and $13.08. At the same time, the rest have reduced their position by 1%."