Top Buys from the m100
02/14/2003 12:00 am EST
Marketocracy.com tracks 62,000 virtual mutual funds run by individual investors, each subject to the same SEC regulations that govern real mutual funds. The top 100 are recognized as the m100, and their holdings are the basis of a real fund managed by Ken Kam. As a group, the m100 had a -2.8% return in 2002 vs. a -21.97% return for the S&P 500 over the same period. Here are their latest buys.
"The Materials sector accounts for nearly 35% of the m100 portfolio. The m100 continues to be bullish on the sector, noting the weak US dollar, waning confidence in paper assets, and geopolitical turmoil as supporting analyses. They are using any short-term pullbacks in share price to pick up additional shares. The largest buys in the sector have been Newmont Mining (NEM NYSE), Goldcorp (GG NYSE), Stillwater Mining (SWC NYSE), Agnico-Eagle Mines (AEM NYSE), and Harmony Gold (HMY NYSE).
"The Financials represents the second largest weighting at 22%, with Real Estate Investment Trusts making up a sizable portion. Their top pick Novastar Financial (NFI NYSE), which has performed at a level uncommon for the industry. REITs are known for their dividend payouts, but are typically slower in growing their earnings. Novastar, however, was able to double its earnings per share over the last year while offering a dividend yield between 20-30%. The m100 has owned Novastar for some time, but picked up additional shares as a defensive investment.
"Finally, the Consumer Discretionary sector is the third most heavily weighted sector at 17%. Here are the latest top buys and holdings expected to buck the sector's trend:
" Goodyear (GT NYSE) has been plummeting. Although some firms were upgrading the tire giant due to an announcement that its lenders had agreed to a loan waiver, others downgraded GT given that it was eliminating its quarterly dividend. The m100 picked up shares at $4.42, feeling that the 33% drop in price was an overreaction. Though the longer-term outlook is still unclear, they believe there is substantial upside in the shorter-term.
"BJ’s Wholesale (BJ NYSE) has been a top buy for the m100 for the last two months. The market seems to be worried that BJ’s is running into a wall in trying to compete with competitors. The Street also fears that BJ’s lowering of 2003 and 2004 estimates may be indicative of weakness in the face of a tough retail environment. Even so, our top investors are willing to bet that BJ’s will be able to battle through this soft spot and that shares will trade much higher prices.
"Ballys Total Fitness (BFT NYSE) is a much more speculative play. While the stock is dirt cheap based on most valuation metrics, it is less clear that the company will be able to clean up its own poor image with consumers. Still, the shares seem to have priced all of this bad news in, and then some. Slight improvements have the potential to bring the share price significantly higher."