iSophia: Wisdom for Women
09/02/2005 12:00 am EST
Natalie Pace runs iSophia, a women's investment network named after the Greek word for wisdom. Male readers should note they are not excluded, and the Web site’s excellent content and top stock picking record should be considered by all.
"Gains on our featured stocks are 69% annualized since the inception of our site. Part of that is because of good stock picking. But it is also because I use defensive positions. Probably the most important thing you can learn is to position your cash to reduce the risk in your portfolio, especially today with rising interest rates. I can’t stress this enough. Cash was the top-performing asset in 2000. And the reason my gains that year were so good, was that I had almost all of my money at that time positioned in a money market.
"Take a look at your retirement plan and make sure you don’t have all of it invested in anything, and certainly not all of it in equities. As a general guideline, take the percentage equal to your age. For example, if you are 28, then 28% of your portfolio should be absolutely safe. As you get older, you want to protect even more. Once you’ve protected your portfolio, you can then afford to take on a little bit of risk in the portion that you’ve allocated to be the Lance Armstrong of your portfolio–the part that will really be the champion.
"The foundation of all good investing–whether it is bonds, stock, or real estate–is that solutions that really work are usually really simple. One rule that works every time is ‘buy low and sell high.’ It’s the toughest to do, because it goes against human nature. To ‘buy low’ you need to go in and buy when everyone else thinks it’s the apocalypse and you think it is an opportunity. To buy low means that no one else is interested, but you know that the bad times that others see are just temporary. This really takes vision.
"On the other hand, to ‘sell high’ means being one of those sober people who is willing to leave the party before it ends. The ones who like to party all night are the ones that get stuck when the market starts to go down. When you see that you have had a great time, that’s usually the time to grab your spouse and head on home. It’s never too much fun if you wake up with a hangover.
"Regarding stock selection, my strategy is to find a great product in an emerging or growing market, find the leader, and buy it at a good price. Those are my fundamentals. Peter Lynch says that if you like the store, chances are you’ll love the stock. In fact, I get my best tips from consumers. But remember, this is just a good place to start. If you love Starbucks, you can’t just blindly go out and buy the stock. You then have to look at the stock compared to its peers and the market.
"If you are thinking about investing, you might look at ImClone (IMCL NASDAQ), which is at a good price right now. Its Erbitux drug has been showing promising results in breast cancer. I like Sony (SNE NYSE) because the stock is still very undervalued and it is the world’s most trusted brand. I love their electronics products and they are very well diversified. One place you can use your own sweet tooth is to look at Krispy Kreme (KKD NASDAQ). You can look at this stock and ask if the donuts are still showing up in the stores and still tasting good. Is there a way that they might come back from their troubles? Being a buyout target, it’s possible. This is a high-risk idea, but one in which you might make some money.
"OSI Pharmaceuticals (OSIP NASDAQ) has a cancer pill, known as Tarceva. Its partner is Genentech. OSI was approved last year in the US. This is a company that with the help of Genentech had their product rolled out in two days following FDA approval last year. Their sales have just rocketed and have been wonderful. I love this company. It’s got great R&D and great distribution with Genentech as well as Roche. (Editor’s note: readers should be aware that following Natalie’s presentation, OSI announced the acquisition of EyeTech.)
"I usually don’t recommend funds. However, I love the overall story in Eastern Europe, such as Estonia and Slovakia and Slovenia. Western Europe is very stagnant, but Eastern Europe is ‘stealing away’ factories and corporations from the West. In Western Europe you have higher wages, a 35-hour workweek, and employees that take month-long vacations. In Eastern Europe, you have a well-educated workforce that is hungry to rebuild. One caution, however, is exposure to Russia. Meanwhile, our two fund picks in this area are T. Rowe Price Eastern Europe & Mediterranean (TREMX) and US Global Investors Eastern Europe (EUROX ). These two funds seem to be in the right sectors within the right countries."
At worst the tax cuts will validate current market valuations, says Tom Essaye. At best they’l...