A Trio for the Long Haul
09/10/2004 12:00 am EST
While some advisors may shirk from their losing positions, Neil George remains confident in the strategy behind his long-term growth portfolio. Here, he looks at three stocks, that while down over the short-term, are not out. He explains why they remain among his favorites.
"Many stocks will be challenged to
overcome the general morass of where the market stands and where it will be
headed, especially leading up to the election. And though you should expect more
mindless chatter about the stock market, there’s still a silver lining. You
don’t have to be caught up in the stock market jargon—at the core it’s not a
stock market, but a market for companies’ stocks. If you familiarize yourself
with the companies and their products and services, you’ll know their worth and
what you should pay for them.
"The key is to know why we own the companies in our portfolio. None of them are bought on a whim. And when the stock market is sagging, it’s knowing that you own the right companies—not faith—that will get you through the tough times. Three of our favorite stocks have lost us money in recent months. Indeed, the picture isn’t pretty. And we aren’t any more pleased with this than you are. But, it’s not about a few poor months of slipping prices—it’s about the three companies. They’re in businesses that will prosper over the long haul.
"Dr. Reddy’s Laboratories (RDY NYSE) is one company we’ve followed for a long time. Based in India, it’s one of the world’s biggest and best manufacturers of generic and knockoff prescription drugs. Pricing pressure is creating more pressure to bring alternatives to both the US and the rest of the world. Reddy’s business is solid. Sales continue to rise. And margins are still fat and expanding, particularly as the company builds on its stable products. The pipeline for new drugs also looks better. Changes in patent laws and, more important, in the judicial interpretation of laws, are opening doors for companies like Dr. Reddy’s. The stage is set for an explosion of new generics and Dr. Reddy’s is positioned to cash in. This is why we still own this company and recommend you do the same."
"Checkpoint Systems (CKP NYSE) is another favorite, though it hasn’t made us money in the past few months. The company provides supply chain management with a specific focus on retailing. This is a fancy way of saying it provides tagging and tracking for products. The new wave is radio frequency identification devices (RFID), which willl enable companies to track and process goods at a vastly higher efficiency level. Companies that don’t deploy it should get ready to post their 'Going Out of Business' signs. Retail giants such as Wal-Mart as well as individual chain stores are being forced to adopt the RFID system. That means the companies with the complete package, like Checkpoint, will cash in and thrive."
"Last on the list is Inter-Tel. (INTL NASDAQ), one of the leading companies that provides the 'whole package' for companies to adopt, shift to, and use the newer and vastly improved phone services running through voice over Internet protocol (VOIP). Like RFID, it isn’t about the gizmos or some limited services from some providers. Rather, it’s the broader business of making VOIP work. Big corporations need the whole package to take advantage of the improved reliability and security of VOIP telecom. That’s what Inter-Tel does and has done for a long time."
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