Marketocracy: Picks from the m100
10/31/2003 12:00 am EST
"Investing is a skill, and like every other skill, some people are better at it than others," says Ken Kam, manager of the Master 100 Fund. "By monitoring over 50,000 investors, I can tell who is really doing a good job." These top performers are known as the m100, and a number of them were at The San Francisco Money Show, where they discussed their favorite stocks.
"Fortunately, investing is an area of activity where there is a very clear measure as to who is good at it. We all can agree that what we want from our portfolios is good returns and less risk. Unlike arguing who is a better lawyer or who is a better doctor, we can clearly measure who is a better investor. It's my job to pick who are the people who are doing really well right now, who we should be listening to in order to pick stocks for right now.
"Would I put new money into the market now? Yes. We've looked at our portfolio, and my job is to find out whom we should be listening to now. We look for 100 people who have great track records. Not just over the last three months, but over the last three years. When you see that group of people putting money into the market, it's time to do the same.
"This weekend, a number of m100 members gathered in San Francisco to discuss the market, their strategies, and stocks they are adding to their portfolios. The group had varying outlooks on market direction and future leadership. Still, the overarching sentiment was that there were a number of stock ideas that should prove profitable in the coming months, irrespective of the market's overall movement. Read on for the group's thoughts and ideas about where the pockets of investment opportunity currently exist:
Ron Strong: "I really like the software firm, Aspen Technology (AZPN NASDAQ). I think that the company is trading cheaply at a price-to-sales ratio of 0.72 and could be a potential take-over candidate. They are finally looking to cut extra costs, which should give them a boost. Aspen currently trades for about $6 per share and is easily a $10 stock in my opinion."
Ryan Parker:"I've got a number of great picks. One is Molecular Imaging Corp., (MLRI NASDAQ) a service provider from PET imaging. They are growing the top line by 30% a year, and are priced at just one times forward sales. The stock is roughly $0.50 per share and should rise to $1.00 or even $1.50. Another pick of mine is Eternal Technologies (ETLT NASDAQ). This company could be a bit risky, as information is limited due to the fact that they operate in China. However, I think that they could be a great Chinese biotech play. Also, ON Technologies (ONTC NASDAQ) is a great stock with a great product that should really take-off with a good marketing strategy. Finally, my favorite stock pick is Commonwealth Biotechnologies (CBTE NASDAQ). This company was just named as one of nine companies to test old crime scene DNA as a part of a government grant worth $233 million. With this deal, I think that the company could earn $1.00 per share. It's currently priced at just $3 per share, and I expect this to explode as the market recognizes its value going forward."
Robert Raney:"I'm really impressed with Netopia (NTPA NASDAQ) and Sonicwall (SNWL NASDAQ). Both are box makers that had hit hard times in the market with the drawdown in Tech. But they used that period to clean up business fundamentals, and now that spending has returned to their area, they are both poised to benefit. The smart idea is that they've returned to a steady revenue stream model by putting their boxes into homes where they can earn subscription fees. I really think that each is at the brink of large product cycles that will benefit shareholders."
John Law:"My largest position is Viisage Tech (VISG NASDAQ). I like this one given increased national security efforts, and also because it is relatively cheaper than close competitors in the space. I am also looking at picking up shares of Protein Design Labs (PDLI NASDAQ) should biotech drift lower. Also in healthcare, I like Pfizer (PFE NYSE) under $30 per share. Some other companies that are intriguing right now include Ballys Total Fitness (BFT NYSE), E*Trade (ET NYSE), and Schwab (SCH NYSE). Though advertising hasn't really picked up again, I do like the Internet players such as DoubleClick (DCLK NASDAQ) and Alloy (ALOY NASDAQ). Lastly, Webmethods (WEBM NASDAQ) is another attractive stock I'll likely add to the portfolio."
Trieu Pham:"I really like Webmethods (WEBM NASDAQ) as well. I own shares and am really confident in the management. I have a large position in Advanced MicroDevices (AMD NYSE) at the moment as a short term play on the good earnings news at Intel, but I don't imagine that this will be a good longer-term investment. Another large position that I hold is Nokia (NOK NYSE). There's really not much downside risk for Nokia at its current valuation and I expect more upside price movement."
John Navin:"I'm purely technical in my analysis of the market, so right now I see great looking charts for Ashland Inc. (ASH NYSE) and Cresud SA (CRESY NASDAQ). Also, I think that General Electric (GE NYSE)) is an incredible short sell on the next move up."
Alan Stormes:"My portfolio is weighted in Financials, but I'm looking for opportunities to move out of some of the REITs that I own. Some things I am getting into are oil trusts such as Torch Energy Royalty Trust (TRU NYSE) and BP Prudhoe Bay Royalty Trust (BPT NYSE). I also have bought into the waste management company Blair Corp. (BL AMEX). And of course, I am still positive on my largest portfolio position Tarragon Realty (TARR NASDAQ), a real estate company with a list of impressive assets."
Sam Koritz:"I've been scouring the market in search of opportunities and found that one interesting place is in property title insurance companies. Pretty much the whole group is undervalued and paying nice dividends. Beyond that, I continue to be bullish on both American Home Mortgage (AHMH NASDAQ) and World Acceptance Corp. (WRLD NASDAQ), both of which are already up 60-70% since I first bought in. Even with the strong move, these two are strong buys in my opinion."
Michael Tom:"I look for a pattern in the market whereby companies become momentum stocks, fall into the value category, and then move back to momentum. It's my experience that getting into these companies as they move into their second wave of momentum is usually very profitable. One stock that fits this profile at the moment is PSS World Medical (PSSI NASDAQ), as earnings and growth are coming back, and the market is recognizing this value quickly. I also like Collagenex Pharmaceuticals (CGPI NASDAQ) as a profitable biotech company with a reasonable valuation at a price to sales ratio of just 2. Candela (CLZR NASDAQ) is one of my favorites; revenues and earnings are growing nicely. I'm looking for this stock to be worth $18-$20 in the next 12 months. And finally, Intelligroup (ITIG NASDAQ) is a fairly safe play at a price-to-sales of just 0.2. I expect this one to double to a price of $5 per share."
Tim Eriksen:"Nothing looks that great to me in the market, which is why I've gone to about 25% cash. But I do have some stocks already in my portfolio that continue to be solid investments. I hold Washington Mutual (WM NYSE)--year in and year out they make their spread, and at a price equal to just eight-nine times earnings, this is a great place to stick extra cash. My top position, PetroKazakhstan (PKZ NYSE), is a good play on oil delivery into China. The homebuilders also continue to look like good values at just seven-10 times earnings, but investors need to watch interest rates closely as any rise would likely hurt these companies."