What's working in 2004 / Mar. 17, 2004 -- After nearly three months of the year, investors already have witnessed stocks undergo a full range of motion, from a parabolic move upward in January to a dull stretch of low volatility in February followed by a dizzying decline in March. At its best, the Nasdaq Composite was up 8% in 2004, and, at its worst, it has declined 10% from peak to post a 3% loss for the year. If the market were a washing machine, we’d be ready for the rinse cycle. That makes this a good time to consider which stocks look brightest so far and what their success suggests about the prospects for these and other stocks going forward. More

Click here for 2004's 100 top large-caps, mid-caps, small-caps and microcaps

Concentration / March 10, 2004 -- Investors' growing disdain for actively managed mutual funds has produced a disturbing consequence: Ownership of American public companies is increasingly concentrated in the hands of just four giant index-fund managers.Through the end of 2003, the world's four largest index-fund firms -- Barclays, State Street, Fidelity Management and Vanguard Group -- in aggregate held an average of 12.6% of the 20 largest U.S. companies on behalf of their clients. Together, for instance, this elite band owns 15% of IBM, 15% of Citigroup,  and 14.5% of Johnson & Johnson. Barclays, a British bank, has emerged as the first among near-equals, as it has paired its new iShares exchange-traded funds business with its long-established pension-fund indexing business to become one of the largest single holders of U.S. companies, if not the largest -- about $1 trillion worth. Fourteen of the 20 largest U.S. public companies now count Barclays as their largest institutional owner. More

Decent Exposure / March 3, 2004 -- As an investor, you've got to give three cheers for indecency. For Bubba the Love Sponge, Howard Stern and Janet Jackson appear to have sparked one of those great moments in the market when companies see their shares spanked for reasons that have much more to do with the short-term crusades of moral fundamentalists than long-term trends of business fundamentals. Consider Clear Channel Communications and Viacom, the companies on the bubble now for their supposed evildoing. More

Going Deep / Feb. 18, 2004 -- For investors interested in intellectually-advantaged speculation seasoned with a dash of geopolitical gaming, it may be time to step on the gas. The broad-brush reasons for taking positions in small-cap North American energy exploration companies has been in place for some time, as China has emerged as a voracious devourer of energy, Saudi Arabian turmoil has intensified, U.S. state governments have demanded wider use of clean-burning fuels by power plants and environmental laws have tightened supplies. Early-bird speculators have therefore pushed up prices of some of the best little explorers, such as Ultra Petroleum and Callon Petroleum by as much as 100% over the past 10 months. But most of these stocks have cooled recently, providing a new entry point for a second wave of investors and traders seeking a hedge against overseas uncertainty. To be sure, drillers defile the landscape of some of the most gorgeous places on earth like filthy rows of steel stinkbugs. Yet they are a necessary evil, angels disguised as devils, and their ugliness masks opportunity. More

Positively Presidential / Feb. 11, 2004 -- What a lousy job. You’re obligated to live in a stuffy old mansion with no view, the press scrutinizes your every twitch, and you’re responsible for a real stockpile of weapons of mass destruction. For your trouble, you earn less than a third-tier Wall Street bond analyst. And now, in a few days, comes the worst insult of all for presidents: a three-day holiday that generates all the excitement of a congressional hearing. No parades with Rutherford B. Hayes balloons, no James Garfield Days Sales at Macy’s, no Lyndon Johnson chocolate-candy boxes on sale for delivery to favorite teachers. Just a day off from work without so much as a bowl game to watch. Humbug. As a public service, therefore, SuperModels proposes to commemorate our country’s chief executives this year with our first annual President’s Day Stock Portfolio contest. More

Saudis' House of Cards / Feb. 4, 2004 -- Saudi Arabia faces its gravest economic, social and political threat in years as hundreds of thousands of Muslims make their annual hajj to the nation’s holy sites this week. And if the House of Saud is threatened, so, too, are the price of oil and the great American right to own two SUVs, a Harley and an RV. The menace, long simmering under the surface of a seemingly content society, has boiled to the surface recently with clashes between Saudi police and armed extremists in Riyadh and Mecca. And we’re not talking about the 250-plus pilgrims trampled while stoning Satan last weekend.  The problem is not just al-Qaeda, which recruited most of the 9/11 suicide hijackers there. According to veteran observer John Bradley of the Independent, it’s also merchant families and tribes who were prominent in the country before the Sauds consolidated power in the early part of the last century and now see a chance to reassert themselves upon the death of the aged, ailing King Fahd. American investors ignore this danger at their peril. For if three disparate forces hook up -- the disenfranchised non-royal merchant class, religious fundamentalists and disaffected youths -- our cheap, easy access to the Saudis’ vast petroleum reserves could be threatened for anywhere from a few weeks to years, sending oil prices north of $60. More

Overlooked Smallcaps / Jan. 28, 2004 -- Scratch an intellectual on the NYSE trading floor, and under his Brooks Bros. shirt you will usually find the hair of a bear. This is because smart people excel at criticism. They love the sound of skepticism, nitpicking and nay-saying. While the unwashed masses on Main Street prefer good cheer, the ursine mossbacks on Wall Street prefer a Bronx cheer. That’s one reason the past year’s rally in stocks has provoked such loathing among brainy professionals. They look at the rising personal balance sheet of the country’s swelling army of 401(k) holders and a well-bred anger wells up inside. They point to the high price-to-earnings multiples and low growth rates of the country’s biggest companies, the historic level of selling among corporate insiders, persistently poor employment growth, the remarkable number of small-cap stocks at 52-week highs and rising margin-debt levels and insist that the public is racing head over high heels into another speculative bubble that will end badly, and soon. But is this really the case -- or is it just another one of the market’s famous deceptions? More

Overlooked Midcaps / Jan. 21, 2004 -- It’s not much of an exaggeration to suggest the stock market appears to be advancing with the strength of Hercules these days, since it’s the unlikely performance of medium-sized companies like Hercules Inc. that is supplying the muscle. Despite the celebrated January gain of small-cap stocks and the surprising performance of the big Dow Jones industrials, the best-performing market measure over the past six months has been the homely S&P MidCap 400/BARRA Value Index. It’s up 25% since last July 18, versus 15% for the S&P 500 and Dow Jones Industrial Average, and it hit historic highs in each of the past six weeks. This is important because shares of medium-sized value companies -- ones that are $1 billion to $9 billion in market capitalization, with below-average price-to-earnings multiples -- are typically the most ignored on the board. And where there is ignorance there is opportunity. Not too big, not too small, not too flashy, not too overpriced, companies classified as midsized value often keep their beauty well-disguised behind a frightful mask.  More

Low-Cow, Mad-Carb Portfolio / Jan. 14, 2004 -- It’s not often that two contradictory investment themes duke it out in the supermarket of public opinion and taste at the same time, but that is the meat of the matter today in grocery aisles and trading rooms across the country as we witness the battle of Mad Cow vs. Atkins. In one corner, we have the challenger -- an investment theme fronted by consumers who fear that the discovery of bovine spongiform encephalopathy in a Washington state Holstein shows our protein food chain has been compromised and therefore should be shut down. In the far corner stands the current champ -- an investment theme fronted by people who believe a diet low in carbohydrates and high in protein, popularized by the late Dr. Robert Atkins, can keep them from getting fat as a pig. Each theme logically argues against the other. If the beef-bashers are correct, it should be time to take a cue from Japan, Mexico and South Korea -- which have forbidden imports of U.S. beef -- and swap meatpacker stocks for shares of veggie processors like Fresh Del Monte Produce or the la-di-dah organic grocery chain Whole Foods Market. If the beef-eaters are right, then it’s time to take advantage of the current fear of frying and buy a lifetime supply of meat stocks.  Of course, there is a middle ground where all can dine and trade in peace, which I will propose in a moment. But first, let’s examine what’s at stake, so to speak, and consider the major players. More
 

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End Days / Oct. 22, 2003 -- Rumors of the imminent death of the 2003 stock-market rally have been greatly exaggerated time and again in recent months. But according to one analyst with an enviable track record, the end days are finally here, and it’s time to prepare for a sickening plunge into December and beyond. The doomsayer is Michael Belkin, one of the few investment analysts who has emerged from the recent boom, bust and re-boom markets with his reputation not just intact, but aglow. Two weeks ago, Belkin abandoned his yearlong (and initially very lonely) bullish posture and put on the fur. He expects the broad market indexes to sink significantly through the end of the year, led by cyclical industrial stocks, and does not see much of a recovery on the horizon for 2004. ... More >

Rally / Oct. 15, 2003 -- Is the worst bear market since the Great Depression finally over? It sure looks that way. Defying critics, skeptics and conventional wisdom, the U.S. stock market has emerged from the agonizing, slow-motion crash of 2000-2002 to advance 25% in the past 12 months -- putting it on track to record the first positive year of the new millennium.... More >

Japan / Oct. 8, 2003 -- Stop me if you’ve heard this one before: The Japanese economy and stock market, the most disappointing in the world over the past 10 years, are zeroing in on a genuine recovery. ... More >

Pink / Oct. 1, 2003 -- For investors, the market is fading from black to pink. Not to red; that would be too obvious, since red is the color of danger and stop signs. Pink, on the other hand, is mythically the color of delusion and denial, the color of rose-colored glasses, the color of juvenile wistfulness. ... More >

Momentum / Sept. 24, 2003 -- Little by little, the doomsday scenario for bears is rounding into shape. The scenario that skeptics most dreaded, and which absolutely, positively could not happen in our lifetimes or our children’s lifetimes. The scenario that cost them so dearly in 1999, and which they prayed and vowed would never repeat. ... More >

Not Too Late / Sept. 17, 2003 The world economy might be improving. Or it might be on the verge of ruin. The Iraq conflict might inhibit consumer confidence. Or maybe no one cares. Al Qaeda might be planning to blow up a U.S. city. Or maybe it’s watching “Seinfeld” re-runs. Auto unions might strike, soybean prices might explode, a hurricane might blow the Pentagon into Pennsylvania, the Chinese might take over every job in America and the Red Sox might actually have a shot at the post-season.
All things are possible, but for twice-burned investors fretful about whether to tippy-toe back into the surging stock market, only one thing is certain: No major bottom in financial history was ever easy to call at the time. Each was obscured by flaws that forced private investors to the sidelines to await one last piece of data that would make the future more clear. ... More >
 
 

StockTactics Advisor

Oct. 16, 2003 -- Two weeks ago, we began our first letter of the month by noting that Mr. P., the anonymous macro hedge-fund manager who has provided us with market-timing guidance for the past few years, advised us to beware the 16th of October. If the markets are trending up into that date, he said, a day or two prior would probably be a good time to take profits and move to the sidelines. We are going to heed his warning now, and close out our portfolios for the month with excellent profits all around. Our results for October: Tac-1 Value, +8.3%; Tac-2 Growth, +4.5%; Tac-3 Momentum, +16%; Tac-4 Low Price, +19%; Tac-5 Master, +7%.... More >

Oct. 9, 2003 -- We’ve been delighted with the performance of our October portfolios. All are up, all are beating the broad market  and virtually every individual stock we recommended this month has gained ground. Our Tac-5 portfolio – our Master Portfolio, since it contains a piece of our other lists – has doubled the S&P 500’s gain with a 7.5% return through Wednesday. Indeed, returns this strong make us a little nervous. They’re a little too good to be true. Generally we like to keep our portfolios for an entire month. But we wouldn’t blame you if you would put tight stops on our most volatile names. More >