Street Patrol
Recent articles:
• The waiting game trips game makers, 12/19/2005
• Why gold is soaring -- and could keep going, 12/7/2005
• A last hurrah for the home-building rally?, 12/7/2005
More...
| | Street Patrol
In 2005, GM wrecked, Google rolled
And my portfolio jumped 22%, thanks to a smart call on Google, a well-timed bet on flash memory and the frying of Krispy Kreme's stock.
By Robert Walberg
Over the past year, Ive beaten up General Motors; hopped aboard the Google bandwagon; identified a couple of winners in the booming flash memory market; shorted a couple of broken-down companies that used to be high-fliers; and been too cautious about the growth prospects and valuations of Apple Computer and Whole Foods Market.
Those of you that followed my top picks in the Street Patrol portfolio, which is up about 22% year to date, should have made some money, as well. In the end, thats what its all about.
Looking back, I had a number of triple-digit winners, but Im most proud of my relentless call for change at the countrys leading automaker -- General Motors (GM, news, msgs). Virtually every time I issued a report on GM, readers flooded me with e-mails. Most of those who wrote agreed with my contention that management at General Motors was too busy pointing fingers to actually fix what ails the company most -- an unfocused, unattractive and uninspiring assortment of cars and trucks that leaves a growing number of consumers uninterested. Some readers believe that Im un-American and that GMs products are just as good, if not better, than those produced by Honda, Toyota and BMW.
Hey, I didnt design the Pontiac Aztek -- I just wrote about why such designs have led to a steady, decades-long decline in market share. Hopefully, GM will change its management team, focus more on products than on cost-cutting and avoid bankruptcy. You can bet that Ill keep a close eye on the company and will report any key developments.
Winning with tech, groceries
Both Apple (AAPL, news, msgs) and Whole Foods (WFMI, news, msgs) put GM to shame. Through innovation, design and product management, both make big, steady profits and reward shareholders with huge gains. I balked at both stocks early in the year due to valuations, but adjusted my way of thinking as sales, margins and profits continued to expand. The lesson: Valuations dont tell the whole story. There are times when it pays to pay up for growth -- especially when a company totally dominates its niche.
More from MSN Money
One company that is enjoying explosive growth by owning a large share of a booming market is SanDisk (SNDK, news, msgs). Since being added to the Street Patrol portfolio, the stock is up over 150%, as high demand for flash memory in digital cameras and other gadgets has resulted in tremendous top- and bottom-line growth. This was one time when the market misjudged the potential for this company, thus I was able to capture this growth at a very reasonable price. After the run this year, the stock is no longer cheap. And with the supply of flash picking up, margins might begin to come under pressure soon. Nevertheless, SanDisk and fellow flash player, M-Systems Flash Disk Pioneers (FLSH, news, msgs) -- up 80% year-to-date -- show just how rewarding it can be to identify the next big thing in technology.
The biggest thing in technology these days is Google (GOOG, news, msgs), as the leading search-engine company is revolutionizing online advertising and making gobs of money in the process -- both for itself and its shareholders. The stock continues to defy gravity, as management makes one bold and successful move after another. As with SanDisk, valuations are getting rich, and it will be tough for the company to duplicate its heady growth numbers. So next year might not be as bullish. But betting against Google has been a losing strategy since the stock came public.
Zapped, profitably
Betting against companies is not always a bad thing, however -- especially when those companies are in world of hurt (particularly when they file quarterly reports late and have the Securities and Exchange Commission knocking on their door). Two shorts that did very well by me this year were Taser (TASR, news, msgs) and Krispy Kreme Doughnuts (KKD, news, msgs). My shorts of Qwest Communications (Q, news, msgs) and Hewlett-Packard (HPQ, news, msgs) were less successful. Even so, I hope investors learned: A) Its OK to short stocks; B) Just because a stock was a high-flier in its past doesnt mean that it will bounce back; and C) A stock in a major decline offers as much opportunity as a stock in a major uptrend.
As we move into next year, Ill continue to focus on stocks making headlines, as well as those sectors making big moves. Energy stocks are likely to continue climbing, as will the precious-metals sector. Given the long and steady climb in interest rates, Im much less excited by the prospects of financials and housing stocks. But if theres one thing that is constant in the markets, it is that unexpected events will make a mockery of many, many pre-year forecasts. So Ill try to stay nimble again this year, and hopefully the Street Patrol portfolio will duplicate its success.
At the time of publication, Robert Walberg did not own or control shares of companies mentioned in this column.
|
