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5 reader picks for tech's next big thing
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Organic light-emitting diodes. "Here's another one: OLEDs (organic light-emitting diodes) replacing LCD (liquid crystal displays) in all devices and creating entirely new display and lighting product categories. Such new categories might include ruggedly flexible (display wrapped around consumer products), transparent (windows during the day become bright advertising panels by night) and task and room lighting panels. Companies with significant patent portfolios are Universal Display (PANL, news, msgs), Eastman Kodak (EK, news, msgs) and Cambridge Display Technology (OLED, news, msgs)." -- Larry.Universal Display is a so-far unprofitable Ewing, N.J., company with 2005 sales of $10 million. The stock has a market capitalization of $430 million. (Visit the companys Web site.) Cambridge Display Technology is headquartered in the other Cambridge, the one in England. The company recorded $18 million in sales in 2005, and the stock has a market capitalization of $180 million. (Visit the companys Web site.)
Two private companies to watch
A couple of other potentially disruptive technology companies didn't make this list of five because they are still private. Financed at this stage in their growth by private pools of venture capital or by corporate partners, these companies are intriguing, but there isn't any way at this point for individual investors to put a single dollar into them.
In a former life, I covered the world of venture capital investments and venture capital-funded companies, and two of the companies that readers nominated stand out to me for the quality of the investor groups backing them at this stage. That's no guarantee that these companies will succeed in bringing a single product to market, but it is enough for me to note and file away the names for the future. These two private companies to watch are:
- inPhase Technologies, a holographic data storage company with an investment group that includes New Venture Partners, Hitachi (HIT, news, msgs), Bayer MaterialScience and Nanotech Partners, an investment pool founded by Mitsubishi (MSBHY, news, msgs).
- A123 Systems, a battery technology spinout from the Massachusetts Institute of Technology backed by Motorola (MOT, news, msgs), Qualcomm (QCOM, news, msgs) and venture capitalist Sequoia Capital.
Thanks to Keith and Dave, respectively, for nominating these still-private companies that bear watching in the future.
First-quarter 2006 performance for Jubaks Picks
Its time for the end-of-quarter, 12-month and longer-term performance numbers on Jubak's Picks. The portfolio finished the first quarter of 2006 well ahead of the major indexes with a return of 9.9% for the period. For the quarter, the Dow Jones Industrial Average ($INDU) returned 3.7%, the Standard & Poor's 500 ($INX) returned 3.7% and the Nasdaq Composite ($COMPX) returned 6.1%. The 9.9% return on Jubak's Picks for the first quarter of 2006 compares to a 5.4% return for the first quarter of 2005.
The solid performance in the first quarter kept Jubak's Picks well ahead of the major indexes for the last 12 months as well. For the 12 months, Jubak's Picks returned 37.6%. That was ahead of the 6.8% and 10.4% for the Dow and S&P 500, respectively. For 12 months, Jubak's Picks is even ahead of recently red-hot Nasdaq index's return of 17.9% and the 25.1% return of the Russell 2000 ($RUT.X) small-cap stock index. Over the last year, small caps have steadily outperformed their large company counterparts.
(Please note that the returns I report here and those calculated by our Expert Picks pages are not equivalent. My returns are for the Jubak's Picks portfolio and include such features as cash balances and reinvested profits during the year. The Experts Picks pages report an average gain for each pick; portfolio totals assume equal holdings and do not adjust for reinvested gains.)
In 2005, investors could pretty much count on energy stocks to power a portfolio. But that wasn't the case in the first quarter of 2006 when returns in the sector became much less predictable. For the quarter, for example, Noble (NE, news, msgs) returned 17.8% but Nabors Industries (NBR, news, msgs) showed a 3.8% loss.
Fortunately, some of the star performers of 2005 kept up the pace in the first quarter of 2006. My three gold stocks, Goldcorp (GG, news, msgs), Glamis Gold (GLG, news, msgs) and Anglo American (AAUK, news, msgs) returned 34.7%, 23.6% and 12.6%, respectively. General Cable (BGC, news, msgs) stayed red hot with a 54.2% return for the quarter and older holdings Rayonier (RYN, news, msgs) and Mitsubishi UFJ Financial Group (MTU, news, msgs) returned 15.6% and 14.1% for the quarter, respectively.
I had the good sense to hold onto Pentair (PNR, news, msgs) and Corn Products International (CPO, news, msgs) as they rebounded from troubles in 2005 to show 19.1% and 25.6% gains for the first quarter. Balancing that, I sold Cell Genesys (CEGE, news, msgs), Station Casinos (STN, news, msgs) and, maybe, iShares MSCI Japan (EWJ, news, msgs) too early. The three are up 29.3%, 23.7% and 6.9%, respectively, since I dropped them from the portfolio.
I am encouraged by the very solid performance of many of the picks of recent months. Alstom (AOMFF, news, msgs), Copart (CPRT, news, msgs), Consol Energy (CNX, news, msgs) and Johnson Controls (JCI, news, msgs), all picks during the quarter, all returned 10% or better for the period. Disappointments so far include Cincinnati Financial (CINF, news, msgs) and Tele Atlas, down 6.7% and 21% since I added them to the portfolio this quarter.
| Jubaks Picks vs. major averages | | Index | First quarter 2006 | 12 months | | Jubak's Picks | 9.9% | 37.6% | | Nasdaq Composite | 6.1% | 17.9% | | Standard & Poor's 500 | 3.7% | 10.4% | | Dow Jones Industrial Average | 3.7% | 6.8% |
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Here are longer-term performance numbers for three years, five years (a period that this quarter begins 12 months after the peak of the bull market in March 2000 and includes much of the bear-market collapse from that peak) and since the inception of the portfolio in May 1997:
| Jubak's Picks vs. the indexes -- the long-run picture | | Index | 3-year return* | 5-year return** | From inception*** | | Jubak's Picks | 172% | 108% | 263% | | Nasdaq Composite | 74% | 27% | 75% | | Standard & Poor's 500 | 53% | 12% | 57% | | Dow Jones Industrial Average | 39% | 12% | 55% |
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*Close on March 31, 2003, through close on March 31, 2006.
**March 30, 2001, through March 31, 2006.
***May 7, 1997, through March 31, 2006.
All returns for Jubaks Picks deduct costs of commissions. Returns for Jubak's Picks and the indexes all include dividends.
As is my practice, I will update these performance numbers at the end of the next quarter in June 2006.
Updates
Sell Corn Products International
I'm probably selling too early, but by historical measures, Corn Products International (CPO, news, msgs) is now fully valued. The stock has historically traded at an average of 18 times earnings per share. Multiply the Wall Street consensus of $1.55 a share for 2006 earnings per share by a multiple of 18, and you get an "average" end-of-2006 target price of $27.90 a share. With the shares at $29.57 at the close on March 31, that adds up to a "sell" for me. My decision to sell also reflects the stock's big move off its low on Sept. 22, 2005, at $18.05, and the solid gains from the Dec. 30, 2005, close at $23.89. So although the shares are up just 5.1% from my March 1, 2005, purchase for Jubak's Picks, they're up 64% and 24% from the Sept. 22 and Dec. 30 prices, respectively. (I will sell my personal position in Corn Products International three days after this column is posted.)
Editor's Note: A new Jubaks Journal is posted every Tuesday, Wednesday and Friday. Please note that Jubak's Picks recommendations are for a 12-to-18 month time horizon. See Jubak's CNBC Picks for shorter six month recommendations. For suggestions to help navigate the treacherous interest-rate environment see Jim's new portfolio Dividend stocks for income investors. For picks with a truly long-term perspective see Jubak's 50 best stocks in the world or Future Fantastic 50 Portfolio.
E-mail Jim Jubak at jjmail@microsoft.com.
At the time of publication, Jim Jubak owned or controlled shares of the following equities mentioned in this column: Navteq and Tele Atlas. He does not own short positions in any stock mentioned in this column.
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