Your Money Matters _ Investment Dartboard: Professionals’ Picks Leave Darts in Dust
Led by a technology stock that more than doubled in value, a portfolio selected by four investment professionals surged ahead of the competition to win this column’s latest stock-picking contest.
The pros posted an average investment gain of 31 percent in the period from June 6 through Nov. 30, compared with a gain of 23.8 percent for four stocks chosen by Wall Street Journal staffers flinging darts at stock tables. The Dow Jones Industrial Average rose 13.1 percent over the same six-month period.
The latest results put the pros ahead of the darts by a score of 40 to 26 in this series of overlapping six-month contests. When compared with the Dow industrials, the pros are ahead 37 to 29.
Professional investors look even better when actual performance is compared, with an average six-month investment gain of 10.8 percent in the 66 contests since current rules were adopted in July 1990. The forces of chance, represented by tossing darts, have turned in an average 4.5 percent gain. The Dow industrials have risen an average 5.2 percent.
Audrey Snell, portfolio manager of SunAmerica Corp.’s Small Company Growth Fund and its Mid-Cap Growth Fund, led the pros in the most recent competition. In her first outing, her pick of PC DOCS Group International Inc., a Toronto computer-software company, soared 101.4 percent in less than six months.
In second place, also with a technology stock, was Erik Grinde of Security Traders Handbook, a financial newspaper in Woodstock Valley, Conn. Also in his first dartboard competition, he chose Micron Technology Inc., a Boise, Idaho, maker of computer-memory chips that rose 20.2 percent during the contest.
As is this column’s custom, Ms. Snell and Mr. Grinde have been invited back for another round. They will be joined for the coming six months by Thomas H. Eichler, chief investment officer for Eichler Magnin Inc., a Los Angeles investment-management firm, and James K. Pollock, senior portfolio manager for Beacon Investment Co. in Ann Arbor, Mich.
Ms. Snell’s pick for the contest that ends May 31 is Chantal Pharmaceutical Corp., a Los Angeles company that makes a line of skin-care products said to reduce wrinkles. ``I don’t think this is snake oil,″ she says. ``There are clinical studies by reputable medical school-affiliated dermatologists″ indicating that the products seem to be effective.
The products are based on a patented ingredient called Ethocyn, Ms. Snell says, which seems to inhibit the decline in elastin production that is part of the aging process. Doctors say ``it seems to be quite safe,″ she adds.
Chantal began selling Ethocyn products nationally through retail drug chains in September, after nearly a year of selling primarily through telemarketing, Ms. Snell says. It is marketed as a cosmetic and the company makes no medical claims, she notes.
``I don’t think this is the fountain of youth, I don’t think it’s a panacea,″ she says. ``But it does seem to be helpful in improving the quality of the skin.″
Ms. Snell expects sales and earnings to more than quadruple in the next calendar year, as the company increases production and improves distribution. Although the stock price, around $21 a share on the Nasdaq Stock Market, has soared from $1.75 a year ago, she says it could go as high as $30 by the time this contest ends.
For his second foray against the darts, Mr. Grinde is going with Cognex Corp., a Natick, Mass., maker of machine-vision products used in computerized quality-control systems. The products are used to analyze images, measure objects and detect flaws. Mr. Grinde says profit margins are expanding and he expects earnings to nearly double this year over last. He also likes the fact that a substantial portion of the company’s business is in Japan. ``It’s a perfect recipe for growth,″ he says.
Cognex has announced a two-for-one stock split, payable Dec. 18 to holders of record on Dec. 1. The stock closed Tuesday on the Nasdaq Stock Market at $58.375 a share, presplit. Mr. Grinde declined to predict where it will be six months from now, saying ``it depends on how the market treats tech stocks.″
Mr. Eichler’s choice for his first contest against the darts is Santa Fe Pacific Gold Corp., a gold producer based in Albuquerque, N.M., that was spun off from Santa Fe Pacific Corp., the railroad company, in 1994. ``We’re bullish on gold,″ Mr. Eichler says, because world-wide demand was up 22 percent in the first half of the year while production was about flat.
Santa Fe is a ``well-run gold business,″ with long-life reserves in the United States and low production costs, he says. ``It’s undervalued relative to its peers.″
The stock closed Tuesday at $12.75 a share in composite trading on the New York Stock Exchange. Mr. Eichler says it could reach about $18 by the time this contest ends.
Mr. Pollock’s pick for the current contest is Borders Group Inc., the big bookstore chain based in Ann Arbor, Mich., that was spun off from Kmart Corp. in May. Although Borders is the second-largest operator of book superstores in the United States after Barnes & Noble Inc., Mr. Pollock says, its sales per square foot and sales per store are higher. ``It’s testimony to (Borders) operations,″ he says.
Borders is increasingly emphasizing superstores over its smaller mall-based bookstores, Mr. Pollock says, providing enormous opportunities for growth. He expects customers to increasingly turn to book superstores for the large selection and inventory, just as they shop at superstores for other products.
Earnings could rise more than 30 percent next year over the current fiscal year ending in January, Mr. Pollock says. Still, he declined to predict how much the stock price will rise over its closing at $17.25 a share in composite trading on the Big Board. ``All retailing stocks are subject to fourth-quarter jitters,″ he says.
The pros will be competing against a dartboard portfolio consisting of Gerrity Oil & Gas Corp., Lehman Brothers Holdings Inc., Stewart & Stevenson Services and Studio Plus Hotels Inc. For the contest ending May 31, the darts were thrown by sixth graders at the New York City Laboratory School for Collaborative Studies, who have been studying the stock market.