Steve's Half-Yearly Portfolio Report
Here is the performance of the stocks of Steve's transactions as of June 30, 1997:
|BUY||trans date||type||trans price||curr price||return||return vs DJIA|
Overall, the performance of my transactions just about matched the performance of the Dow Jones Industrials. I have not been surprised by any of the price movements of these stocks over the first half of the year. The big ups and downs in the DJIA don't cause me any concern. I anticipate long term growth and success in most of the that I have purchased. Here are some opinions I have about specific stocks:
ASND 39 3/8 - Ascend
The halving of this stock, from 80 to current levels of around 40, has created a nice value. Networking equipment is still a huge growth industry, and I believe Ascend will continue to grow profitably. I do not own any Ascend right now, because I believed it has been overpriced with a P/E ratio of over 80, but the price looks right right now.
BGEN 33 7/8, CHIR 20 7/8 - Biogen and Chiron
I am slowly accumulating positions in Biotech. It is hard to predict when the boom in biotech will occur over the next five years, but firmly believe that it will happen. Since I do not currently have the resources to research many of the smaller biotech firms, I am picking the biggie biotechs that are profitable and have a favorable earnings growth outlook for the next five years.
CSCO 67 1/8 - Cisco
Cisco is great. A dominating hi-tech company with plenty of room to grow. My favorite tech stock right now.
CPU 21 1/2 - CompUSA
Although I still own some CompUSA stock, I do not like the company's profit potential any more. Granted, they may become the Home Depot of walk-in retail computer products sales, but there is to much other competition, especially from direct mail-order suppliers like Dell Computer and direct mail-order catalog companies like MicroWarehouse. CompUSA has to carry a lot of quickly-obsoleted inventory, so there is a lot of inherent inefficiency in their business model (vs. direct sales). Company may still be good for 25% earnings growth year-over-year, but there isn't any hidden grand slam here.
EGRP 19 5/8 - E*Trade
I use E*Trade, and I am a very satisfied customer. Their online trading service is, to this customer, excellent, and their briefing.com commentary and analysis is very nice as well. E*Trade is a scalable company, in that, if they execute their business plan properly and more and more people use their services, then they can EXPLODE. Of all the stocks listed here, I think E*Trade has the best chance of 1000% stock price appreciation over the next five years. And I don't think the downside risk it too severe either - they already have a large and loyal client base. The main risk is many online-trading competitors, like E-Scwab and PCFN means a lot of slices in the online trading pie.
HD 69 - Home Depot
Still my favorite boring stock. Can still produce 25% yearly growth in earnings until who knows when. Appeals to homeowners and contractors alike. Can't imagine any scenario where Home Depot doesn't strengthen their domination on their home building supplies market more and more over the next 20 years.
INTC 141 13/16 - Intel
Stagnant price performance the first half of the year means better value now than six months ago. Company still a beast, so now is a decent time to buy. I may buy more shares.
IOM 19 7/8 - Iomega
Pretty fairly priced now, but has potential to increase quickly at any time. IOM is still, happily, my largest holding. Company has executed their plans extremely well over the past two years. There are many new competitors in the removeable storage industry (as well there should, because it's a large growth industry), but I continue to believe that IOM will be the primary provider of removeable storage solutions for years to come. I expect the stock to be in the 18 to 40 range at the end of the year.
MCRE 11 - MetaCreations
The merger of MetaTools, Fractal Design, and Specular is now official. At my company, Creation Engine, we offer all of these companies' products. Collectively, the technology put out by MetaCreations is pretty awesome. After Adobe and Macromedia, MetaCreations should become the third largest provider of 2D and 3D creative graphics development tools. And they have a chance of passing up Macromedia sooner or later. The company is well positioned to be one of few big, successful players in their industry. My main concern is how much the graphics tools market can grow. Even though I have lost a lot of money in this company, I think they will succeed and maintain quality earnings growth, once the logistics of the merger are history.
MSFT 126 3/8 - Microsoft
Great company, overpriced stock. I don't think it's worth paying a 45 P/E ratio for a company that can't grow earnings more than 20% to 25% per year from here on out.
RAIN 25 3/8 - Rainforest Cafe
My favorite stock right now. Expansion is going smoothly and explosively. Company still has $9/share in cash and no long-term debt. Growth seems reasonably predictable, and P/E is at a steep discount to growth rate, especially when considering the $9/share in cash in the bank!