Stock Picks - The Doh.com 10 - Long Term
Strategy Updates Trades
Commentary We closed Worldcom because the telecom fallout that has happened in 2000 and 2001 has left a landscape where Worldcom can no longer grow at rates that it has historically. With the lower growth rate, the company no longer meets our investment criteria and as a result has been replaced with Genentech, arguably the best positioned company of the larger cap biotechs. We closed Frontline Capital Group because we never should have invested in this dog to begin with. The debt load of the subsidiary that it was going to go public with eventually became too much for the company before it could spin it out, and now the company is fighting to stay alive. Time to move on to H&R Block. We're in good company as investors with Warren Buffett as a major shareholder. On the 12/29/2000 trades: We closed Biogen because we found a much better value in the Biotech sector in Cell Genesys. With all the cash and stock in Abgenix that Cell Genesys has in its balance sheet, the stock is selling at book value, which means you're getting the company business for free. The current revenue stream and the interest with the cash on hand makes the company cash flow neutral which gives it plenty of time for its rich pipeline of drugs to mature. We closed Seagate because of the merger with Veritas, which is not a suitable investment for the Doh.com Long Term Portfolio due to valuation. Veritas is replaced with Frontline Capital Group, which has holdings in a company that should go public in the next year or two. When the IPO hits, the stocks true value should be unleashed. On the 12/31/1999 trades: We closed Philip Morris for one simple reason - odds are very good that all the future earnings of the company will end up going to settle lawsuits instead of into shareholder pockets. Time to move on to greener pastures, which in this case is Tyco. The stock in our opinion is under great management, has solid growth prospects, and is at an incredibly great valuation. We closed Nike for two reasons. First off, Nike's growth has been stagnant in the last few years, and secondly, the world in which we live is becoming tech, tech, and more tech. We felt it was wise to keep the long term portfolio with the times and add a reasonably priced technology stock with solid fundamentals: Applied Materials. We closed Chase Manhattan mainly because we felt the portfolio needs less financials and more tech. We continue to play financials with the credit card company MBNA, and we add another reasonably priced technology stock to the fold: Solectron. On the 12/31/1998 trades: We closed McDonalds on valuation purposes - was too expensive for us to hold at a little over 2.0 forward pe to long term growth ratio (or PEG ratio) - and replaced it with Best Buy. Best Buy has a more promising medium term growth rate (around 23%) and a much more attractive PEG at a little over 1.0. We closed Komag on fundamentals. Deteriorating computer prices are putting the squeeze on small suppliers, and the prospects in Asia are still adding to the pain. Seeing that this stock traded under $5 for most of 1998, we decided to take what we could get. Note: we continue our play on the hard drive sector with Seagate. We closed Federal Home Loan Mortgage mainly because we felt the portfolio was too much financial and not enough tech. We replaced it with a cheap Internet technology play, MCI Worldcom, which has a forward looking PEG of around 1.2 and great medium term growth prospects. Performance Doh.com 10 Long Term = 42.77% S&P 500 = 29.71% Notes Disclaimer
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