Saturday, December 31, 2005

Report Card: Year in Review

It's been a pleasure having the opportunity to share our market insights with all of you this past year.

We began this site with only one goal in mind: share our monomaniacal passion for the equity markets with a dedicated readership.

We receive zero compensation from the companies we cover -- we get paid in psychic currency.

That means that if we can steer you towards undervalued situations and pull you out of murky ones, or capitalize on our connections and past experiences, our job is done.

We've been getting a ton of emails asking for our performance in 2005.

We're proud to say that in 2005, we were right a lot more than we were wrong.

We decided to do what everyone else does this time of the year: review our best and worst calls.

2005 was a year in which we told you to sell PC maker Dell (DELL) long before it crashed 10 points.

We also put a sell tag on Pfizer (PFE) weeks before it began its precipitous decline. That one was a lay up -- Pfizer was bedeviled by flat growth, an anemic pipeline, heated competition at the hands of generic drug makers, and an industry-wide litigation cloud. Thank you Merck (MRK).

Also on the upside, we liked search giant Google (GOOG) so much we put a $500 target on it when it was at $330. Google now trades at $420.

Speaking of internet plays, (BIDU) fell flat on its face. After China-fevered investors snapped up shares at the IPO and bid it up to $140, we put a $60 target on the stock. The stock tanked after Piper Jaffray and Goldman Sachs confessed that BIDU was a dog, sending shares to $65. A 53% return for anyone who took our suggestion to heart.

Other winners for us included beverage maker Hansen (HANS) and aesthetic reconstruction play Cutera (CUTR).

Hansen was a home run for us. We picked the stock after reading Peter Lynch's "One Up on Wall Street." In his seminal book, Lynch urges one to pick stocks of companies they like and understand. If teenagers are all over it, he adds, buy the stock. So we tried Hansen's visible energy drink once and were instantly hooked.

At $43, shares were already expensive, but we went ahead and recommended them anyways. Hansen's explosive revenue growth fueled by a specialty drink for an underserved market was the driver we were looking for. The stock recently hit a high of $80 -- an 86% return for ye faithful.

Cutera was our vanity/Baby Boomer play -- it was a fast grower with strong demographics and a heap of analysts cheerleading behind it.

Those two were trend-driven plays, primarily. When we see an opportunity in the market, we take it. We have no qualms about excercising a "shoot now, ask questions later" mentality, as we showed you with one of our most memorable calls -- the now infamous Darden call.

Days before Darden's (DRI) last earnings announcement, we threw an aggressive buy on the restaurant chain. Darden blew away numbers and the stock popped, translating into a 13% return in 2 days. On that pick alone, we had throngs of people in areas as far as San Francisco (we're in NY and Miami) emailing us their compliments.

Lastly, we weren't without our losers.

Biotech sweetheart Celgene (CELG) has done diddley squat since we told you to dump it because of its rich valuation and "one trick pony" status; and niche apparel retailer Urban Outfitters (URBN) didn't exactly set the world on fire or cruise past our $34 target.

We love DVD delivery king Netflix (NFLX), but by the time we initiated coverage, the party was over.

Don't forget Corning (GLW) -- we've pitched the LCD glass maker 4 times and it's still in the morgue.

Apparently, investors can't get over the fact that Corning could at any time announce an inventory glut. In addition, insiders at the 100 year old company sold shares hand over fist, which asphyxiated the stock even further.

Ditto for Home Depot (HD) -- management (including the CFO) sold blocks of stock and left the home improvement retailer's share price in the dust.

The stock market's a new ballgame every day, starting at 9:30. We thank all our readers and we look forward to your continued participation next year. Happy New Year.

Just make sure you've committed our disclaimer/terms of use to memory before you bet the ranch on one of our picks.

(Disclosure: At the time of publication, the author and/or his family held a long position in Pfizer and Home Depot).

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