Dear Reader, I updated the ratings on my Equity Scorecard. The Scorecard is located at the lower right-hand side of this blog. Please note that I am not a professional investment analyst, and I urge you to do your own research or consult a professional broker before buying or selling these stocks. I have tracked these equities for awhile and have an idea as to how they might perform over the short term. The ratings I suggest are a snapshot in time; I do not actively change my ratings and don’t necessary change them when critical news breaks. I will indicate whether I own shares of this stock.
Infospace (INSP): Hold. If you own this stock, hold it until it rises to $28 per share (I own shares and will sell at $28). If you don’t own it, don’t buy it. I’ve been burned twice on this stock, including when I bought and sold during the dot.bomb era. Infospace offers online and mobile search technology and content. It competes with Google, Yahoo, Ask Jeeves, and other search companies. It is a niche technology play. The stock is moving nowhere fast, and it seems to drop like a rock whenever it announces that projected returns are not in line with expectations. That happens too often for comfort.
Blue Nile (NILE): Buy. Online jewelry e-tailer Blue Nile disappointed investors with sobering earnings news earlier this month. It also lowered its projections for 2006. Still, with the price correction from $44.35 to $33.10 per share, I think Blue Nile has room to move up. I do not own shares. If you buy shares of Blue Nile, consider accumulating shares rather than buying them in large blocks.
Archipelago Holdings (AX): Hold. The parent company of the Archipelago Exchange will soon merge with the New York Stock Exchange, making the NYSE a public company. This has been driving AX shares up. If you had bought shares in May 2005, you would have doubled your money by now. The easy money is gone. I do not own shares. I do not recommend buying shares of AX, although if you own them, you might want to hold on to them at least until the merger closes.
Ebay (EBAY): Buy. The world’s largest online market took a beating last year as growth in its core business, its online marketplace, has slowed. Its Paypal and new Skype subsidiaries show strong promise. Although shares are off by about 25% since January 2006, volatility leads me to downgrade Ebay from Strong Buy to Buy. Ebay’s stock appears to be caught in a tug-of-war between volatility and maturity, indicating that its share price will be relatively flat over time but much too volatile to be appealing. I do not own shares.
Krispy Kreme Doughnuts (KKD): Outperform. While it still makes the tastiest doughnut on the planet, the company itself has not shown that it has regained its previous luster. I do not own shares and don’t plan to buy any in the near future. I did, however, eat a Krispy Kreme doughnut this morning and highly recommend them if you have a craving for a good doughnut.
Petrochina (PTR): Hold. China’s upstart petroleum company has seen a huge run on its stock price ever since energy prices began to rise. In fact, its shares have doubled in price over the past year. Its price-to-equity ratio is a bit high for a petroleum company. I do not own shares. If you do, consider holding them through the end of the year because oil prices will continue to be stability or will increase, which will benefit Petrochina.
Salesforce.com (CRM): Hold. I missed out on this one. I don’t own shares and didn’t think it would be a hot stock. Salesforce.com sells online customer relations managment software. In August I indicated that you should benchmark it against its peers, and the price ended up doubling in the last six months. I downgraded it to Hold due to rumors that it lost a big contract to rival Oracle (shares dropped 10% in one day) and the fact that its price has doubled since mid-2005.
Sears Holdings (SHLD): Buy. Eddie Lampert’s creation, a holding company akin to Warren Buffett’s Berkshire Hathaway that throw off cash from its Sears, Kmart, and Auto Zone retail outlets into new investments, is still an interesting concept. It seems that investors have cooled to the idea and are rightfully concerned that Lampert and CEO Alywyn Lewis won’t be able to turn around Kmart and Sears. However, they’re missing out on the bigger picture. Now would be the time to accumulate shares before Lampert buys another big company such as Albertsons and generates even more investor interest.
DreamWorks Animation (DWA): Buy. I’m now bullish on DWA, the animation unit of DreamWorks Pictures, for three reasons. One, Pixar is being acquired by Disney, leaving DWA as the only publicly-traded computer-generated animation studio. Two, Paramount Studios is acquiring DreamWorks, DWA’s sister company. This will give the DreamWorks franchise additional clout. Three, DreamWorks Animation has some interesting films currently in production, including the upcoming "Over the Hedge," Jerry Seinfeld’s "The Bee Movie," and "Shrek 3," which should reign at the box office in 2007.
Dell (DELL): Strong Buy. Ouch. Dell’s shares have tanked since I recommended Strong Buy in August. I do not own shares. I reiterate Strong Buy, particularly since shares have dropped. Owning Dell shares is still a must for any technology portfolio. Although Dell has suffered from negative customer service image problems (plus, Steve the Dell Dude was canned and subsequently arrested), I think the king of computing hardware has plenty of room to grow. Now that its shares are down 25% since its high in July 2005, I think it is an even better buy.
Overstock.com (OSTK): Sell. This company, a direct competitor to Ebay, is its own worst enemy. First, it decided to sue analysts who claimed that it was overvalued and were shorting the stock. Don’t bite the hand that feeds you. Then, when investors were expecting Overstock.com to turn a profit, it dropped a bombshell by announcing that it will stay unprofitable in 2006. Who knows when, if ever, it will turn a profit. This company has squandered its potential thus far. I sold my shares at a loss and am glad I did. They’ve gone down even further since I sold.
Microsoft (MSFT): Accumulate. The maker of Windows and Office software continues to manufacture money. However, its stock has moved little over the past few years. I don’t own shares, although I recommend accumulating shares. Microsoft should benefit from Windows Vista when it debuts later this year. Owning Microsoft shares is a good hedge against volatile technology stocks such as Ebay.
Cogent Technologies (COGT): Buy. Cogent sells biometric technology used to enhance security. I own shares of Cogent, and frankly, I’ve been disappointed with their performance since I bought them in mid-2005. Cogent is a hot company in a hot industry. I plan to stick with it through 2006 and may sell later this year if it continues to underperform. For now, I still believe it has potential to excel in 2006.
Baidu.com (BIDU): Hold. This Chinese online search was hailed as the Google of China and debuted in an historic, oversubscribed IPO. Since then, shares have meteorically fallen to $48.50, close to what I thought was a fair price for the shares. Google is gaining ground in China through its Google.cn portal, so the Google of China might actually be…Google. I do not own shares but may buy if the price continues to go down if Baidu.com continues to be a viable stock to own.
Morningstar (MORN): Hold. Morningstar is a well-known, independent analyst research firm. I own shares have been very happy with the results. Shares have more than doubled since its May 2005 public debut. If you own shares, I recommend keeping them. I am not sure how long Morningstar will continue to shine, although it should hold its current value or outperform in 2006.
Google (GOOG): Buy. Google, the online search giant, has produced stellar returns since its 2004 public debut. I bought shares at IPO and sold awhile ago. Lately Google’s shares have been taking a beating as its latest earnings announcement hinted that growth has started to slow a bit. Most analysts still estimate that Google will rise to $500 per share, and it is currently at $352 per share (after hours on Friday). I am still bullish on Google, although I currently don’t own Google. Shares will certainly head back to over $400 per share this year.
Caribou Coffee (CBOU): Caribou Coffee, a direct competitor to Starbucks Coffee, has underperformed. Shares most recently tanked when the CEO announced that it would remain in the red for the foreseeable future. I own shares and am still high on Caribou’s future prospects. With its price at $8.54, far below its IPO price, now would be a good time to buy shares if you think that Caribou will be a good long-term investment. I think it will be.