Picking Stocks Like a Pro

(last updated Monday, 26-Mar-2001 20:34:57 PST)

Ok. The first thing you should know about how I pick stocks is that I suck at it. Mostly my picks go down. The exception was PCP of which I sold half my holdings after the split for a nice return.

New Strategy
Every year Money Magazine publishes a list of the "Best Places to Live in America". One of these is the "Best Small City". The idea is to look up what that city is and invest in the company that supplies homes there with electricity. Since the city is small, there's lots of room for growth. For year 2000 that was Sarasota, Florida. Their power company is Florida Power and Light which is owned by the Florida Power and Light Group (FPL).

Current Holdings

ENCD - Encad
Encad makes wide-format inkjet printers. Their new printer, the 850, looks like a winner. It competes very favorably with its HP counterpart, with with consumables that cost half as much. In at 14 7/8, in more at 4 5/8. It remains to be seen whether Encad will be able to make a go of it or not, but lets see what the most recent quarter numbers are. They're not quite dead yet.

PCP - Precision Castparts
I really like these guys. They make high-precision cast-metal parts (hence the name) for use in such things as aircraft engines, gas turbines etc. Cast parts have significant cost advantages over machined parts, although there is concern that cast parts are not as strong, hence need to be made heavier than a machined part. This is becoming less true however. Lately PCP has been diversifying to reduce their dependence on the aerospace industry by getting into fluidic control devices and other non-aerospace uses of their process. They are the market leader in their field. I like their dominant market position, their aggressive expansion into new areas, and the strong insider buying. In at 31 7/16 (split adjusted). In more at 18 15/32 (split adjusted). Sold half at 39 3/16.

CLE - Claire's Stores
Claire's sells costume jewelry and other items less than $20 to teenage girls. They completely dominate (>95%) their competition. Now that they are approaching American saturation they are exanding in England, Japan and Europe. They are also branching cautiously into the teen fashion market through strategic aquisitions. Claire's has always been (and will remain forever I think) family owned. The current CEO is 80+ and is passing the reigns to his daughters. The company has minimal debt, and a ton of cash. I like Claire's because when the revolution comes and the global economy finally goes down the crapper, Daddy's Girl will always still have $5 to buy that pretty new scruchie she just saw in Claires. Wall Street doesn't like the nepotism of Claires, and of course, costume jewelry isn't nearly as exciting as the internet, so the stock price is low. Since the family isn't selling, they don't care, and Claires continues to have record-breaking overall and same-store sales with great consistency. Recently Claires bought out their last remaining American competitor, Afterthoughts (formerly owned by Venator aka Woolworth's) at probably a fair price. They implemented the required store closings and reallocations accordingly. In at 22 7/16. In more at 16 13/16.

T - AT&T
These bastards. I loved their all-inclusive broadband strategy, but the investors were impatient and made them abandon it. Now they are planning to split into four different companies over the next few years. In at 41 13/16. In more at 29 5 /16. I continue to hold this stock because I think it is currently undervalued and that the split-apart pieces will be worth more than the one big company. We'll see though.

FPL - Florida Power & Light Group
In at 59.49. See the "new strategy" described above.

Other Holdings
We also have some money in a money market account, and shares in the mutual funds Fidelity Puritan, Fidelity Select Technology, Europe Capital Appreciation and Small Cap Stock, and in United Services World Gold Fund. The technology fund had stupidly good returns, but those have all gone away now of course.

Stocks I'd Like to Buy

GE - GENERAL ELECTRIC everyone should own this stock and put it in a drawer and forget about it. Very expensive though (but recently getting cheaper).

PLUG - PLUG POWER these guys make fuel cells which I really like. This technology is the way of energy utilization of the future. Unfortunately, I have no idea how to make a valuation for this company, so it is impossible to find an entry-point.

FDX - FEDEX makes a profit whenever someone buys stuff over the internet, unlike the actual internet vendors. :)

Previous Holdings

SCCO - Smith-Corona
They make (or made anyway) the typewriters. SCCO came out of bankruptcy with a plan to move into the telephony market. They gave it a go, but it didn't work out. In at 6 3/16. Out at 1 15/16. They re-entered bankruptcy recently, came up with a buy-out plan, got bought out and are worth 1 cent per share now.

Would you like to go back to the home page?

Questions or comments?