It’s a brave new world for stock pickers. While in the past investors may have benefited from the sage advice of a financially savvy aunt or brother-in-law, nowadays they can profit from the expertise of an “electronic analyst.” Elroi, which stands for Electronic Review of Investments, helps stock-picker Steven Singleton of Oakland, California-based Robert Van Securities deliver top-notch returns to clients. Four of his five stock picks garnered double-digit returns since he recommended them last year, returning a whopping 41.34% total return for the period (“High-Tech Investing,” Moneywise, March 1999).
In fact, Singleton, whose picks were based on his growth-stock investment approach, puts technology at the core of that strategy. “It’s global information technology that’s paving the way to and through the new millennium,” he adds.
Ironically, the top performer of the group was retailer Wal-Mart (NYSE: WMT), which soared 67.74%. “The Wal-Mart everything-in-one-place model has done extremely well in 1999, and some major department stores, such as Sears and J.C. Penney, have been victims of its success,” he says.
Closely following Wal-Mart was Lucent Technologies (NYSE: LU), which returned 63.88% for the year. “Back then, the theme was the Internet, and we basically chose the plumbing side of it,” explains Singleton, referring to Lucent’s business of providing the systems and software to cruise the information superhighway.
Discount brokerage firm Charles Schwab (NYSE: SCH) scored a 63.04% gain. Singleton attributes the stock’s success to “a combination of the brokerage sector doing well and Schwab’s position in online trading. This is essentially an e-commerce position,” he says. While he notes that online revenues flattened over the summer, he says they’re once again on the rise. Carter adds that with the entry of new competitors, online trading should still grow, just not as quickly.
“The Street has had a love-hate relationship with this stock,” says Singleton of MCI WorldCom (Nasdaq: WCOM). “It’s currently in the hate phase, but the stock moved up earlier this year,” providing a respectable 15.51% return. But questions remain, since the long-distance market is highly competitive and MCI is still groping for a wireless offering, he adds. Singleton still likes the stock, since 40% to 45% of Internet traffic travels along the company’s lines, and the acquisition of a wireless business is possible down the road.
Finally, Pharmacia & Upjohn (NYSE: PNU) was the only laggard, with a negative 3.46% return. Partly to blame: pharmaceutical stocks were out of favor this year, Singleton says.
Meanwhile, Elroi’s model portfolio returned 28.2%, behind Singleton’s five picks but better than the Standard & Poor’s 500 stock index’s return of 13% for the same period. Looking ahead, Singleton says he expects technology-what else?-to remain the dominant theme for the coming year.