Double-Digit Days

Commodities fuel impressive returns for Charles Payne's picks

The stock of white-shoe investment bank Goldman Sachs Group Inc. showed little muscle over the past year — but two blue-collar companies did enough heavy lifting to make Charles Payne’s portfolio soar.

Payne, CEO and chief analyst of his own research firm, Wall Street Strategies Inc., saw the three stocks he picked in March 2007 rise by an average 28.7%, while the S&P 500 index dipped 6.3%. CSX Corp. led the way, posting returns of nearly 43%. The railroad benefited from resilient shipping demand in the United States as well as “an outstanding global economy,” he says.

Growing economies in countries such as China and India have fueled demand for rail-shipped commodities such as coal and corn. Railroads have cleaned up in part because they face fewer regulations than trucking companies, Payne explains. Expect CSX stock to tack on another $8 within a year to get to $64, he says.

Another booming commodity, oil, lifted the stock of Weatherford International Ltd., by more than 61% over the year. The company sells its equipment and services — from pumps to drilling services — to oil companies. But Payne expects the U.S. economy to rebound in the second quarter. And that should help the stock — which he rates a hold.

The sole loser in Payne’s portfolio was Goldman Sachs, whose shares fell 18.6%. Goldman fared far better than many rivals, however. Merrill Lynch fell 45% over the same period, and of course Bear Stearns & Co. Inc. was bought by JPMorgan Chase & Co. in March after a near collapse.

Goldman’s nearly unscathed emergence through the subprime crisis is further evidence, says Payne, that the bank is “the best-run company on Wall Street.” The stock should climb to about $250 within a year, he says, adding that investors should buy shares as the price dips.

Company (Ticker) Price 3/29/07 Price 4/11/08 Total Return*
CSX Corp. (CSX) $39.40 $56.31 42.9%
Goldman Sachs (GS) 205.43 167.30 -18.6
Weatherford Int’l (WFT) 46.15 74.67 61.8
Total Portfolio   _ 28.7
S&P 500 1,422.53 1,332.83 -6.3

Current Value of $3,000 Investment: $3,861.00
*REFLECTS STOCK SPLITS AND DIVIDENDS. SOURCE: YAHOO FINANCE

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