The words “core equity and fixed income” are melodic to Isaac H. Green, president and CEO of Piedmont Investment Advisors L.L.C. in Durham, North Carolina, which has $1.3 billion in assets under management. The portfolio of stocks that Green recommended to BLACK ENTERPRISE (see “Smooth Sailing,” April 2006), generated a total return of 14.8% over the 52-week period ended Jan. 25. This surpassed the 12.6% return of the S&P 500 over the same period. But it’s worth noting that the portfolio was largely weighed down by one stock that happened to reflect the political ups and downs of the last year.
Green says his riskiest choice was Apple Inc. (AAPL). “It proved itself to be risky because after we put it on the list [at $74.20] it dropped all the way to $50; yet it yielded [one] of the highest returns,” says the 20-year investment expert. In the end, shares of the Cupertino, California-based icon were up 16.2% to $86.25. “They own the portable music sector,” he says, “and the iPhone’s introduction shows they have raised the bar again.”
Surpassing Green’s target of $28, AT&T Inc. (T) leapt 52.7%, from $24.10 to $36.79. Formed in 2005 when SBC Communications acquired AT&T (the combined company retained the AT&T name), it has established itself as a major player in broadband services. AT&T went on to buy BellSouth, which Green describes as an important strategic acquisition that makes the company a significant player in local and long distance and which gives AT&T full ownership of Cingular–one of the dominant wireless companies.
On the downside, shares of Houston-based Halliburton Co. (HAL) slid 19.2%. “The whole oil sector was challenging,” says Green. Oil prices peaked in July 2006 at $78 a barrel and are now near $50. As an oil services provider, Halliburton isn’t very sensitive to oil prices, he says, but “the whole group went down, and it went down in sympathy with the group.” Another problem was that management talked about spinning off KBR Inc., the engineering and construction subsidiary that provides services in Iraq, but the deal never happened. Last summer, with a share price around $74, shares split 2:1, and are now trading at a modest $29.74. “I wouldn’t sell it if I owned it all year, but I wouldn’t buy it,” says Green.
Shares of Purchase, New York-based PepsiCo Inc. (PEP) jumped 13.9%, from $56.58 to $64.42. Green notes that PepsiCo is a diversified company that produces a range of drinks and snacks beyond its eponymous cola–including Gatorade, Tropicana Orange Juice, Doritos, and Rold Gold pretzels. “They do a great job of balancing their portfolio products and managing them very well,” sums up Green.
Shares of Wachovia Corp. (WB) jumped 10.4%, from $50.52 to $55.76. “It’s still a solid stock,” says Green who considers shares of the Charlotte, North Carolina-based bank a “buy.” He points to a low P/E ratio of 11.5, on a trailing 12-month basis, and a healthy dividend yield of 4%. Mostly Green is hyped about Wachovia’s acquisition of Golden West