Corporate Pains

Corporate Pains

Stock picking is not an exact science, but every stock picker has a formula for determining when to buy, sell, and hold. Ty Burroughs, president of the Burroughs Financial Group in Atlanta, uses an investment strategy that involves value picking and whether or not corporate management is buying or selling their own company shares. Eyeing market capitalizations of individual stocks and following insiders’ moves seemed like a sound strategy for Burroughs, but the portfolio of five stocks he recommended to BLACK ENTERPRISE fell short with a 0.11% loss. Comparatively, the S&P 500 eked out a 4.35% gain.

Motorola Inc. (NYSE: MOT) While Motorola experienced big market share gains and strong revenue growth its stock traded below Burroughs’ $22 target at the 12-month mark. However, the introduction of new products, plus the continued popularity of the Razr, bodes well for the No. 2 wireless phone maker.

Apple Computer Corp. (NASDAQ: AAPL) was trading at $38.10 at the time Burroughs projected a $49 price target in July 2005. Apple hit a high of $85.59 in January 2006 before retreating to $55.65 at the 12-month cutoff. This was Burroughs’ big winner; the stock produced a 46% gain. By mid-September it had gone up even higher. Despite a volatile year that involved backdated stock options and tech scandal, investors continue to pick Apple shares for their portfolios. By continuing to broaden its product line, Apple should generate sales and earnings power over the next 12 months.

Comtech Telecom. Corp. (NASDAQ: CMTL) did exceed Burroughs price target of $41 when it climbed to $45.65 by year end of 2005. But during the first half of 2006, the stock slid, settling at $29.17 a year after his recommendation. This produced a loss of 15.74%. The company, which manufactures and markets wireless transmission products and high-power broadband amplifiers for commercial and government markets, is expected to profit and gain momentum from recent military subcontracts.

D.R. Horton Inc. (NYSE: DHI), which designs, constructs, and sells single-family homes, was the bane of Burroughs’ portfolio. The stock traded at $40.20 when Burroughs recommended it, but it fell well short of his $50 price target 12 months later, trading at $22.85. D.R. Horton has made some adjustments in response to a current housing market that is experiencing high inventory levels and moderate demand.

TALX Corp. (NASDAQ: TALX), the human resources services provider, is still considered a strong buy even though a recent antitrust inquiry by the Federal Trade Commission could make the company vulnerable. Once the situation is resolved, TALX should realize revenue and earnings gains. TALX was trading at $19.42 at the time of Burroughs’ recommendation and reached a high of $55.14 in January 2006 before skidding to $21.23.