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Wall Street professionals will tell you that stock picking can be a nerve-wracking affair where egos sometime flair up and arguments ignite over the smallest details. But for Chris Wilson, who lives in Durham, North Carolina, selecting a portfolio is much more peaceful.
Wilson does his research with friends Saundra Williams and Robert Lancaster. Together they head Wall Streetwise, a three-year-old African American newsletter (800-419-1318). During the weekdays, the three independently gather information on companies from the Web or the library and meet once a month to hash out which companies will be included in the newsletter’s Portfolio. As editor. Wilson says the group’s Saturday morning meetings are very civil. Members take turns hosting the portfolio meeting while they sip tea and grapple with the numbers.
The calm atmosphere, however, doesn’t necessarily make for lightweight picks. All three editors of the newsletter have been long-time investment club members, so they know the lay of the land. Lancaster has an M.B.A. in finance from Duke. And to back it all up, the newsletter’s portfolio has more than held its own, with a 23% average annual return, a figure that shames most of the mutual funds around.
Wilson says the Wall Streetwise portfolio holds between 17 and 20 stocks, depending on how optimistic he and his colleagues are about the economy. From there, the trio of North Carolinians looks for companies that meet several criteria. First, according to Wilson, Wall Streetwise is in the hunt for companies with an average 10% or more annual increase in sales. From there, the editors look to make sure a company’s stock is selling at or below its average price-to-earnings ratio during the past five years. There’s also research to be done on how efficiently the company is run compared to its industry. It’s a conclusion Wilson says is easy enough to reach after working through annual reports and 10(k) documents corporations must file with the Securities and Exchange Commission (SEC). To add a value component to their portfolio, Wall Streetwise looks for industries that are out of favor on Wall Street, something the average investor can find by looking at gains industry groups have made in the market as listed in Barron’s. Wilson says he and his group favor laggards, industry sectors that have trailed the market whose member stocks should be cheap.
Currently, Wall Streetwise is bullish on Ballantyne (Amex: BTN), an Omaha, Nebraska, company that makes projection equipment for movie theaters. Wilson says Ballantyne has prospered even as home-theater equipment has gained in popularity, thanks to a move to build more multi-screen cinemas in the U.S. Overseas demand, meanwhile, has been booming, particularly in Asia and Europe. Wilson says those two trends should help Ballantyne continue to grow earnings and sales at a 25% annual rate for the next three to five years.
Another Wall Streetwise pick is Omnicare (NYSE: OCR), a Cincinnati company that manages pharmacies in nursing homes, retirement centers and other long-term care facilities. Wilson says Omnicare has been building its business base by
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