There’s Always One

When Dawn Alston Paige, co-founder of Durham, North Carolina-based Piedmont Investment Advisors (No. 12 on the be asset managers list with $1.4 billion in assets under management), picked Office Depot as part of a defensive-minded portfolio, she thought the stock would rise by about $10 to a target of $50 per share within 12 to 18 months (See “Defensive Moves,” Moneywise, December 2006).

But after approaching $45 last fall, Office Depot shares have dropped by nearly 47%, to the $21 range. Office Depot executives have blamed the housing recession for a pullback in spending by small businesses, its prime customers. Office Depot’s woes dragged down the overall performance of Paige’s five-stock portfolio to a gain of 15.7%, just behind the 18% increase of the S&P 500 index.

MEMC Electronic Materials Inc. performed the best of Paige’s picks, returning 69.1%. The company’s polysilicon is used not just in microchips but in the burgeoning solar panel industry as well. Oil refiner Valero Energy Corp., meanwhile, was another big winner, posting a 51% gain. “It’s a good long-term holding,” Paige says. “Take some profits here, but don’t get out completely.” The reason to hold on to some shares? The stock could hit $80 within six months, she says.

Finally, home mortgage giant Fannie Mae came within a hair of Paige’s $70 target price this summer, closing at $69. Paige sees Fannie’s stock hitting $80 within six months. “The demise of the subprime market should be favorable, since they provide liquidity to more traditional mortgages.”

Company (Ticker) Price 9/25/06 Price 10/09/07 Total Return*
Amgen (AMGN) $71.22 $57.08 -19.9%
Fannie Mae (FNM) 53.50 66.95 25.1
MEMC Electronic Materials (WFR) 37.95 64.18 69.1
Office Depot (ODP) 40.40 21.52 -46.7
Valero Energy Corp. (VLO) 47.80 72.19 51.0
Total Portfolio 15.7    
S&P 500 1,326.37 1,565.15 18.0

Current Value of $5,000 Investment:$5,786.96

source: yahoo finance
* reflects stock splits and dividends