Tag: Investing

Scorecard: 2008 Beltway Stock Bets

WASHINGTON, D.C. — In 2008, this author wrote 20 stories serving up Washington-themed stock picks. The proposition behind them was that companies and their investors often benefit from activity inside the Beltway, be it procurement, favorable legislation and regulation or even just political developments.

This approach worked out well enough in 2006 and 2007. Not this year.

On average, stocks highlighted in our 2008 stories show a total return of -26%, using prices from the date of publication through market close on Dec. 8. Small consolation: That’s three points better, leaving aside transaction costs, than the S&P 500 return of -29% during equivalent time periods.

Full story at Forbes.com

Beltway Bet: iRobot

Since an initial public offering three years ago, iRobot’s stock price has steadily dropped. The Burlington, Mass., company, whose machines can vacuum your floor or help soldiers sniff out roadside bombs, went public at $24. Recent price: $9.

By certain metrics, the stock looks tempting. Its latest 12-month price-to-earnings ratio is a modest 15, while the company’s enterprise value, market capitalization plus net debt, stands at just 0.6 times its 12-month revenue of $316 million. The latter multiple is in line with a big defense contractor like Lockheed Martin and well below that of a comparable niche technology company like AeroVironment, whose enterprise-value-to-sales multiple is 2.5.

Full story at Forbes.com

One Roll of The Dice

For the 12 months ended Oct. 31, the S&P 500 lost 37%. Happily for the five bears in our annual equities contest, their picks did considerably worse. In October 2007 we challenged them each to name one stock that would trail the S&P over a one-year period. On average their stocks fell 61%. All five accepted our customary invitation to the winners to play again another year.

Our panel’s 12 bulls scraped by. Only five of their picks beat the market, and only two of those showed gains. As a group they declined 37%, same as the S&P 500.

Richard Jandrain, head of growth investing at Fort Washington Investment Advisors, leads the bulls. A year ago he liked the look of Pharmion, a developer of cancer treatments. So did Celgene (nasdaq: CELG – news – people ), which acquired Pharmion last March and helped Jandrain to a 50% gain.

Full story at Forbes.com

Defense Stocks At The Turning Point

WASHINGTON, D.C. – With the election of Barack Obama, uncertainty hangs over U.S. defense companies. Michael Lewis, equity analyst at BB&T Capital Markets, isn’t ready to make a call on how things will shape up for this sector in the Obama administration’s first six months.

“It’s very difficult to determine until we actually begin to see directional changes in funding or contracts actually starting to be pulled to the side,” he says. “Longer term, I do think there will be some type of sea change with regard to how dollars are spent.”

Fittingly, U.S. aerospace and defense stocks didn’t dodge Wednesday’s post-election market drop. The S&P 500’s aerospace and defense constituents fell 5% yesterday, in line with the broader index’s decline.

Full story at Forbes.com

Mid-Cap Beltway Bets

As part of our Washington coverage on Forbes.com, we take a keen interest in companies doing significant business either directly with the U.S. federal government or with the big contractors catering to it.

One reason: investment opportunity. Sometimes it pays to make a bet on a company with products or services that have struck have the fancy of a huge, sophisticated and deep-pocketed customer: Uncle Sam.

We’ve used our annual list of the 100 Best Mid-Cap stocks to test the proposition, with good recent results. The seven stocks we highlighted in this 2007 story show a 12-month total return of 2%, through our price date of market’s close on Sept. 18, versus a 19% drop (total return) for the S&P 500.

Full story at Forbes.com

Best Countries For Business: Stock Bets

Washington, D.C. – The International Finance Corporation, the private sector arm of the World Bank, releases its annual “Doing Business” report this week. The report, based on a survey of 6,700 business experts across the globe, ranks 181 countries by their hospitality to private enterprise.

The IFC describes its report–which looks at criteria such as enforcement of contracts, taxes and cross-border trade–as “a kind of cholesterol test for the regulatory environment.”

By the IFC’s tally, Azerbaijan, consistent with reform-happy Eastern Europe and Central Asia, has made the biggest improvement to its business climate recently. Meanwhile, 28 African countries have taken steps to make doing business easier, a number the IFC calls a record.

For the last several years, we’ve used “Doing Business” as a tool for stock pickers. The gist: International investors should stick with companies in countries with the most business-friendly regulatory frameworks. We start with the 30 countries taking the top spots on the IFC’s “Ease of Doing Business” rankings. You can find the full list here.From there we look for publicly traded companies from those countries.

Full story at Forbes.com

Beltway Bet: NICE Systems

The last 10 years have been quite a ride for shareholders in Israel’s NICE Systems, a developer of data-analysis technology for use in security and customer service. The Nasdaq-listed stock jumped to a tech-boom high of $50 in March 2000, only to sink to $3 per share a year and a half later. Since then, it has gradually recovered and now trades at $31.

Equity analyst Daniel Ives of Arlington, Va.’s Friedman, Billings, Ramsey & Co., believes NICE Systems’ (nasdaq: NICE) stock will continue to climb back toward its 2000 peak.

“They’re a well-run company,” he says. “The stock is undervalued based on growth.” (Note: Friedman, Billings, Ramsey makes a market in NICE Systems shares but does no banking work for the company).

One reason for his optimism: the potential in NICE’s security and surveillance business, which accounted for 24% of its $517 million in sales for the year ended December 2007. Ives thinks NICE can build on its big wins with government customers like the Federal Aviation Administration and the city of New York.

Full story at Forbes.com

Government Tech Stocks: Don’t Fear November

Washington D.C. – U.S. Air Force Captain turned stock analyst, Raymond James’ Brian Gesuale keeps tabs on 14 companies selling technology or technology services to government agencies–military and civilian. One issue he’s not too concerned about these days: McCain versus Obama.

“The general message we’re putting out there is, ‘Don’t be afraid of politics and the election this year,’ ” he says.

That advice isn’t for every defense investor, however. Gesuale thinks stocks of defense giants like Lockheed Martin (nyse: LMT – news – people ) or Northrop Grumman (nyse: NOC – news – people ), as well as companies who sell war “consumables” (ammunition and so on), could well get knocked around by electoral outcomes.

In contrast, Gesuale suggests the stocks he covers–small- and mid-cap technology concerns–likely stand only to benefit from a changing of the political guard. One reason is that these smaller players tend to suffer disproportionately from budget uncertainties. When Congress and the Bush administration battle over military spending priorities, as they did over supplemental war funding earlier this summer, the odds rise that money for new technology will get squeezed or cut.

Full story at Forbes.com

Political Risk Watch: Nanotechnology

In print and online, Forbes has chronicled the amazing potential of nanotechnology, or the ability to see, manipulate and manufacture things that are as small as one-billionth of a meter.

At a Wednesday event in Washington, D.C., a panel of experts didn’t play down that potential.

“The future of nanotechnology is extraordinary,” said J. Clarence Davies, a former Environmental Protection Agency (EPA) official who now serves as a senior adviser to the Project on Emerging Nanotechnologies at the Woodrow Wilson Center in Washington. “When you start crossing it with synthetic biology and artificial intelligence and so on, science fiction looks very pale in comparison.”

Lately, however, the market has not shared in the enthusiasm, at least when it comes to pure-play nanotechnology stocks. In the table below, we show four that have dropped more than 45% from their respective 52-week highs.

Uncertainty stalks these companies. Altair Nanotechnologies (nasdaq: ALTI – news – people ), Nanophase Technologies (nasdaq: NANX – news – people ) and Nanosphere (nasdaq: NSPH – news – people ) have never turned a profit, and security analysts project that all will lose money for their current and upcoming fiscal years.

Another source of uncertainty, although not necessarily a negative, is regulation. Thicker red tape surrounding nanotech is practically inevitable, say Davies and colleagues, who have released a 28-page regulatory agenda for the next administration.

Full story at Forbes.com