|
Insiders Corner, the First Year: Up 14.4% vs. 6.6% for NASDAQ
By Michael Brush
December 28, 2004
It’s the end of the year and time for a look back at my picks.
Not bad. Here’s a summary of my returns.
- My picks from the Insiders Corner column are up 14.4% since it
launched Nov. 30, 2004.
- That’s better than twice the 6.6% gains for NASDAQ in the same time
frame.
- It also beats the 8.5% or so made by mutual fund managers running
all-stock funds that invested in U.S. companies in 2005.
- I picked 74 stocks, and 65% of them advanced while 31% declined.
- Twenty one stocks gained more than 25% and nine of them stopped out
with 25% losses. Three stocks more than doubled.
advertisement
What worked
Not surprisingly, some of my best stocks were in the energy sector. Here,
the insiders started buying early -- well ahead of monster moves in many
energy stocks. This showed how good a signal the insiders can provide. Half
of my picks that did better than 50% were in energy.
The best-performing energy names included Parker Drilling (PKD)),
the pick that launched this column on Nov. 30, 2004. It’s up 166% so far –
the biggest gainer in this column, too. Beginner’s luck? Other top energy
performers included PetroQuest Energy (PQ)
and Chesapeake Energy (CHK),
up 80% and 97% since I first wrote about them last January.
But tech and retail did well, too. Two tech names, Sigma Designs (SIGM)
and Universal Display (PANL),
were up 58% and 39%. The retailer Charlotte Russe Holding (CHIC)
is up 48% since I wrote about it on April 6.
Only one biotech name landed among the top twenty performers, or DexCom (DXCM),
which advanced 56% since I wrote about it on May 4. This is a little
surprising – given the hefty amount of insider buying that we see in biotech
names on a regular basis.
Why so few biotech names among the top performers? It’s probably because
insiders typically buy well ahead of the positive trends they foresee – and
those trends take even longer in biotech given that research and the
approval process take so long. Or maybe the insider signal just doesn’t work
as well in biotech. This is worth watching, to figure out which is the case.
What didn’t work
One of my worst performers was a stock I thought showed the most promise, or
Constar International (CNST)
where a high-rolling insider with a good track record placed a multi-million
dollar bet. That turned out to be a bad signal – at least so far – and the
stock stopped out for a 25% loss.
The retailer Gander Mountain (GMTN),
which I wrote about in my second column in late 2004, started off as a good
pick. But then it released even more bad earnings news in late September and
the stock tanked. Insiders bought again in a big way – so the stock is
probably a decent hold. But it stopped out of our portfolio.
Not surprisingly, a homebuilder was one of my lousier picks, or Comstock
Homebuilding (CHCI).
It had decent gains for a while but then it got hammered with the group in
the late summer and stopped out. Fortunately, I kicked out another
homebuilder -- Orleans Homebuilders (OHB)
– for 10% gains late last May when insiders started selling. At least the
insiders pointed us in the right direction with this one. At $19 a share,
Orleans is still below where insiders signaled we should exit, or $21.86.
Two other names that stopped out were Tri-Valley (TIV),
a volatile energy stock and Cash Systems (CKN),
which sells cash and payment processing systems to Casinos. I think both of
these stocks are still worth owning. They stopped out in part because of the
extreme volatility that can happen in less-liquid small cap stocks.
Methodologyy
To calculate these returns, I assume a simple buy and hold unless I’ve
written that it’s time to sell a stock. If so, I use the mid-point price on
that date. I use a 25% stop loss on all stocks, as described in the set up
for this column. A stop loss is a limit order that turns into an outright
sell order once a stock has declined enough – in this case 25%. They are
used to protect against excessive losses. I excluded all dividends except
those paid by three real estate investment trusts I wrote about, and I
assume no trading costs.
For buy prices, I used the mid-point prices on the first trading day after
my columns were posted. For the closing prices, I used the mid-point prices
on December 22, 2005. These returns are for all picks from November 30, 2004
when this column launched, through November 24, 2005.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in
any of the companies listed in this column. Mr. Brush is an independent
columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About
Insiders Corner:
http://www.investorideas.com/insiderscorner/. InvestorIdeas.com
Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
|
|
