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Assessing Where We Went Right and Where We Went Wrong

Stock Exchange lets readers listen in as Times staff writers James Peltz and Michael Hiltzik debate the merits of individual stocks.


Today's column takes a look at some of their previous calls.


Jim: We decided against our better judgment to once again review some of our past recommendations.

Mike: We last did this six months ago, and we're doing it again now because it's been about a year since we started this column.

Jim: Now, the last time we did a review we got a lot of letters questioning our ability to pick stocks. And I think it's important to remind everyone that that's not what this column is all about.

Mike: Right. Some of our readers may be under the misapprehension that what we're doing here is proposing a model portfolio in our "buy" and "don't buy" picks. But what we're really trying to do is give our readers some guidelines for looking at companies.

Jim: Exactly. The way I look at it, people who might be interested in a particular stock can take our position as a jumping-off point for them to investigate the stock further themselves . . .

Mike: . . . by highlighting some pertinent points about these companies--whether it's the performance of the CEO, or the likelihood of a takeover, or the health and direction of the general industry. We try to show that companies are dynamic things, with individual personalities. You have to really understand what they do and how they do it to decide whether you want to invest in them.

Jim: People should remember, though, that they really shouldn't even be in stocks unless their financial houses are already in order. But once you're ready to invest, you find that, unfortunately, a lot of the information out there is in Wall Street-speak. What we try to do is cut through all that and give you a plain-English overview.

Mike: So, to all of our readers who have been spending time putting our picks down in a spreadsheet and doing the quantitative analysis and measuring our picks against the S&P 500: I'm not saying we don't appreciate it, and I'm not saying that we don't try to keep score ourselves. But that's more or less beside the point.

Jim: So, having said all that, one thing I have noticed, Mike, about our recommendations is that we've been cautious in some sectors, passing on some stocks that have done quite well.

Mike: To name one: Broadcom . . .

Jim: . . . which is the maker of the electronic chips that go in sophisticated TV-set-top boxes that are going to be able to carry all sorts of interactive broadband technologies. We both passed, and it's done extremely well. Then there's IBM, which we both thought had peaked at the beginning of December.

Mike: And I'm happy to report, since I own the stock, that that peak was surpassed long ago. The stock is up 40% since we talked about it.

Jim: There're a couple of others we passed on for fundamental reasons and that have gone up nonetheless.

Mike: You're thinking of Revlon and Polaroid.

Jim: Exactly. I thought those stocks had nothing going for them. But they've been buoyed by takeover speculation since we talked about them.

Now, there are a couple that I'm particularly proud of, Mike. One is Nike, which we talked about last November. You felt that all of their problems were ongoing. I felt that they were starting to get their act together. I'm happy to say that Nike is up more than 30% since then.

Mike: As I've said before, you really know how to hurt a guy. But turnabout is fair play: Does the name Bed Bath & Beyond mean anything to you?

Jim: Oof!

Mike: Right. I thought this retailer of household furnishings would do great in the buoyant housing market, and do well even if housing sales slowed down, because people priced out of the housing market would console themselves by gussying up their existing homes. You feared the economy and the housing market were heading for a slowdown and would take BBY down. Anyway, the stock is up more than 64% since we talked about it in October.

Jim: On the other hand, we both agreed that Gap Stores had a lot of momentum going for it. We happened to talk about that in November as well. And Gap, which has been a perennial all-star, continues to do well. I'm happy to say it's up 50%.

Another I'm particularly proud of is PeopleSoft.

Mike: I've spent a lot of time trying to forget this.

Jim: PeopleSoft is the big maker of database software whose stock was a real highflier until last year, when that whole industry suddenly turned sour. Why don't you remind us of your position on PeopleSoft when we discussed it in January? The stock had already taken a tremendous dive, and you were of the opinion that it was going to start working its way back.

Mike: Yes, I believed that its troubles were behind it and that this was such a strongly growing market that PeopleSoft was sure to participate in further growth.

Jim: Actually, I still think that's the case. I just didn't and don't think it's hit the bottom yet, so I still recommend staying away from the stock for a while. It's dropped more than 25% since we spoke.

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