So I'll come out upfront and say I must have been goofy last May when I sounded an alarm about Expedia (EXPE) and concluded the troubles as expressed in its earnings might allude to deeper woes in the travel business and the economy. None of that emerged. Oh, and the stock is up 46 percent since I wrote about it. Serves me right. As Freud might have said, "Sometimes a quarterly report is just a quarterly report."
Patience is more in order when I look at other recommendations. During 2006, I argued or quoted others arguing the merits of such local stalwarts as Caterpillar (CAT), Illinois Tool Works (ITW), Wm. Wrigley Jr. (WMY), USG (USG) and Fortune Brands (FO). None of those stocks did much during 2006, but don't write them off just yet.
Big companies with excellent overseas sales networks are apt choices if you believe predictions that the world's economic growth will be led outside the United States in 2007.
After another year in which small-cap stocks outperformed large-caps, it's possible the large-caps will strike back. That's the view of many top traders, such as Giri Cherukuri at Oakbrook Investments, who told Bloomberg News the large caps are "the place to be." We'll see. Many have been wrong about this before.
On the other hand, I take full credit for pointing people in the direction of unsung performers, such as Deerfield-based Dade Behring Holdings (DADE), which is up more than 18 percent since its appearance in this column last April, and Standard Parking (STAN), a real find. STAN has gained 31 percent since I wrote about it in May. A few other stocks that have rewarded the faith expressed here: Mittal Steel (MT), Chicago Mercantile Exchange Holdings (CME), Johnson & Johnson (JNJ) and even Boeing (BA), up 14 percent since an August piece about analysts warming up to it.
As for recommendations from others, the coveted Curious Investor Positive Mention Award goes to Carl Birkelbach, chairman of Birkelbach Investment Securities, whose stock picks for 2006 I listed late in 2005. Some turned out to be average performers for the year, but he hit on two, First Marblehead (FMD), up 162 percent since then, and Badger Meter (BMI), up 32 percent.
A Positive Mention honorable mention goes to John Jostrand, manager of the William Blair Large Cap Growth Fund, who I said in April was recommending Cisco Systems (CSCO), up 34 percent since then.
SELL ALERT: It's nice to see the strategists at Merrill Lynch start the year way out on a limb. They issued a report, "The Run Is Done," listing 17 companies whose performance in 2007 could sag after they rallied last year. The stocks face pressure because fund managers won't sell their top gainers until this month to avoid short-term capital gains, the strategists argued.
On their watch list are General Motors (GM), Kohl's (KSS), DirecTV Group (DTV), Gymboree (GYMB), Safeway (SFW), Boston Properties (BXP), Applera (ABI), AGCO (AG), Allied Waste Industries (AW), Deere (DE), Lockheed Martin (LMT), Paccar (PCAR), Terex (TEX), Lam Research (LRCX), Mentor Graphics (MENT), Synopsys (SNPS) and ValueClick (VCLK).
GOOD CEO: Stock options and outsized pay packages have brought new entries lately to the rogues' gallery of CEOs. Soonly fair to discuss one Will Oberton of industrial parts supplier Fastenal (FAST), the 2006 CEO of the Year as named by Patrick Dorsey, director of stock analysis at Morningstar. Its earnings are up 30 percent annually over the last 20 years, yet Oberton takes a modest pay package with little use of options that dilute investors' holdings.
Dorsey wrote that FAST serves customers who "are happy to pay a bit more for a bolt or screw if they get the right one and they get it fast, because industrial employees are getting paid by the hour even if the project is held up for lack of some special fastener or other supply item."
WAG TAG: Police in Orange County, Fla., are looking for a woman who tried to burn down a Walgreens because she thought a clerk gave her incorrect change. If she's ever found, her lawyer should insist on a jury full of people who have been stiffed by "sale" prices that don't show up at the checkout. She'd get probation, max.
CLOSING QUOTE: Bank of America (BAC) "has maintained a low profile by making intelligent acquisitions and managing its business well, while its peers struggle to regain their former glories. I'm starting to think of B of A as America's most underappreciated bank, if not one of the market's most underappreciated stocks. We can buy the stock right now and get a 4.2 percent current yield and the prospect of 8 percent annual dividend growth." -- Josh Peters, editor of Morningstar DividendInvestor
