The Momentum Portfolio this year begins with Priceline.com, which is up 497 percent this year through Friday. That big gain, however, only partially offsets a plunge in 1999 and 2000. At the end of April 1999 Priceline shares traded for US$162.38. By the start of 2001 they were down to US$1.31. So the recovery this year to US$7.83 is scant consolation to long-time holders. Based in Norwalk, Connecticut, Priceline sells airline tickets, hotel rooms and other items over the Internet.
Two of the ten momentum stocks are Internet-based travel services, Expedia Inc and Travelocity.com. Expedia has the second biggest gain year to date, 340 percent. Travelocity ranks eighth, up 177 percent.
I've used both services and like them pretty well, but 179 times estimated 2001 earnings seems like too much to pay for Travelocity. And 433 times estimated earnings for Expedia seems even scarier.
The third-biggest gainer (up 280 percent) is Service Corp.
International, which operates funeral homes, cemeteries and crematoria. I unwisely recommended this stock in 1999 when it was close to US$10. It is US$6.65 now, even after this year's big rise.
Today, as the stock sells for 21 times recent earnings and has debt equal to 158 percent of equity, I'm not partial to it.
Rounding out the Momentum Portfolio are Ikon Office Solutions Inc, Rite Aid Corp, Fleming Cos, Earthlink Inc, Network Associates Inc and Nvidia Corp. I think this year's group will do better than last year's, but not great.
Six of the ten hot stocks posted a net loss for the past four quarters. The profitable ones were Service Corp, Ikon, Fleming Cos and Nvidia. Nvidia sells for 57 times recent earnings, Service Corp and Fleming for 21 times earnings, and Ikon Office for 17 times earnings.
The Trudge Portfolio isn't one I would actually select in its entirety. But it does contain two stocks I own for clients at Dorfman Investments, AT&T Corp (owned in the form of options) and Raytheon Co. It also contains two stocks we own for clients at Dreman Value Management (where I am a managing director), R.J. Reynolds and SafeCo.
Tune in next July and we'll hear another installment on the adventures and misadventures of momentum investors.
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