Top Stocks in Power Ratings Up 42% Since August Update
If you’re waiting for momentum investing to run out of steam, it might not be happening any time this century.
“Momentum” stocks, as defined by The Times’ Power Ratings screen, have handily beaten the market since Aug. 24, the last time we updated the ratings.
The top 10 stocks from that Power Ratings list have risen an average of 42% from their Aug. 23 closing price, versus a gain of 4% for the blue-chip Standard & Poor’s 500 index.
The 98% jump in shares of Conexant Systems, the Newport Beach-based maker of semiconductors for telecom applications, led the way. Another big winner: telecom networker Periphonics Corp., which zoomed more than 80% before being acquired in late November.
The No. 1-ranked stock on the August list, Millennium Pharmaceuticals Inc. is up 56%, while No. 2 Harmonic Inc., which makes fiber optic systems, has gained 52%.
Seven of the August list’s top 10 have beaten the S&P.; Two were down slightly, while Tesoro Petroleum was a big loser, off 38%.
Stocks further down the August top-25 list were more of a mixed bag, but on average, they too have more than held their own.
Qualcomm Inc., the wireless technology giant that has become one of this year’s hottest stocks overall, was ranked 23rd on the August list. It has since vaulted 128%.
The Power Ratings, based on data from Zacks Investment Research of Chicago, are designed to show which stocks have the greatest recent upward--or downward--momentum by three measures: share price, analysts’ earnings estimate revisions, and analysts’ overall ratings of the stocks.
In a market like this one, hot stocks often stay hot as their strong gains attract other investors. That’s one definition of “momentum” investing.
But by factoring in earnings estimates revisions and analysts’ changes in their ratings on the shares, the Power Ratings methodology also looks for companies whose fundamentals appear to be improving as well.
The top Power Ratings stocks have generally been strong performers all year. The Times has updated the list several times in 1999.
There’s no guarantee that the gains will continue, of course. But momentum investing, for now, is ruling the market.
The new Power Ratings list, based on data through last Friday, includes a few tech stocks that are household names (top online directory Yahoo Inc., for instance, and global cell-phone leader Nokia) or are on their way to becoming big names (fiber-optic rocket JDS Uniphase, up 716% in the last year).
But the list also includes some names even tech-savvy investors might not know.
Two of the stocks on the updated list are holdovers. Chip equipment maker Lam Research Corp. and telecom services provider Western Wireless Corp. made the top 25 on Aug. 24 as well.
A note of caution: Executives at several companies on the new list--including chart-topper Infospace.com Inc., biotech firm Protein Design Labs Inc. and Western Wireless--have recently sold shares or filed to sell them, according to Washington Service, which tracks such transactions.
Some analysts see insider selling as a bearish sign for those stocks, indicating a possible share price peak--although with hot issues such as these, insider selling is almost unavoidable, and not necessarily a negative.
Here’s a quick look at a few of the stocks featured in the new Power Ratings portfolio:
* Tweeter Home Entertainment Group Inc. of Canton, Mass., expects registers to ring loudly this season for its audio and video products. Demand for expensive digital televisions is one reason for the company’s cheery outlook.
* Siebel Systems Inc. of San Mateo, Calif., whose software helps businesses manage online marketing, was recently named to Lehman Bros.’ “virtual economy” portfolio of stocks expected to benefit most from the growth of the Internet.
* Networking equipment maker Emulex Corp. of Costa Mesa has seen its shares surge fourteenfold in the last year on huge demand for its fiber channel technology. The stock will split 2 for 1 Wednesday.
* Lam Research of Fremont, Calif., is still benefiting from the improved outlook for the semiconductor business. On Monday, an analyst at First Security Van Kasper upgraded the stock and set a $107 price target.
* E-Tek Dynamics Inc. of San Jose, which, like JDS Uniphase, is benefiting as investors bid for fiber-optic stocks at the speed of light.
* One stock that investors have been attracted to only recently is Korn/Ferry International of Los Angeles, the world’s top executive recruiter. The company went public in February at $14 and languished in that neighborhood until breaking out in August. Korn/Ferry recently said it expects strong earnings growth next year, boosted in part by the U.S. presidential campaign. As CEO Windle B. Priem told Bloomberg News: “It always happens. People cycle from the administration back into the business world. It helps business.”
Times staff writer Josh Friedman can be reached at josh.friedman@latimes.com.
