January 11, 2001

Your Money Matters

Experts, Darts, Readers 
All Take a Drubbing

A brutal six months led to the worst showing for investment professionals in the 10-year history of this column's stock-picking contest -- an average loss of 53%.

The best of the four pro picks dropped 22% between July 11 and Dec. 29, 2000. The worst plunged an eye-popping 90%.

Wall Street Journal readers and a portfolio of stocks chosen by flinging darts at the stock tables didn't do much better. The four readers, whose picks were selected at random from among e-mail submissions to WSJ.com, posted an average 43% drop, while the dartboard portfolio slid nearly 11%. Only a single dartboard pick made money in the competition.

 

1Learn how to enter next month's Dartboard contest. 2Check the performance of the pros, the darts and the amateurs in this month's contest. See the current contestants and the prior contest's results

Despite their drubbing in the latest six months, the pros who came in first and second gamely accepted an invitation to return for another round against the darts and Journal readers. Sheridan Reilly, chief investment officer for international stocks at Ivy Funds in Boca Raton, Fla., chose Vodafone Group PLC, the British wireless-communications company whose shares slid 22%. Shelley J. Meyers, president of Meyers Capital Management in Beverly Hills, Calif., was in second place with Sola International Inc., a Menlo Park, Calif., maker of eyeglass lenses; its stock dropped 32%.

They will be joined for the coming six months by two intrepid newcomers: Timothy L. Swanson, head of stock investments for Wachovia Asset Management, a unit of Wachovia Corp. in Winston-Salem, N.C.; and Paul Gulden Jr., chief investment officer for H.G. Wellington Capital Management in New York.

How the market has changed in the last six months is apparent in their picks. All four are going with big, well-known companies for the competition ending next June 29, and there isn't a technology stock among them.

Mr. Reilly's choice is GlaxoSmithKline PLC, the British pharmaceutical giant formed by the recent merger of Glaxo Wellcome PLC and SmithKline Beecham PLC. Its American depositary shares trade on the New York Stock Exchange. "In this period of economic slowdown, we think growth will become a scarce commodity," Mr. Reilly says. This company "will deliver something near double-digit earnings growth over the next few years."

The combined company has a "very solid" medium- and long-term pipeline of new drugs, he adds, and it "has the power and the might to invest heavily in research and development." But most of the company's earnings over the next few years are expected to come from drugs already approved, he says. At $52.63 in 4 p.m. trading on the Big Board, the stock is trading at lower valuations than the rest of its sector and its European peers, Mr. Reilly says.

Ms. Meyers, who manages the Meyers Pride Value Fund, is going with AT&T Corp., the big telecommunications company, for her second outing against the darts and Journal readers. "The stock really has been hammered down," she says, but a recent dividend cut indicates that "management doesn't have their heads in the sand."

On a "piece-parts" basis, and even valuing the long-distance business at zero, AT&T is worth far more than the $23.13 it was trading at 4 p.m. yesterday on the NYSE, Ms. Meyers says, whether or not a proposed breakup of the company goes through. "I have a big respect for brand names," she says. "This is one of the top 10 brand names in the world." Indeed, AT&T also is one of the reader selections for the coming six months.

Newcomer Mr. Gulden's pick is the new J.P. Morgan Chase & Co., formed at the end of last year in the merger of J.P. Morgan Co. and Chase Manhattan Corp. "Financials are clearly a major beneficiary of falling interest rates," he says. The newly combined company has a "unique franchise" in consumer services, investment banking and asset management, he adds, and the merger will provide cost-cutting opportunities.

The stock traded on the New York Stock Exchange at $50.94 at 4 p.m. Wednesday, which Mr. Gulden says is "a significant discount" to the Standard & Poor's 500 and to its peers.

Mr. Swanson's choice is Tyco International Ltd., a diversified industrial company in Exeter, N.H., that makes health-care products, fire-protection and security systems, electronic components and flow-control products. "For the next six months it makes sense to be in a name that's not so dependent on where the economy is headed," he says. "It's a little more stable situation."

The company has a significant proportion of recurring revenue, and earnings are expected to grow at a rate of about 20% a year, he says. "Given the uncertainty now, investors are going to look for companies that offer growth at reasonable valuations," he adds.

For the competition ending June 29, the four pros will be competing against a dartboard portfolio consisting of Electronics Boutique Holdings, Empresa Nacional de Electricidad [Chile] SA, Republic Bancorp Inc. and Walt Disney Co. Internet Group.

The readers' portfolio, four stocks chosen at random from among e-mail submissions to dartboard@interactive.wsj.com³, consists of AT&T, which is the selection of Mike Turner of Newport, Ark.; ADC Telecommunications Inc., the choice of Lloyd Otto of Sylvania, Ohio; Biomira Inc., chosen by Barry N. Voorn of Orland Park, Ill.; and Viacom Inc., the pick of Cletus Conrad of Orrville, Ohio.

Despite the latest results, the pros remain comfortably ahead of the darts and the Dow industrials when results of 127 contests since 1990 are tallied, with a score of 78 to 49 when compared with the dart throwers and 66 to 61 when pitted against the Dow industrials. The pros, meanwhile, have racked up an average six-month investment gain of 10.9%, compared with 4.3% for the darts and 6.4% for the Dow Jones Industrial Average.

The pros also are ahead for the 15 contests since readers were invited to join in 1999. Their average six-month gain for those contests is 9.6%, compared with 5.3% for Journal readers and 2.3% for the darts. The Dow industrials were flat, on average, over the same 15 contests.

Write to Georgette Jasen at georgette.jasen@wsj.com⁴

	Sheridan Reilly Ivy Funds Buy: GlaxoSmithKline		Shelley J. Meyers Meyers Capital Mgmt Buy: AT&T
	Paul Gulden Jr.  H.G. Wellington Buy: J.P. Morgan Chase		Timothy L. Swanson Wachovia Asset Mgmt Buy: Tyco Int'l

Experts vs. Darts vs. Readers the Past Six Months
 

		Performance* July 11, 1999 - Dec. 29, 2000
Experts as a Group		- 53.2%
Sheridan Reilly Ivy Funds	Buy: Vodafone	-21.7%
Shelley J. Meyers Meyers Capital Mgmt.	Buy: Sola Int'l	-32%
James E. Grefenstette Federated Investors	Buy: Interlink	-68.9%
Richard Keim Kensington Mgmt.	Buy: Futurelink	- 90.3%
Dartboard Portfolio:  Olin, +28.3%  Epcos, -16.3%  Worthington Industries, -26.7%  Intimate Brands Class A, -32.4%		-11.8%
Readers' Picks:  Lisa Scheuplein, Juniper Networks, -15.3%  Steve Terlaga, Critical Path, -45.1%  Ronald Komas, Artesyn Technologies, -50.3%  Doug Gessner, Applera-Celera Genomics, -61.9%		-43.1%
Dow Jones Industrial Average		-0.6

*Capital gain or loss only.
Calculations by IDD Information Services/Tradeline.

Hyperlinks in this Article:
(1) http://interactive.wsj.com/documents/dartboard-portfolio.htm
(2) http://interactive.wsj.com/mds/dartboard10.cgi
(3) mailto:dartboard@interactive.wsj.com
(4) mailto:georgette.jasen@wsj.com

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