Inside Wall Street: Turbo-Charged Investment Managing
Well, that's what a young outfit called Marketocracy aims for -- in good times or bad. However, it isn't your usual type of asset manager. It's one of the few incubators of experienced and stand-out investors on the Internet, whose performance Marketocracymonitors, to determine which of them are the best stock pickers. Those who excel are chosen by Marketocracyto undergo a rigid and lengthy screening process before they are given assets to manage and held accountable to produce great gains.
That's a tall order, especially since Wall Street is littered with so-called hot and smart investors who have flamed-out and fallen during economic downturns or market crashes. That's one reason why Marketocracy founder and CEO Ken Kam, who formed the company in July of 2000, makes sure the investors he picks have demonstrated proven, long-term staying prowess. Prior to forming Marketocracy, Kam founded and served as CEO of Firsthand Funds in the 1990s -- and eventually ran a $1billion mutual fund portfolio.
The result: high-octane returns. If an investor had invested, say, $10,000 in Marketocracy-managed portfolios at the beginning of April 2005, he or she would have more than doubled the money, producing a total of $26,000 by April 2010. Compare that to Standard & Poor's meager gain, where your $10,000 investment would have increased to just $11,000 in the same time period, says Kam.
SWAN and ART
Marketocracy's chosen portfolio mangers' two principal portfolios, named SWAN, or "Sleep Well At Night," and ART, for "Absolute-Return Team," have produced extraordinary results since their inception. The SWAN portfolio posted a yearly gain of 23.1% from Dec. 31, 2000, through Dec. 31, 2010, vs. the S&P's 6.1% return. And the ART portfolio did even better, posting an annual gain of 26%, compared with the S&P's 4.1%.
Still, investors should keep in mind that nothing is guaranteed in stock investing, and past great performance doesn't mean it could be repeated. The best maxim to remember, in each case, is "investor beware." The stock market is a battleground of ideas, and various factors come into play that often create volatility.
Apple, Bank of America, China Media Express
What are Marketocracy's managers' current stock picks? They now hold a total of 150 stocks in its portfolios. Three of the top SWAN stocks are Apple (AAPL), Bank of America (BAC), and China Media Express Holdings (CCME). And among the ART team's top choices are Novo Nordisk (NVO), MasterCard (MA), and Northgate Minerals (NXG).
Everybody knows that Apple's stock has been on fire, rocketing from a 52-week low of $199.95 a year ago to a high of $364.90 on Feb. 16. It has since eased to $339 on March 15, reflecting the market's drop resulting from the nuclear crisis in Japan following a devastating earthquake and tsunami there. Even so, Marketocracy's managers are convinced it is one stock that will continue to reward investors -- which should allow them to sleep well at night, despite the market's volatility. The recent release of Apple's iPad 2, reported to have sold more than 500,000 during the first weekend they were available in the market, has added allure to Apple's already enticing stock. Some analysts predict the stock will hit $450 to $500 a share in 12 months.
Bank of America, on the other hand, has been depressed, but its current appeal is precisely because of that -- its much-emaciated market valuation, caused in part by its huge mortgage-loan problems. The stock traded as high as nearly $20 a share in mid-April of 2010, but it later got deflated to as low as $10 in late November. It has since rebounded to $14. Easily, the stock could snap back to its 52-week high of about $20, predict some analysts. Any good news about Bank of America at this time should lift the stock to much higher levels, they argue.
China Media Express is among the least-recognized stocks among Marketocracy's picks, but the Hong Kong-based company operates an interestingly lucrative business. It sells advertising on in-bus television programs, shown in more than 20,000 inter-city express buses serving China's most economically active cities. Its stock is trading at $11.87, down from a 52-week high of $23.97. Some big global companies are among China Media's clients, including Toyota (TM), China Telecom (CHA), and Siemens (SI).
Novo Nordisk, Mastercard
Among the ART portfolio stocks, Novo Nordisk, a global health care company with more than 87 years of leadership in diabetes care, is the world's leading producer of insulin. This Swedish company is also a leader in hemophilia, growth hormone, as well as hormone therapy for women. Its ADRs (American Depositary Receipts) are traded on the New York Stock Exchange and have been one of the fast-advancing stocks. It has bolted to $123 a share as of March 21 -- after hitting a 52-week high of $129.26 on March 4 -- up from a 52-week low of $73.16 on May 24, 2010. Analysts remain optimistic that the stock is still far below its peak levels. Earnings are also on a fast growth track. Analysts project profits for 2011 of $5.39 a share, leaping in 2012 to $6.18, up from 2010's $4.38.
MasterCard, famous for its ubiquitous credit cards, is a global leader in transaction processing with nearly 30 million business locations worldwide. And it hasn't stopped expanding. According to Zaineb Bokhari, an analyst at Standard & Poor's, there are numerous long-term growth opportunities for MasterCard -- including further expansion overseas, increasing the growth of its debit card business, and boosting its mobile payments and prepaid card operations. Rating the stock a buy, Bokhari has a 12-month price target of $267 a share. Currently trading at $247, the stock is up from a 52-week low of $191 on Sept. 13. The big driver behind the stock's climb is MasterCard's rapid earnings growth. Bokhari forecasts MasterCard will earn $16.20 a share in 2011, way up from 2010's $14.05, and 2009's $11.16.
Northgate Minerals isMarketocracy's small-cap bet in gold and copper mining. The company, which has operations in Canada and Australia, is one of the old-timers in the mining business, dating back to its start in 1919. Its stock climbed to a 52-week high of $3.54 a share on Sept. 21, but profit-taking and a net loss posted in its fourth quarter pulled the stock down to $2.75 a share as of March 21. But analysts see the stock bouncing back to at least its old high as they expect Northgate to get back to profitability this year. The analysts' consensus estimate for 2011 earnings is 5 cents a share, followed by a big jump to 21 cents in 2012.
For investors who like their money scrupulously handled by experienced managers with a hands-on grip on their portfolios' goals and holdings, Marketocracy should fit the bill, with its "master" managers' proven track record in producing robust long-term gains.