Adult entrants favor issues that performed well last year

1/20/2008

TECHNOLOGY and solar power were the keys to winning last year's stock market game, but will lightning strike twice in a row?

Several participants of The Blade's Stock Market Game for 2008 apparently believe so: Solar-power companies and tech stocks make up most of the most popular Nasdaq and New York Stock Exchange picks by the 880 contestants.

"Do these people know something? That'll be something to see," said Wallen "Buzz" Crane, senior vice president and resident manager of the Toledo and Sandusky offices of Smith Barney. The company is a co-sponsor of the contest and will tabulate the results.

Some contestants have focused on commodities.

Robert Connelly, an engineer from Perrysburg who finished 35th last year and second in the 2002 contest, chose a portfolio of precious-metals firms.

"I just think that, in general, the commodities are a bull market that's going to last a long time," he said. His portfolio for the contest is made up of DRD Gold Ltd., Silver Standard Resources Inc., Harmony Gold Mining Co. Ltd., and Hecla Mining Co.

Peter Genot, an auto industry professional from Sylvania, is a newcomer to the stock market game, entering because his mother told him to put his stock advice toward the contest. His portfolio has Kinross Gold Corp., a gold mining firm; PICO Holdings Inc., a land and mineral rights firm; FreightCar America Inc., a coal and minerals rail car hauler, and Advantage Energy Income Fund, which deals in natural gas supplies.

"With a recession and market decline, gold is a safe haven," he said. "I personally wanted to stay away from other stocks because you can see from the market in general that it's at the start of a bear market."

Entrants had to pick two New York Stock Exchange stocks and two Nasdaq stocks, each priced over $5 a share, and submit the entry before Dec. 31, 2007. The hypothetical portfolio began with $40,000 divided equally among the stocks. The entry that grows the most for the year wins. Each contestant can change one stock by the end of June.

First prize is $200 in cash and a three-day/two-night trip for two, including transportation and hotel, to Chicago, Toronto, or Tampa during 2009 with arrangements made by contest co-sponsor Central Travel of Toledo. Second place receives $300 in cash and third place $200.

For fun, The Blade's business news staff randomly selected four stocks for a challenge portfolio not eligible for prizes.

Among contestants, the most frequently selected stock was First Solar Inc., which shot up 795 percent last year. It was critical to last year's top three prize winners as well as the top 40 portfolios.

The firm began in Toledo and has its only North American solar-panel manufacturing plant in Perrysburg Township, but its headquarters office is in Phoenix.

Four other solar-panel or solar-wafer stocks were also top picks: Evergreen Solar Inc., Solarfun Power Holdings, LDK Solar Co., and Suntech Power Holdings Ltd.

"They're obviously the most popular because they were the most successful last year," said Mr. Crane. But First Solar already has shown signs of slipping.

After reaching $280 a share in the final week of December, First Solar closed Friday at $167.20 a share.

Equally popular this year were last year's strong technology performers, such as Apple Inc., which finished up 133 percent last year, and Google Inc., which finished up 50 percent.

But other stocks also made a splash, such as Ford Motor Co. The automaker's stock hit $38 a share in 1999 but closed at $5.92 Friday.

Also a common pick was Citigroup Inc., which just announced a $10 billion fourth quarter loss; its stock closed at $24.45 Friday after trading at over $50 much of last year.

Some entrants went after financial companies that have posted stock-value declines in the last year. Mr. Crane said those contestants are counting on a rebound.

Others decided to focus on commodities, such as Mr. Connelly and Mr. Genot.

Smith Barney maintains that industrial materials and energy segments are more exposed than generally thought.

Also, the Federal Reserve likely will cut interest rates more if a recession occurs.

Said Mr. Crane: "Over the years during this contest, I have been very impressed with the way the general public invests.

"You have groups of investors that somehow find things.

"Last year they found solar energy stocks and everyone in the top group had First Solar. Two years ago they found gold mining stocks."

The prevailing opinion, he said, is the general public doesn't know much, but many are smart.

The holdings of the winners of the contest probably will be stocks most people would not have picked at the outset, he added.

"I always say, 'Holy mackerel! How did they know this?'•" Mr. Crane said.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.