ODI Stocks: It’s a Stock Pickers’ Market

TDWI Boston Chapter Users’ Meeting – May 29th
May 22, 2008
Notes from TDWI Boston Chapter Meeting
May 30, 2008
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ODI Stocks: It’s a Stock Pickers’ Market

Odi_pic On Monday May 19, 2008 the Wall Street Journal (WSJ) published a section titled ”Finding the Way in Rough Seas”. Two of the three top stock pickers in the software category gained that distinction by selecting such SaaS stocks as Taleo Corp., Ultimate Software Group Inc., Salesforce.com Inc. and Omniture Inc.

The On-Demand Index has recovered some ground from being down just over 30% YTD in March and now is “only” 17% down YTD. This compares to the iShares S&P GSTI Software Index Fund (IGV) is down 4.07% YTD, Dow -4.82%, Nasdaq Composite index -7.08% and S&P 500 -5.04%.

An interesting observation is that the ODI stocks are not behaving as uniformly as they have in the past. (see ODI Index table) They all are off from their 52 week highs but the range is 2% to 73% with an average of -38%. Four of the eighteen stocks in the index are actually in positive territory in terms of YTD gains. These stocks all have make a profit and are in an industry or market segment that is holding up well in this economic slowdown (or recession, that’s another post!)

Odi_2008_05_23_4 

(Click to enlarge)

Also attached is a chart with TZIX, N, CRM, CTCT and SLRY to illustrate the divergence of the stocks with the index this year.

Odi_2008_0523_chart_2

(Click to enlarge)

From an investing perspective, stock selection is the key. Pick a stock with expectations that are attainable in this economic environment and whose application helps companies expand and perform better in a healthy industry, such as health care, or reduces costs in companies that are more economically challenged.

The disclaimer on mutual fund performance about “past performance does not guarantee future returns” is applicable selecting stocks. It’s easy to pick a winner on momentum stocks in a bull market. All boats rise.

fyi: The index is calculated on an equal-weight representation based on closing prices as of 12/31/07.

Disclosure: I have no current stock positions in any of the companies listed in this index and no current business partnerships.

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