Stocks That Almost Made the Cut: August 2006

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August 1, 2006 | S.T.A.M.T.C | | Author Asif

Picking Suntech Power Holdings (STP) and Sify Ltd (SIFY) for this month’s SINLetter was relatively easy as I have been following both these stocks for months and the recent pullback in both these stocks provided a good point of entry. After the August newsletter was sent out to subscribers this morning, I picked up both these stocks for my personal portfolio as well.

Other stocks I considered for this month’s investment newsletter included Fedders (FJC) and Genentech (DNA). Given the extreme heat wave the United States has experienced over the last few weeks, I started looking at companies that make air conditioners for consumers. Fedders (FJC) is one such company and a quick check at stores like Home Depot indicated that almost all Fedders units were sold out. A local TV station also reported that most retailers were out of air conditioning units. However a closer look at the company’s financials indicated that it had very little cash on hand, a large debt load and was not profitable to boot. So while the cyclical summer story was great, the numbers were terrible.

I had considered featuring Genentech (DNA) back in February but decided to hold off. The stock has fallen another 6% since then and I reconsidered it this month when it reported strong second quarter results that beat analyst estimates. Genentech’s drug Lucentis has also been granted regulatory approval for the treatment of wet age-related macular degeneration, a leading cause of blindness in the elderly. However with its extremely high valuation, even a small slip causes a sell off in the stock. A good example of this was the sell off when sales of one of Genentech’s drugs Avastin came in $16 million less than analyst estimates. Hence I decided to feature Suntech Power (STP) instead thanks to its amazing growth rate and all the other reasons mentioned in the one-year anniversary edition of SINLetter.

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