Stocks That Almost Made The Cut: November 2006

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November 2, 2006 | S.T.A.M.T.C | | Author Asif

With the Dow Jones Industrial Average hitting an all time record high in October and the economy showing further signs of slowing down, finding the right stocks for the November edition of SINLetter proved very difficult. This is the reason I picked only one stock and four options instead. Two of those options, the March 2007 put on IYT and the May 2007 put on NEW have done very well, registering gains of 23% and 16.67% in just two days. The other two have not traded in the last two days but St Joe (JOE) has continued to fall.

Apart from SanDisk (SNDK), the nanotech venture capital company Harris & Harris Group (TINY) and financial services company State Street Corp (STT) were other strong contenders for this month’s investment newsletter. I considered Harris & Harris because nanotech is one of the most important emerging technologies of the future and TINY offers more of a pure play on nanotechnology than the nanotech Exchange Traded Fund (ETF) PowerShares Lux Nanotech Portfolio (PXN), which includes General Electric (GE), Hewlett-Packard (HPQ) and Intel (INTC) amongst its holdings. However with no steady stream of earnings (this is a venture capital company after all), it is hard to arrive at an appropriate valuation for TINY and the stock price is likely to be driven by overall market conditions in the short-term. Since I believe the market has more downside risk in the near future, I decided to let TINY lounge on my watch list for a little while longer.

With the growing popularity of ETFs, assets under management have been steadily growing to reach a total of $363 billion in September 2006. Assets under management grew $10 billion in August and another $4 billion in September. In addition to its various business units that serve institutional investors, I was attracted to State Street (STT) because it is also one of the largest providers of ETFs. After launching the first ETF called the SPDR 500 (SPY) in 1993 and the DIAMONDS Trust (DIA) in 1998, State Street was not as active as Barclays (BCS) or PowerShares in coming out with new and innovative ETF products. However State Street launched a set of 9 new ETFs last year and is also the provider of the streetTracks Gold Share (GLD) ETF that was mentioned in last month’s SINLetter. This shift of assets from mutual funds to ETFs will prove beneficial for State Street but with a P/E of over 20 and a dividend yield that is not even a third of what Barclays offers, I decided to let State Street join TINY on my constantly growing watch list.




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