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AUGUST 13, 2007
A Stockpicker's Progress Despite a mixed year, our Inside Wall Street columnist's 10-year record bests the big indexes Few stock pickers can outperform the market over the long haul. But BusinessWeek's Gene G. Marcial seems to be one of them. Since 1997, when we started tracking the performance of his weekly "Inside Wall Street" column, Marcial's picks have bested the S&P 500, Dow Jones Industrials, and Russell 2000 indexes after one day and after one, three, and six months. On average, his stocks returned 7.1% in six months, two percentage points ahead of the closest index, the Russell 2000. He had mixed results in 2006. Last year's 151 stock picks beat five benchmarks over one-day, one-month, and three-month periods. After six months, Marcial's picks gained an average of 5.7%. Those returns outpaced the NASDAQ Composite (up 4.9%) and the Russell 2000 (5.3%). But they trailed the S&P 500 (6.5%), Wilshire 5000 (6.6%), and Dow (7.3%). To compute Marcial's results, we take the closing price of each company on Thursday when it appears in his column after the market closes (the column is available on businessweek.com). We then follow the picks for the next six months, calculating the gains or losses for each company over the four periods. Next we compare the performance of the group with the major stock indexes. (The picks of BusinessWeek staffer Mara Der Hovanesian, who filled in for three weeks, are included as well.) As he has done for 25 years, Marcial wrote mainly about small and midsize companies in 2006, quizzing analysts and investors to find undervalued companies. For instance, Marcial highlighted Abercrombie & Fitch, which an analyst called "one of the best values in specialty retail," arguing its teen niche wouldn't get crimped by a drop in consumer spending. It rose 43.7% in six months. Of course, Marcial's picks can change direction quickly. Biotech's Praecis Pharmaceuticals (PRCS ), bought by GlaxoSmithKline (GSK ) earlier this year, jumped 22.3% in the first day of trading. But after six months, the price had dropped by 41%. It was a similar story for Northwest Airlines (NWACQ ): The stock nearly doubled in four weeks, but investors lost those gains when the company emerged from bankruptcy and the shares were canceled. Other airlines proved to be some of Marcial's biggest winners. UAL (UAUA ), parent of United Airlines (UAUA ), and AMR (AMR ), which owns American (AMR ), racked up gains of 88.9% and 59.2%, respectively, in six months.  By Joseph Weber, with Sarah B. Davis, Michael Mandel, John Peabody, and David Purcell
BW MALL
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