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Unfortunately, the war in Iraq, an anemic economy, and slow consumer spending due to higher unemployment all conspired to dampen the success of William Young’s “momentum” investing strategy. The president of Buford, Dickson, Harper & Sparrow was optimistic that his approach could overcome the dismal returns of 2002. While there were positive signs, the recovery didn’t come quickly enough.
Young’s list of five stocks showed a loss of 6.24% in the 52-week span from June 3, 2002 to June 2, 2003. By comparison, the S&P 500 fell 7.08% and the Dow tumbled 8.36%. Young contends, “The portfolio provided a stellar return when compared to other stocks in the S&P 500.” However, his firm decided to sell one of his holdings and maintains a “hold” on the four others.
Young was disappointed with the performance of Kraft (NYSE: KFT). The stock dropped nearly 21.54%, from $41.42 to $32.50, which he attributed to the consumer food giant’s inability to develop new products in a bearish market. Young’s firm sold Kraft in late May, then bought Best Buy (NYSE: BBY), the specialty electronics retailer because, “We see that as a growth stock, especially if the economy gets better and people have more discretionary income.”
A second disappoint was Apple Computer (Nasdaq: AAPL), which dropped 23.83%, going from $22.91 to $17.45. Although Apple was hurt by the soft economy as fewer consumers bought personal computers, Young believes its launch of iTunes, which allows consumers to download songs off the Internet for .99 cents, bodes well for the future. “It will help greatly expand Apple’s market and allow it to reach people it was not selling products to before,” he says.
NIKE (NYSE: NKE) was Young’s best performer. A solid product mix backed by sports personalities such as Tiger Woods and LeBron James helped the stock grow 7.76%, rising from $51.94 to $55.97. “They continue to be the best marketing company in the United States,” says Young.
Robust sales growth enabled United Technologies (NYSE: UTX) to climb 4.85%, going from $66.20 to $69.41. The future looks promising because the company recently agreed to pay $1 billion for London-based Chubb PLC, one of the largest security services firms in the world, which should provide new revenue.
And AutoZone (NYSE: AZO), which maintained market dominance by acquiring other auto parts stores, nudged up 1.58%, going from $81.01 to $82.29. Young says profit-taking caused the stock to retreat a bit but believes that the firm’s plans to buy back up to $500 million of its shares could help boost its stock price.