By Amey Stone Investors certainly have something to be thankful for this holiday season. The Dow Jones Industrial Average is up 600 points, or nearly 6% in the past month, pushing 2005 returns into the black for the first time since March.
This rally comes just in time for Thanksgiving -- and BusinessWeek Online's annual Turkey and Pilgrim awards. In prior years, we've granted our awards to individual business leaders and losers -- The Pilgrim's Pride to the year's heroes, the Turkeys to, well, the turkeys of Corporate America (see BW Online, 11/24/04, "Thanksgiving '04's Turkeys and Pilgrims").
This year we recognize companies that deserve either a hearty thank you or a basting from investors. The Pilgrim's Pride recipients listed below represent stocks that keep rising, and, just when you think they can't go any higher, they climb some more. The Turkeys are the stocks that dashed our hopes -- and our investment returns -- through devastating blunders. Let's start with the turkeys:
Krispy Kreme Doughnuts (KKD)
This once high-flying doughnut-maker has seen its fortunes baked to a crisp. It started the year at $12.25 and is now trading for around $5 a share. In mid-2003 it briefly reached the high $40s before it began its fall from grace, which has been accompanied by lawsuits, regulatory investigations, restated earnings, and declining sales. Even turnaround specialist Steve Cooper is having trouble reviving the chain (see BW Online, 11/23/05, "Krispy Kreme Has That Glazed Look"). Krispy Kreme is searching for a new CEO. It's going to take a major overhaul to turn this gooey mess around.
Taser International (TASR)
Taser's products -- stun guns -- couldn't be more different from Krispy Kreme's. But in many ways their stock stories have an odd similarity. Once the darling of investors, Taser started the year at $32.50. Now it's at $7 a share. The slide was triggered by allegations that its guns caused serious injury and death, which prompted police departments to put their orders on hold (see BW Online, 9/28/05, "Taser's Shocking Slide"). Securities & Exchange Commission investigations and restated earnings have added to its many woes.
Biogen Idec (BIIB)
How's this for a biotech nightmare -- marketing a drug that could trigger fatal brain disease in patients? That's what happened to this once-promising firm, which voluntarily suspended sales of its multiple sclerosis drug Tysabri in late February. The stock fell from $67 to $35 after the announcement. "There were very high expectations for it," says Brandi Allen, portfolio manager of Live Oak Health Sciences Fund (LOGSX). Now the stock has rebounded to $45, and the Food & Drug Administration is reviewing the drug's safety. For investors, this stock still may need some time in the oven.
Once the king of pharmaceutical companies, investors are still feeling the pain at Merck from its 2004 failure to pull Vioxx from the shelves as evidence mounted that it caused heart problems. In November it won one of its many lawsuits over the fiasco (helping its stock rally from $27 to $30 in the past month). But it still faces many more suits and has a dearth of new drugs (see BW Online, 11/3/05, "A Weak Tonic for Merck").
Fannie Mae (FNM)
In the post-Enron era, what could be more bird-brained than failing to provide investors with clean financials for more than two years? Yet the nation's largest mortgage-finance company, forced by regulators to restate past results, still hasn't issued clean statements for 2004 or 2005 (see BW Online, 10/6/05, "A To-Do List for Fannie Mae"). Gobble, gobble.
So much for the birds. Now let's take a look at the Pilgrims:
The Pilgrim's Pride:
Investors would be a happy bunch if only there were more companies like Apple. Not only does the company enjoy a cult-like following that flocks to its iPods, iMacs, and iTunes, but its stock has rocketed from $32 to $66 this year. Innovation is the key to its success, says Chris Johnson, director of quantitative analysis at Schaeffers Research. Unfortunately, he says, there's no other company quite like Apple to invest in. The biggest argument looking ahead to 2006, really, is how fast it will continue to grow.
If there were a company to compete with Apple for earning the adulation of investors, it would be Google. The stock recently hit $414 (see BW Online, 11/18/05, "Is Google Flying Too High?") after starting the year at "just" $200 a share. Time for a split, perhaps?
This company is biotech's answer to Google and Apple. Not only does it have promising treatments for many forms of cancer (something for which we can all be thankful), but its stock has continued to rise in 2005 following solid performance in 2003 and 2004. It started off 2005 at $53 and is now at $98. A feast for investors this year.
Gold ETFs (GLD) or (IAU)
For investors, all that glitters isn't gold. It might be a gold exchange-traded fund, like streetTracks Gold Shares (GLD) or iShares Comex Gold (IAU). Gold funds trade like stocks, but move with the price of gold. These ETFs have been a great new alternative for investors as the price of gold has reached new highs. GLD shares, which attract the most volume, are now trading around $49, after starting the year at $43. That's a respectable 14% return.
One of the stars of the "everyday luxury trend," Coach is a member of the BW 50 (see BW, 11/7/05, "Coach's Split Personality") and a stellar stock, having risen from $25 to $35 this year. It suffered a dip when high gas prices made investors wary of consumer stocks but remains a favorite of Jim Huguet, president of Great Companies, a Clearwater (Fla.) money-management firm. He compares Coach's brand strength to Apple's iPod. That's a claim for which this Pilgrim of a company should be proud.
On Nov. 22, Standard & Poor's Equity Research Group added Coach to the S&P Top Ten Portfolio -- those stocks it considers the best candidates for capital gains over the next 6 to 12 months (see BW Online, 11/22/05, "Coach Bags a Spot in S&P's Top Ten").
Happy Thanksgiving, everyone.
Stone is an associate editor for BusinessWeek Online