Soda and cigarettes? Yes. But say no to drugs

Stock Spotlight: Although we had our share of winners in '06 (Coke, Altria and HP), bad calls on Merck, AT&T and MasterCard have us resolving to do better in '07.

By Paul R. La Monica, editor at large

NEW YORK ( -- We run a feature every other week (give or take) called Stock Spotlight that focuses on shares of a well-known company. At the end of the piece, we share our opinion as to whether the company being profiled is a good bet or not.

This year, sad to say, we did a mediocre job. Ten of our 16 "buy" recommendations have gone up in value since we wrote about them. And of our six "sell" selections, only three have declined. So we got the direction right about 60 percent of the time.


At first blush, that may not seem all that terrible. But it's not just the number of right versus wrong calls that have us kicking ourselves. It's the magnitude of the misses. Let's get the bad news out of the way first.

We thought the worst was over for chipmaker Intel (Charts) back in January. But the company has been faced with brutal competition from resurgent rival Advanced Micro Devices, and as a result, Intel's stock has tumbled 20 percent since mid-January. It's been one of the worst performers in the Dow this year. Yuck.

Two separate bearish calls on Dow components Merck (Charts) and AT&T (Charts) in April also bombed on us. We thought that investors still had reason to be wary of drug maker Merck because of Vioxx litigation and concerns with its relatively lackluster pipeline of new drugs. But the stock is up 25 percent since we wrote about it.

Our skeptical take on Ma Bell - we essentially told investors to hang up on the stock - has also failed to pan out. We thought investors should fret about the company's aggressive acquisition strategy since shortly after the AT&T-SBC deal closed, the new AT&T announced that it was buying BellSouth. But the stock is up 44 percent since late April.

As far as our recommendations, we thought that Sony had better days ahead of it, and wrote a positive story about the company in May. But that was before a laptop battery recall and manufacturing problems with its new PlayStation3 sent the stock skidding. Shares have dropped about 12 percent since we profiled the company.

A "corny" buy recommendation of agricultural products giant Archer Daniels Midland back in June has not done well for us either. Although the stock, at the time, was one of the top performers in the S&P 500 thanks to optimism about ethanol, the fuel made from corn, we thought that it had more room to run. But ADM has been a dog in the latter half of the year, falling about 20 percent since mid-June.

Our worst call by far though was on MasterCard. The credit card processor, which went public in May, looked risky to us since it was facing two lawsuits (one by merchants and another by rivals American Express and Discover). But Wall Street hasn't been too concerned. We turned down the stock as if it were a card that has reached its credit limit, but shares have more than doubled since we wrote about MasterCard in July.

Still, in this season of celebrating tidings of comfort and joy, we do have some stock picks that we can look back fondly upon. We correctly predicted in February that Dell would face more problems ahead and shares have fallen about 20 percent since then.

A bullish call on Coca-Cola (Charts) in February, and a positive piece on Cisco Systems in March also wound up being good picks. Coke's stock has been effervescent this year, gaining about 20 percent since late February while Cisco reminded investors that it can still be considered a growth stock. Shares of the networking equipment kingpin have surged 35 percent since early March.

Our stock picking prowess did seem to improve as the year progressed. A contrarian "buy" recommendation on Altria (Charts) certainly didn't go up in smoke (ha ha!) for us. Shares of the tobacco and food giant are up 13 percent since we wrote about the company in July.

Two positive pieces on controversial tech companies HP (Charts) and Apple (Charts) have also been successful for us. Even though both firms have had some high profile corporate governance concerns (HP's "pretexting" spying scandal and Apple's issues with options backdating) we thought that investors should look beyond the negative headlines and focus on the companies' extremely solid fundamentals.

And so far, investors have largely brushed off the boardroom dramas at HP and Apple. Shares of HP are up more than 25 percent since we wrote about the company in August while Apple's stock has gained about 20 percent since our profile in September.

A bearish call on Ford has also been a good pick so far. We argued in September that the company was due for a pullback after a healthy run-up earlier in the year.

Investors had hopes that the troubled automaker's turnaround plan would lead to better days ahead but we thought that the stock would at best be stuck in neutral, if not heading for reverse. And that turned out to be the case; shares of Ford have slumped about 20 percent since September.

Most of our other picks from earlier in the year have either been moderate successes or mild flops. We touted Google in late January and the stock is up 7 percent since then, for example, while Motorola is down 6 percent since we recommended it in March.

And it's probably too soon to judge how prescient (or not) our picks from the fourth quarter of this year are. For what it's worth though, shares of online auction company eBay are up 2 percent since we argued the worst was behind the company in October, while video game maker Electronic Arts has slumped 8 percent since we touted it later that month.

Target, which we recommended in November, is up 1 percent and Microsoft, which we also liked, is up 2 percent since we wrote about it earlier this month. Shares of Oracle, which we just profiled a few weeks ago, have fallen 5 percent, however.'s resolution for 2007: To do a better job with our Stock Spotlight picks.

We wish all our readers a safe, happy and profitable New Year.