Some background: The Best Investment Potential award was given out to the company that represents the best long-term potential return on investment by virtue of solid management, product development, and market growth potential. There were five finalists. These companies were picked on November 21, 2005, so the performance is from that date to the close of market last Friday.
There is an old Wall Street adage, "Sell in May and go away," reflecting the fact that the general market often performs best between November and April, and then goes into a summer slumber – or worse – from May to October. This year, apparently, many folks have taken that advice. With it being May and some serious volatility revisiting global stock markets in the past week – the stock market in India fell 10 percent in just one day – it’s a good time to take a look at these Light Reading stocks and talk about where they might go.
Here's how they've done:
ADVA Optical Networking
- Nov. 21, 2005, price: €5.50
May 19, 2006, price: €8.27
In fact, if I were to pick one stock that’s still an outstanding value, it’s ADVA. Because it’s traded in Germany, it receives a multiple substantially below its North American counterparts. Its recent acquisitions and new product launches in the metro Ethernet and optical markets are absolutely the right places to be. This is still an attractive stock.
JDSU (Nasdaq: JDSU; Toronto: JDU)
- Nov. 21, 2005, price: $2.15
May 19, 2006, price: $2.78
If you didn't buy before the rally started last fall, this stock is probably too risky up here. With the market rally on the rocks, it's best to steer clear of single-digit midgets. We also noticed that JDSU recently issued some new debt. (See JDSU Issues Debt Notices).
It's safe to expect JDSU to chug along in the $2 to $4 range through the summer. In the fall, look for new visibility into the outlook for the second half of the year – and the market in general – each of which may provide a better window of opportunity. (See Whispers Shout Down JDSU, JDSU Buys a Bit of Test, JDSU Inches Toward Profits, and Notes From Needham .)
Motorola Inc. (NYSE: MOT)
- Nov. 21, 2005, price: $23.75
May 19, 2006, price: $21.42
We think Motorola’s Q device is going to be hot. (See Moto's Q Pulls Up to the Curb.) This seems like a silly stock to dump, if you are considering a loss. (See Motorola Makes WiMax Breakthrough , Verizon Moves Toward Home Gateway, and Moto Rides RAZR to Strong Q1.)
Neustar Inc. (NYSE: NSR)
- Nov. 21, 2005, price: $31
May 19, 2006, price: $33.26
The bottom line: The trajectory of earnings and revenue has been up. There have been no serious hiccups, and we don't see any on the horizon. (See NeuStar Buys DNS Player, NeuStar Reports Q4, NeuStar Moves Into SIP Peering, and Telecom's New Star.)