Nasdaq 100 Watch List: December 24, 2012

Below are the Nasdaq 100 companies that are within 10% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Watch List Summary

The last time that Vodafone (VOD) was this close to the low and on our watch list was September 9, 2011 (found here).  At the time, our data indicated that Vodafone had a dividend yield of 7.30% and a price to book ratio of 1.01.  In two months VOD rose +12% and after two years, the highest VOD was able to rise was $30 or nearly 17% from the Sept 2011 low. For us, this is an indication to be mindful of the fact that high dividend yields are not necessarily the clearest path to exception gains, unless in some cases the investor has the willingness to accept the 10% achieved within 2 months.

Teva Pharmaceutical (TEVA) was on the watch list on September 23, 2011 (found here) when the stock was trading at $35.26.  At its highest point in January 2012, TEVA increased +30% from the September 2011 low.  However, since the January 2012 high, TEVA has fallen –18% to the current price of $37.79 or +7.18% above the price of September 23, 2011.  On September 23, 2011, TEVA sported a dividend yield of 2.10% and a P/E ratio of 10.08.  Now, TEVA has a P/E of 15.4 and a dividend yield of 2.10%.

Activision Blizzard (ATVI) was on the watch list on August 12, 2011 (found here) when the stock was trading at $10.71.  No sooner than ATVI was on our list that it rose +30% to the November 8, 2011 high.   ATVI is now selling at the same price as August 2011, however, the stock has a lower P/E ratio and a lower P/B ratio.  If we suppose that the stock has not moved up at all in the last year, this could be considered an undervalued stock.

As is often the case with most stocks, early gains are offset with declines, at least in the first year, which explains why we’re so focused on the 52-week low.  Most stocks seem to run in cycles of 1 to 2 years.  Stocks that fall to a new low after one year should be at or below the price from the prior year.  Stocks that fall to a new low after 2 years could be significantly above the low of two years prior but a 52-week low.

Watch List Performance Review

In our ongoing review of the Nasdaq 100 Watch List, we have taken the stocks from our list of December 16, 2011 (found here) and have checked their performance one year later. The companies on that list are provided below with the closing prices from December 16, 2011 to December 14, 2012.

The performance of the top five stocks from the December 16, 2011 watch list was reasonable.  However, despite the outcome after a year, all five of the stocks achieved +20% gains within the first three months.