Category Archives: Nasdaq 100 Watch List

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

We’ve highlighted the chip sector stocks to put emphasis on the fact that, as an industry group, the sector may be at or near a low.  The last time we made this observation of the chip sector was on March 20, 2010 based on the closing price of March 19, 2010 (found here).  The average return of the chips stocks on that watch list was +21.95% as compared to the Philadelphia Semiconductor Index (SOX) gain of +17.86% over the following year.  After the first year had passed (March 18, 2011-present), the same semiconductors stocks have average a loss of –8.98% as compared to the SOX index decline of –10.67% (see chart below).

Within the first year (March 20,2010-March 18, 2011), all of the stocks on our list except Intel (INTC) managed to achieve gains of over +20% before falling lower.  After the first year had passed (March 18, 2011-present), only MXIM and KLAC were able to achieve gains of +20% while INTC was the only stock to rise above +40%. Depending on the timing of the purchase, we wouldn’t be surprised to see the same performance of the chip related stocks on our current watch list.

Watch List Performance Review

In our ongoing review of the Nasdaq 100 Watch List, we have taken the top five stocks from our list of November 18, 2011 (found here) and have checked their performance one year later. The companies on that list are provided below with the closing prices from November 17, 2011 to November 16, 2012.

As can easily be seen by the table above, after one year the top five stocks severely underperformed the representative Nasdaq 100 index.  However, three of the five stocks gained +10% or more within the first six months.

The disastrous performance of Ctrip.com (CTRP), declining over –50%, was highlighted well in advance in our December 16, 2011 posting (found here). At that time (CTRP at $23.10) we said the following:

“Ctrip.com International (CTRP) is on a pace to replicate the performance from the high in April 2008 to the low of January 2009 which equaled a loss of 72%. A similar decline in CTRP from the high of $50.57 would bring the price down to $14.16. Suffice to say, the stock “only” needs to decline another $8.94 or 38% from the current price of 23.10. This seems very easy considering the high volatility of Chinese stocks. We believe that unless CTRP is summarily dismissed from the Nasdaq 100 index, there may yet be life in this company.

We believe that the Nasdaq 100 committee added CTRP to the index based on the performance of Priceline.com (PCLN). Amazingly, at the current price of $23.10, CTRP sits one penny below the 2^nd Dow Theory support level of $23.11. any further deviation below the current price almost ensures that the stock is destined for the $10 range.”

At its lowest point, Ctrip.com fell as low as $12.36 on July 30, 2012.  We feel that our analysis, based on Dow Theory provided appropriate warning on the downside risk.

Another stock that severely underperformed in the last year was NetApp (NTAP).  However, our initial analysis of the company on January 20, 2012 (found here) we said the following:

After a 39% decline in price, NetApp (NTAP) is a prime candidate for a two transaction purchase. The first purchase should take place starting at $30. The second purchase should take place around $23.47. Based on the market capitalization of NTAP may actually be a buyout candidate.

In May 2012, NTAP briefly fell below $30 and then rose +20% by the month of September 2012.  Then on November 2, 2012 (found here), we recommended that investors consider buying NTAP ($27.74).  Since our November 2, 2012 recommendation, NTAP has risen +18.28%.  In all the history of the stock market over a 100-year, 50-year, and 30-year period, gains like these are exceptional on an annual basis and should be considered gifts in a months time.

We ask that you consider selling the principal and allow the gains to run.  Keep in mind that we believe that stock is a buyout candidate.  However, Dow Theory says that the wish should not become father to the the thought (source: Hamilton, William Peter. The Stock Market Barometer. Harper & Brothers, New York. 1922. page 133).