Stock Performance, Funds Linked American Online Led Widely Held Shares To 51 Percent Gain In ‘96
While many individual investors struggle to find the next hot growth stock, financial author Gene Walden thinks he’s found a sure-fire way to zero in on winning selections.
Walden, whose books on the 100 best stocks and funds to own in America are top sellers, says that in doing background work for his mutual fund book, he discovered “a possible correlation between the number of funds that hold a stock and the performance of that stock.”
To select the stocks for the list, Walden first screened thousands of mutual funds to identify the nation’s top-performing stock funds based on five-year performance.
Then he compiled a list of the top 10 stock holdings of each of those funds.
The stocks that made the list were the ones that were most often included among the leading holdings of those top funds.
Walden went public with his list at about this time last year with nine selections that he said would outperform the market.
And they did in grand style. In fact, his nine selections on average rose 51 percent in value over the last 12 months.
Last year’s selections were led by America Online, up a whopping 157 percent. Next in line were Oracle, up 74 percent; U.S. Robotics and Electronics for Imaging, both up 55 percent; HBO, up 47 percent; and Cisco Systems, up 45 percent. In addition, he had three stocks that underperformed the market: HFS, which rose 12 percent; Parametric Technology, up 4 percent; and Ascend Communications, which turned south, falling 21 percent.
So what’s the outlook for the next 12 months?
Once again, Walden has scanned the leading holdings of about 90 top-rated growth, aggressive growth, small stock and selected sector funds to come up with what he calls the Top 10 Stocks for the next year.
And again, Cisco Systems, a leading global supplier of Internet working products for corporate intranets and the global Internet, heads the list, being owned by 13 mutual funds.
Walden’s other recommendations include Altera Tellabs, BMC Software, Electronics for Imaging, EMC Corp., HBO & Co., HFS, Parametric Technology and 3Com.