Filed under: Analyst reports, Google (GOOG), Apple Inc (AAPL), Cisco Systems (CSCO), Time Warner (TWX), Home Depot (HD), Indices, Halliburton (HAL), Altria Group (MO), NYSE Euronext (NYX), Goldman Sachs Group (GS), Duke Energy (DUK), Dow Chemical (DOW), Top Picks 2007, Valero Energy (VLO), PetroChina Co Ltd ADR (PTR), Huaneng Power Intl ADS (HNP), Level 3 Communications (LVLT), Chasing Value, S and P 500, DJIA

No surprise the volatile James Cramer of TheStreet.com carries the burden of having made the best and worst picks for the year among those I’ve been tracking monthly. Apple Inc. (NASDAQ: AAPL), the best performer among all the stocks and indices in this review, has saved his rear throughout the year. In general, it has been a good year for energy and tech stocks. It has been a poor year for the financial sector, and as of August, for most of the Wall Street investment firms.

August had some gut wrenching moments but finished on a positive note. Still, the Dow Jones Industrial Average’s 14,000 level has not been seen since the financial sector gave the bears something to grouse about. The housing market and subprime loans continue to worry the market, but no help is expected in the form of rate cut from the Federal Reserve.

Crude oil prices have been up slightly, but down at the pump even through the busy Labor Day weekend and even with continued turmoil in Iraq. All the speculation about a Dow 15,000…16,000…17,000 has come and gone and I have not read about such silliness lately.

The month of August continued the trend of stock picking outperforming the indices … again. Earnings reports still trickle in but nothing unexpected affected the market. Perhaps the most telling is that there are discussions of slowing in some industrial sectors but I think Wall Street is just too eager to jump on short-term news. The global economy is still clicking along in a positive direction and August was another month where Chinese stocks did very well. Mergers and acquisitions are showing some signs of slowing, but deals are still getting done.

This is my eighth follow-up where I compare my stock picks to Cramer’s and the indices. For reference, check out my original Dec. 28, 2006 post on the topic.

Summary of Results:

• Google Inc. (NASDAQ: GOOG) has continued to move up in the recent erratic stock market. It closed at $515.25, for a solid +11.39% gain through eight months of the year, holding the top spot.
• My picks continued to advance through August improving to a 6.14% gain year-to-date. Adding the dividend portion of 1.94% (2.89% x 0.67) brings the total return to +8.08% (improving on last month’s +7.09% gain for the first seven months). Clearly, dividends can help and make a noticeable difference when the returns are modest. Leading the way for me were Valero Energy (NYSE: VLO), which continued to be my best overall pick, gaining 32.75%, and Huaneng Power International ADS (NYSE: HNP) gaining 28.72% for the year so far. My biggest surprise and disappointment is Time Warner Inc. (NYSE: TWX), which is down 13.73% so far in 2007.
• Jim Cramer’s average return on his nine picks was 6.75% for the first eight months, beating the Standard & Poor’s index, but losing out to the DJIA and the NASDAQ. Cramer, however, did beat the average of the three indices. Adding the dividend portion of 0.44% (0.66% x 0.67) brings Cramer’s gain to +7.19%. Apple Inc. (NASDAQ: AAPL) was the best pick of the year among those discussed herein. There does not seem to be much that Apple can do wrong this year. Given new product and software launches and the continuation of current products and programs there is every reason to believe 2007 should be another one for the record books. Apple has been Cramer’s savior from disaster because some of his picks are in trouble for now. In particular, his worst pick, the New York Stock Exchange Group (NYSE: NYX).
• All of the Indices gained ground in August, with the DJIA, NASDAQ and S&P coming back the last week after some very tough trading days, for an overall average of +5.78.% year-to-date. Adding their portion of the dividend yield of 1.21% (1.8% x 0.67) brings it up to a total gain of +6.99%, which is not very exciting but safely beats out most fixed income securities. The overall market remains one where stock pickers seems to be topping the indices.

Note that portional dividends have been added to the results. This is one of the criteria I use in my stock picks and it is having an impact on the results thus far. Only three of Cramer’s picks pay dividends averaging about 0.66%. The Indices pay a higher average of 1.8% and my picks average still higher at about 2.89%. Google does not pay a dividend. The flatter the market is this year, the more the dividends will be a factor.

Google has not been the brightest star (or stock) this year, wavering at times as most speculative stocks do, but it was the best bet for the second month in a row. I still maintain that Value will beat Growth and indexing over the long run. Google will be the wild card! Two of my picks continue to be mentioned as buyout candidates but the rhetoric has died down considerably; The Dow Chemical Co. (NYSE: DOW) and The Home Depot (NYSE: HD). Home Depot continues to receive the most negative discussion in business circles these days although now the sub-prime loan mess is stealing headline space on a daily basis.

The following are the closing prices as of December 28, 2006 and eight month returns for the seven stocks I recommended plus the addition of Spectra Energy Corp. (NYSE: SE) that was spun out of Duke Energy (NYSE: DUK). Among Cramer’s picks Kraft Foods (NYSE: KFT) which was spun out of Altria Group, Inc. (NYSE: MO), is included in the calculations

1. The Dow Chemical Company: $40.02 is UP to $42.63 (+6.52%) 3.54% yield
2. Duke Energy: $33.02 (incl. of Spectra Energy (NYSE: SE)) is Down to $29.97 (-9.24%) 4.31 yield
3. The Home Depot Inc.: $39.73 is Down to $38.31 (-3.57%) 2.31% yield
4. Huaneng Power International ADS: $36 is UP to $46.34 (+28.72%) 3.62% yield
5. PetroChina ADR: $142.12 is Up to $144.33 (+1.56%) 4.5% yield
6. Time Warner Inc. (NYSE: TWX) $22.00 is Down to $18.98 (-13.73%) 1.1% yield
7. Valero Energy: $51.61 is UP to $68.51 (+32.75%) 0.84% yield

The following index comparisons are also from December 28, 2006 :

• Dow Jones Industrial Average: 12,501.52 is Up to 13,357.74 (+6.85%)
• NASDAQ Composite Index: 2,425.57 is Up to 2,596.36 (+7.04%)
• Standard & Poor’s 500 Index ($INX): 1,424.73 is Up to 1,473.99 (+3.46%)

The Cramer Speculative Stocks for 2007:

1) Level 3 Communications (NASDAQ: LVLT) $5.66 is Down to $5.23 (-8.13%) No dividend
2) Rite Aid (NYSE: RAD) $5.49 is Down to $5.07 (-7.06%) No dividend
3) Savient Pharmaceuticals (NASDAQ: SVNT) $12.01 is Up to $13.18. (+9.47%) No dividend

The Cramer Growth Picks are:
1) New York Stock Exchange Group (NYSE: NYX) $97.51 Down to $72.75 (-25.39%) No dividend
2) Apple Inc. (NASDAQ: AAPL) $80.87 UP to $138.48 (+71.24%) No dividend
3) Cisco Systems (NASDAQ: CSCO) $27.42 Up to $31.92 (+16.41%) No dividend

The Cramer Value Picks are:
1) Altria Group (NYSE: MO) $86.23 UP to $69.41 +(Kraft at .692024 x $32.06 = 22.19) to $91.60 (+6.23%) 4.12% Yield
2) Goldman Sachs Group (NYSE: GS) $200.80 Down to $176.01 (-12.35%) .72% yield
3) Halliburton Co. (NYSE: HAL) $31.26 UP to $34.59 (+15.23%) .97% Yield

The New Powerhouse Google

I continue to track Wall Street darling Google since it is of broad interest to the investing public and internet users alike. Google closed December 28, 2006 at $462.56, rose in January, then traded downward for a few months before hitting new highs in June, closing the month at $522.70. In July Google hit another all-time high of $558.58. However a 3 cent earnings miss followed (based on analysts expectations) knocking it down considerably, about 10%. Since then it has found support at around $500 per share and traded in a very tight range between $505 and $515. Google ended the month of August at $515.25. for a solid YTD gain of $52.69 per share (+11.39%) building on last month’s performance. Google does not pay a dividend.

I will be reporting again during the week following the closing stock prices each month.

Disclosure: I own shares of DUK, HNP, PTR, SE, TWX, and VLO.

To find more potential opportunities and verify my track record read Chasing Value or Serious Money.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

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