Investment Derby

Our second quarter results show five of our six financial pros and physician investors beating the market, and one is blowing it away.


Investment Derby

Jump to:Choose article section...The Investment Pros Joe Duarte, MDRam KolluriMichael GoldstonThe MDs Warren B. Shaffer, MDRajendra R. Shroff, MDMichelle Taube, MD

Our second quarter results show five of our six financial pros and physician investors beating the market, and one is blowing it away.

By Leslie Kane
Senior Editor
Research assistance provided by Vicki F. Brentnall

The market has finally seen some bright days, and our participants are basking in the sun.

In February, we asked three investment professionals to create hypothetical $100,000 portfolios. We later randomly selected three Medical Economics readers, who are avid investors, to join the challenge. So far, the results are impressive. The Standard & Poor's 500 Stock Index (composed of large companies) rose 16.8 percent for the six-month holding period since the contest began (Feb. 1 through July 31); our pros' portfolio returns ranged from 13.9 percent to 33.4 percent in the same time frame. The S&P 500 Stock Index rose 8.5 percent in the second quarter (May 1 through July 31), when our physician investors entered the race; their portfolios brought in from 18.7 percent to an eye-popping 94.7 percent returns in those three months.

The burst of life from small- and mid-cap stocks may account for part of the uptick. The S&P MidCap 400 Stock Index returned 13.6 percent, and the S&P SmallCap 600 Stock Index rose 16.6 percent.

Not surprisingly, family physician Michelle Taube's portfolio, which delivered the top return, contains only small-cap stocks. Most of her holdings nearly doubled in three months, and one company, 24/7 Real Media, increased almost sixfold. Still, the market can't claim all the credit; the best-performing small-cap mutual fund returned far less than Taube's portfolio—just 43.5 percent—during the quarter.

Internist Rajendra Shroff's portfolio came in second, up 39.1 percent. He sold Factory 2-U Stores and Carreker and bought Aether Systems, a provider of wireless services and software, and E.piphany, which develops marketing software.

We'll update the portfolios again in our Jan. 23, 2004 issue. Here's a closer look at where our model portfolios stand now.

The Investment Pros

Joe Duarte, MD

River Willow Capital Management • Dallas

"I chose stocks that were economically sensitive but could also show some earnings growth," says Duarte. "I was fortunate to catch the market right at a nice trough. The portfolio really got a boost from Apple Computer, Business Objects, and Sears Roebuck, all of which benefited from the market's expectations of an improving economy.

"Sears had been very beaten up, and took a turn upward because of improved earnings as well as the market's expectations," he says. "Apple also had shown some relative strength prior to April. It was moving sideways while the market was falling; then it moved ahead."

 CompanyValue on 2/3/03Value on 7/31/03
Apple Computer014,819
Business Objects9,99915,126
Engineered Support Systems9,9900
Flextronics International10,0070
Iron Mountain10,0200
LaBranche & Co.010,559
SBC Communications9,9969,849
Sears Roebuck9,99815,666
Wells Fargo010,525


Ram Kolluri

GlobalValue Investors • Princeton, NJ, and New York City

"My portfolio's performance is similar to that of the overall market during the same period," says Kolluri. "That's because I have a well-balanced portfolio in lieu of a more volatile arrangement of stocks, which may compromise some investors' goals.

"The market had quite an impressive showing during this quarter," says Kolluri. "Strong industries that helped lift the market included precious metals within large-cap stocks; textiles and general merchandisers within mid-caps; and leisure companies within the small-cap universe."

CompanyValue on 2/3/03Value on 7/31/03CompanyValue on 2/3/03Value on 7/31/03
Abbott Laboratories$1,906$1,987International Game Technology1,9722,553
Abercrombie & Fitch2,0042,310ITT Educational Services1,9872,785
Aflac2,0081,998Johnson & Johnson1,9841,932
Amgen1,9872,708Marsh & McLennan2,0042,360
Applebee's International2,0022,456MBNA2,0032,677
Bandag2,0061,937The McGraw-Hill Companies2,0132,085
Bank of America2,0312,437Microsoft1,9932,226
Bard (C.R.)1,9842,416Mylan Laboraties2,0042,538
Bemis2,0072,082The New York Times Co.2,0021,839
Biomet2,0122,146Old Republic International2,0082,583
CH Robinson Worldwide1,9892,634Oracle1,9971,990
The Clorox Co.1,9872,281PepsiCo1,9842,274
ConAgra Foods2,0111,890Qualcomm1,9963,156
Dell Computer2,0042,829Sysco1,9972,064
Exxon Mobil2,0152,128Tyco International1,9532,273
General Electric1,9902,481United Technologies1,9712,351
Graco1,9972,747Wal-Mart Stores2,0082,356
Hudson United Bancorp2,0102,379Wyeth1,9912,352
International Business Machines2,0342,120Cash10,1479,158
International Flavors & Fragrances2,0021,918Change +13.9%


Michael Goldston

Cambridge Equity Advisors • Brentwood, TN

"Iam very pleased with my portfolio's performance. We continued to surpass the market by a nice margin," says Goldston. "I originally placed half the money in steady, large companies to provide some dividends and reduced volatility. I put the other half in more mid-size stocks that offered higher growth expectations. This balanced approach has generated market-beating returns, while avoiding the volatility and risk that can accompany some more aggressive styles."

CompanyValue on 2/3/03Value on 7/31/03
AOLTime Warner$8,162$10,801
Apollo Group6,6699,746
Bed Bath & Beyond6,7007,766
Concord EFS7,3300
Fox Entertainment Group5,5266,054
General Electric8,86311,051
Gilead Sciences6,98013,646
JDS Uniphase8,1009,030
Lockheed Martin7,6580
Lucent Technologies9,9559,366
Motorola Equity Units7,6388,288
Nasdaq-100 Index Tracking Stock7,3329,540

On June 30, Goldston sold all shares of Concord EFS for $7,360 and Lockheed Martin for $7,173. The proceeds were held as cash.


The MDs

Warren B. Shaffer, MD

Family Practice • Alexandria, VA

"I chose my companies after doing intensive research, paying attention to diversification. These are the most important factors in picking winning companies," says Shaffer. "As a result, I'm getting some nice gains from McDonald's, Polaris Industries, and Charles Schwab. Internap Network Services, my best performing stock, was beaten down in the past few years, but strong balance sheets, a rise in earnings per share, and good decisions from the company's executive officers have ultimately boosted its share price."

CompanyValue on 5/1/03Value on 7/31/03
Abbott Laboratories$13,408$13,033
Becton, Dickinson & Co.3,5403,672
Charles Schwab & Co.8,1999,901
Internap Network Services4,40012,700
Johnson Controls8,2249,702
Polaris Industries5,2877,931
SunTrust Banks8,5839,204
Target Corp.3,3443,838
Wal-Mart Stores5,6325,600


Rajendra R. Shroff, MD

Internal Medicine • Centralia, IL

"I attribute my portfolio gains partially to the fact that I hold many small-cap stocks, which are doing well, and partly to my technical analysis, which I feel is giving indicators that the market is rising in certain areas," says Shroff. "I do not have a buy-and-hold strategy. I look at the direction and various measures of the moving average, which shows the direction of average stock prices over a time period. I pay particular attention to 5, 10, and 50 days, and then buy or sell stocks based on the pattern I see. Based on those signs, I bought two new stocks, and sold two of my original holdings."

CompanyValue on 5/1/03Value on 7/31/03
Aether Systems$0$5,238
AirTran Holdings5,1038,470
Amkor Technology6,43512,478
Comstock Resources6,1057,068
Factory 2-U Stores6,9860
Ligand Pharmaceuticals6,6839,705
Magma Design Automation7,0649,377
Mattson Technology7,56011,610
SpeechWorks International7,1787,112
Xerox Group7,3958,100
XM Satellite Radio7,27510,328


Michelle Taube, MD

Family Practice • Eugene, OR

"I looked for low-priced stocks that had recently experienced small run-ups, thinking that those gains would continue in the future," says Taube. "I felt that with low-priced stocks, I could purchase more shares, and small increases in their prices would lead to large percentage increases in the portfolio. I also chose stocks that were very different from each other instead of relying on one or two types of stocks. Basically, I think that the portfolio has done well because small-cap stocks have experienced a rebound, and all of my stocks are small-caps."

CompanyValue on 5/1/03Value on 7/31/03
B/E Aerospace4,5009,375
Centillium Communications14,47522,250
Midway Games7,8755,375
24/7 Real Media3,10018,300
Tripath Technology6002,560


Leslie Kane. Investment Derby. Medical Economics Oct. 24, 2003;80:40.