Gimme My Money!

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In my continuing effort to see if I can win the half-million dollar prize CNBC is giving away in its stock-picking challenge, I'm following the advice my Foolish colleague Bill Barker laid out a few weeks ago for a 10-step strategy to win the two-month-long game.

We all basically agree Bill's plan is an admittedly risky approach to investing -- highly concentrated portfolios of very small-cap stocks poised to announce earnings so as to capture their volatility -- so we wouldn't want to necessarily invest this way in real life. However, for a game giving away some big bucks, it's worth a try and I figured I'd emulate Bill's ideas as closely as I could.

Don't try this at home
As I originally noted, I screened for the smallest-cap companies permissible ($500 million or more) whose stocks were trading below $10 a share and showed relatively high levels of short interest. Bill suggested delving into biotechs since they often showed the greatest price fluctuations, but I opted to find companies where they lay.

So how am I doing? I had a rough go of it last week as my five virtual portfolios now have an average return of negative 0.9%, ranging from a gain of 9.1% in Portfolio 1 (up slightly this week) to a loss of 17.8% in Portfolio 3 (my real bow-wowser). This week I'll look at my other portfolio in the red, Portfolio No. 2, which has a return so far of negative 4.1% (slightly higher than the stock returns in the chart below because it includes some cash holdings).

Stock	Purchase Price	Price 6/6/08	% Chg.
FuelCell Energy (Nasdaq: FCEL)	$8.84	$9.08	2.71%
Fairpoint Communications (NYSE: FRP)	$9.31	$8.42	(9.56%)
Lions Gate Entertainment (NYSE: LGF)	$10.04	$9.83	(2.09%)
TiVo (Nasdaq: TIVO)	$8.13	$7.37	(9.35%)
Average Return			(4.57%)

While I'm still unsure of just how many players there are, that average return, while not the worst, puts me at 656,420 on the list. The portfolio's value of $958,598.94 still puts me well behind the top player, James Fox, whose portfolio continues to be valued at $1.7 million.

Not exactly energized
The winning card in this hand has been FuelCell Energy. The maker of high-efficiency power plants using renewable biogas also happened to make it to the list of most active stocks in the CNBC game. Perhaps a few others are playing this strategy of buying before the earnings release.

Despite a robust quarter that showed revenues almost tripling, shares have fallen in the days since the announcement, as losses widened to $0.38 per share. Despite greater demand for FuelCell's largest megawatt-class power plants -- particularly in South Korea and California, where backlog for orders is now 266% ahead of last year -- it still suffered increased losses. Product costs have been reduced, but the plants still cost more to make than they earn.

It's probably not surprising that California would be on the list of order leaders. And the growing demand for alternative energy sources in a day of $4-a-gallon gas has investors like Motley Fool CAPS player Sqwii optimistic, as orders rise even in the face of topsy-turvy markets.

I am bullish on FCEL due to continue[d] strong market demand for alternative energy products/investments and also their continued exposure to international market (s. korea deals). Cosidering the credit market conditions, they are still doing well in U.S.-getting a few new contracts to see plants. I have been with this stock since 2006-and i think it still has got fuel in its engine to go above $14. I think between $15 and $17 by September.

Movin' on up
A lot can happen in a week's time; next week, we'll see which of my portfolios has made the biggest move in that time span and which may yet catapult me to the lead.

Previous portfolio updates:

• The 10-step plan
• We hatch our plot to capture the gold!
• Week 2's lowdown on the portfolio down below
• Week 3 and a look at the top of the heap