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Gimme My Money!

In my continuing effort to 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 last month, providing a 10-step strategy to win the two-month-long game.

We all basically agree that 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). I looked for stocks trading below $10 a share, and showing 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? Ugh. It was a rough week again last week; my five virtual portfolios now average a loss of 7%, ranging from a gain of 2.5% in Portfolio 1, which saw ethanol producer VeraSun Energy (NYSE: VSE  ) rebound from its analyst downgrade the week before, to a loss of 25.4% in Portfolio 3, which was dragged down by a combination of financial companies and those related to housing. This week I'll revisit Portfolio No. 5, which is hanging onto a slim 0.5% gain (slightly lower than the stock returns in the chart below because it includes some cash holdings).


Purchase Price

Price 6/6/08

% Chg.

Cirrus Logic (Nasdaq: CRUS  )




TriQuint Semiconductor (Nasdaq: TQNT  )




Lawson Software (Nasdaq: LWSN  )




Smurfit-Stone Container (Nasdaq: SSCC  )




Average Return



While I'm still unsure of just how many players there are, that average return puts me at 228,652 on the list -- well behind the leader, whose portfolio's value has doubled.

Wireless disconnect
The winning card in this hand has been wireless semiconductor provider TriQuint Semiconductor, which faces tough (and sometimes better-financed) rivals in almost all of its product categories. Yet management recently updated its guidance, now expecting revenue to top out near $135 million in the second quarter, with pro forma profits of $0.09 per share at the upper end. At less than 15 times forward earnings, TriQuint is in the same ballpark as competitors like JDS Uniphase (Nasdaq: JDSU  ) and ANADIGICS (Nasdaq: ANAD  ) .

Top-rated Motley Fool CAPS All-Star carlosgg, who has a 91.45 player rating, finds TriQuint's improving financial situation a good reason to take a look: 

The 3 things to like about TQNT are the trend toward greatly improved gross margins, which hit 31.8% in 2007 and 36.7% in the last quarter of the year, the fact that they broke through positive FCF (Cash from Operations minus Capex) territory this year after a two-year lull in the red, and the fact that the CFO and a director have bought $340,000 worth of shares in the last few months. The balance sheet shows zero debt and 28% of the market cap in cash, ~$1.4/share.

They themselves expect higher gross margins going forward and have guided for EPS of $0.30 to $0.40 in the upcoming year, up from $0.17 in 2007. Their goal is 40% GM. Also they want to gain more market share in the handset business, this is their fastest growing segment, and their biggest source of revenue (53 to 54% in 2007).

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

Previous portfolio updates:

Fool contributor Rich Duprey does not have any real financial positions in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

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