The Innovation Index closed at 76.87 on April 26, 2007, up 11% from the closing price of 69.31 on December 29, 2006.
What caused The Innovation Index to have this steep rise? Four innovators caused the jump, the largest increase coming from Amazon.com, Inc. (NASDAQ: AMZN) that went up a dizzying 41% in just one week, and is up 59% for the year! WOW! Amazon.com is the first innovator to cross the venerable 50% stock performance gain in 2007.
15 of the Top 20 Innovators showed positive gains (compared to 8 in the previous week), only 3 of the Top 20 Innovators showed negative gains (compared to 7 in the previous week), and 2 Innovators were unchanged last week (compared to 5 in the previous week). What a difference a week makes!
Weekly Advances
The week belonged to Amazon.com for the stellar stock performance gain in one week: 41% in just one week, and 59% for the year.
“Amazon reported a profit of $111 million, or 26 cents a share, compared with $51 million, or 12 cents a share, in the year-earlier period. Sales rose 32% to $3.02 billion from $2.28 billion. Wall Street was expecting earnings of 15 cents a share on sales of $2.92 billion, according to analysts polled by Thomson Financial.” – Amazon has performed remarkably well in 2007 owing to the innovations introduced in 2006. Last week, I had reported: “Amazon.com analysts are bullish about the first quarter earnings and 2007 performance.” Perhaps some of the investors picked up on this, and invested into the Amazon.com earnings and profited.
Apple Inc. (NASDAQ: AAPL) had another strong performance for the quarter, and the shares jumped to a new all-time high after the company reported an 88% surge in second-quarter earnings. Whereas 2006 was the year of the iPod, 2007 is shaping up to be the year of the iMac and iPhone.
“For the quarter ended March 31, the company said earnings for the quarter came in at $770 million, or 87 cents a share, compared to earnings of $410 million, or 47 cents a share, for the same period last year. Sales for the quarter grew more than 20% to hit $5.26 billion for the period ended March 31. Analysts were expecting earnings of 64 cents a share on revenue of $5.17 billion for the quarter, according to estimates from Thomson Financial. During the quarter, the company said it shipped more than 10.5 million iPods, its popular digital music player. More than 1.5 million units of its Macintosh computer line were also shipped during the period.” – Some of the improvement in margins came from "very favorable" pricing for components - memory in particular. Absent from Apple’s earnings announcement was an update on Apple TV, and the initial sales. The consumers and investors alike are waiting for the launch of iPhone in June 2007.
Google is building its lead on Yahoo!, MSN and AOL. Google Inc. (NASDAQ: GOOG) reported revenues of $3.66 billion for the quarter ended March 31, 2007, an increase of 63% compared to the first quarter of 2006 and an increase of 14% compared to the fourth quarter of 2006. Google is on a tear. Google Non-GAAP net income in the first quarter of 2007 was $1.16 billion, up 69% compared to 2006. Google-owned sites generated the highest revenue growth, brought in $2.28 billion, growing 76% from last year – this means Google’s core business is strong. Google shares are now up 4% for the year. Google also announced acquisition of Marratech software.
IBM (NYSE: IBM) “announced first-quarter 2007 diluted earnings of $1.21 per share from continuing operations, an increase of 12 percent as reported, compared with diluted earnings of $1.08 per share in the first quarter of 2006. First-quarter income from continuing operations was $1.8 billion compared with $1.7 billion in the first quarter of 2006, an increase of 8 percent. Total revenues for the first quarter of 2007 of $22.0 billion increased 7 percent (4 percent, adjusting for currency) from the first quarter of 2006.” IBM had a solid quarter showing double-digit earnings growth. IBM innovations in service and delivery are taking hold.
“3M Company (NYSE: MMM) shares made their biggest one-day gain in about a year, growing 4.5%, owing to earnings that jumped 52% to $1.37 billion, or $1.85 a share, from $899 million, or $1.17 a share, in the year-earlier period. Although, the latest results reflect a net gain of $422 million, or 57 cents a share, from the January sale of its European branded drugs business, restructuring charges and environmental liabilities. The company said earnings excluding special items totaled $946 million, or $1.28 a share, easily topping analyst forecasts of $1.12 a share. Revenue at the St. Paul, Minn., company swelled 6.1% in the three months ended March 31 to $5.94 billion, also beating forecasts of $5.68 billion, as polled by Thomson Financial.” 3M is showing organic growth, and surprised the consumers and investors alike.
“Microsoft Corp. (NASDAQ: MSFT) fiscal third-quarter profit surged 65%, beating Wall Street estimates, as the company benefited from sales of heavily marketed new products including the Vista operating system and Office 2007. The world's biggest software maker reported earnings of $4.93 billion, or 50 cents a share, in the period ended March 31, compared with $2.98 billion, or 29 cents a share, during the year-earlier period. Revenue rose 32% to $14.4 billion. Analysts surveyed by Thomson Financial had expected Microsoft to post earnings of 46 cents a share on revenue of $13.89 billion.” – Microsoft had projected conservative growth for Vista and Office; however, the results show that the market has adopted them rather well, perhaps even surprising Microsoft. “Microsoft's Client division, which includes Vista, reported $5.27 billion in sales for the quarter, compared with $3.15 billion in the period a year earlier. The business division, which includes Office 2007, reported revenue of $4.83 billion for the third quarter, compared with $3.6 billion in the period a year earlier.” Microsoft also provided a healthy guidance for 2008. Microsoft shares are up in after hours trading today.
Weekly Declines
Southwest Airlines Co. - (NYSE: LUV) reported its first quarter 2007 results. “Net income for first quarter 2007 was $93 million, or $.12 per diluted share, compared to $61 million, or $.07 per diluted share, for first quarter 2006. Economic net income for first quarter 2007 was $33 million, or $.04 per diluted share, compared to $64 million, or $.08 per diluted share, for first quarter 2006. This economic net income result is in line with First Call's mean estimate of $.04 per diluted share for first quarter 2007. (Refer to the reconciliation in the accompanying tables for further information regarding economic results.)
First Quarter 2007 Financial Highlights:
-- Record first quarter revenues of $2.2 billion, up 8.9 percent
-- Economic net income of $33 million, down 48.4 percent
-- Economic net income per diluted share of $.04, down 50 percent…”
Although Southwest had a record quarter, and showed profits, the net income went down 48.4 percent owing to rising fuel costs. Southwest shares were down 6% on the news, and are now down 5% for the year.
Yearly Leaders and Laggards
Who sits on the top of The Innovation Index? Amazon.com, Inc. (NASDAQ: AMZN) leads all innovators with 59% gains for the year. America Movil (NYSE: AMX) is showing a strong 20% gains owing to another good quarter. “America Movil’s first-quarter net profit soared 52.5% year-on-year to 15.80 billion pesos ($1.45 billion), or MXN0.45 a share, on the back of strong revenue growth and higher margins. The market was expecting net profit of MXN11.50 billion, or MXN0.33 a share, according to the median forecast of 10 analysts surveyed by Dow Jones Newswires. America Movil added nearly 6.5 million wireless subscribers in the quarter, bringing its total to 131.2 million, of which 44.8 million were in Mexico.” Apple Inc. (NASDAQ: AAPL) is up 17% for the year.
Starbucks Corporation (NASDAQ: SBUX) is down 10% this year. Starbucks is announcing earnings next week.
The Innovation Index Annual Report
I posted The Innovation Index Annual Report earlier in the year that included three Chapters:
Chapter One - Total Innovation Activity at the Top 20 Innovators
Chapter Two - The Top Innovator - The Innovator of Innovators
Chapter Three - The Innovation Insights and Roundup
About The Innovation Index
The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.
The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.
The Normalized Innovation Index has returned an impressive 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.
Alphabetical list of the top 20 Innovators of The Innovation Index and their stock ticker symbols:
3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)
The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.
Disclaimer: I invest in the stocks comprising The Innovation Index.
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