The Innovation Index closed 2007 with 66% gain, crushing the major U.S. indices.
Even though Apple Inc. kicked Off 2008 with bold new innovations, and Apple delivered outstanding results for the latest quarter beating the analyst expectations, Apple shares are down 36% from their 52 week peak of $202.96. Apple had the best quarter in its history. Further, eBay, Cisco and Intel shares are also down 34%, 29% and 29% respectively from their 52 week highs. eBay, Cisco and Intel all had great quarters as well, and beat the analyst expectations.
Why?
On the other hand, IBM and Microsoft had great quarters as well, and also beat analyst expectations. However, IBM and Microsoft shares are trending up, and are only down 14% and 12% from their 52 week highs respectively. NASDAQ composite is also down, but only 19% from the 52 week high.
Thus, IBM and Microsoft stocks are doing better relative to the NASDAQ and also four innovators.
Future Earnings Guidance
IBM and Microsoft came out with positive, uplifting future earnings guidance for 2008. Their earnings guidance either met or beat the street's expectations. Hence, their stocks are trending up! On the other hand, the street perceived Apple's, Cisco's, eBay's, and Intel's 2008 guidance as weak, and below their expectations. Are Apple, Cisco, eBay and Intel sandbagging, or simply playing the conservative earnings guidance game - under-promise and over-deliver? Or are they taking into account the current economic climate, and simply don't want to over-promise?
It's evident though that even these Top Innovators are not immune to interim stock price fluctuations owing to their earnings guidance. The reality is that these companies will outperform, and show a solid earnings growth. At which point, their stocks will go up. For now, because of their relatively weak outlook, their stocks are battered down. Perhaps they provide an excellent buying opportunity to the prudent, value investor.
The Innovation Index Reports:
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance
About The Innovation Index
The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in
The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.
Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:
3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
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)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)
The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.
Disclaimer: The Innovation Index Group, Inc. invested in the stocks comprising The Innovation Index.
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