Scorecard: 2008 Beltway Stock Bets

WASHINGTON, D.C. -- In 2008, this author wrote 20 stories serving up Washington-themed stock picks. The proposition behind them was that companies and their investors often benefit from activity inside the Beltway, be it procurement, favorable legislation and regulation or even just political developments.

This approach worked out well enough in 2006 and 2007. Not this year.

On average, stocks highlighted in our 2008 stories show a total return of -26%, using prices from the date of publication through market close on Dec. 8. Small consolation: That's three points better, leaving aside transaction costs, than the S&P 500 return of -29% during equivalent time periods.

Full story at Forbes.com

Beltway Bet: iRobot

Since an initial public offering three years ago, iRobot's stock price has steadily dropped. The Burlington, Mass., company, whose machines can vacuum your floor or help soldiers sniff out roadside bombs, went public at $24. Recent price: $9.

By certain metrics, the stock looks tempting. Its latest 12-month price-to-earnings ratio is a modest 15, while the company's enterprise value, market capitalization plus net debt, stands at just 0.6 times its 12-month revenue of $316 million. The latter multiple is in line with a big defense contractor like Lockheed Martin and well below that of a comparable niche technology company like AeroVironment, whose enterprise-value-to-sales multiple is 2.5.

Full story at Forbes.com

One Roll of The Dice

For the 12 months ended Oct. 31, the S&P 500 lost 37%. Happily for the five bears in our annual equities contest, their picks did considerably worse. In October 2007 we challenged them each to name one stock that would trail the S&P over a one-year period. On average their stocks fell 61%. All five accepted our customary invitation to the winners to play again another year.

Our panel's 12 bulls scraped by. Only five of their picks beat the market, and only two of those showed gains. As a group they declined 37%, same as the S&P 500.
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Richard Jandrain, head of growth investing at Fort Washington Investment Advisors, leads the bulls. A year ago he liked the look of Pharmion, a developer of cancer treatments. So did Celgene (nasdaq: CELG - news - people ), which acquired Pharmion last March and helped Jandrain to a 50% gain.

Full story at Forbes.com

Value Stock In Pictures: Alcoa

Alcoa, one of the world's biggest aluminum producers, might tempt a contrarian. Here's a closer look.

Slide show at Forbes.com

Defense Stocks At The Turning Point

WASHINGTON, D.C. - With the election of Barack Obama, uncertainty hangs over U.S. defense companies. Michael Lewis, equity analyst at BB&T Capital Markets, isn't ready to make a call on how things will shape up for this sector in the Obama administration's first six months.

"It's very difficult to determine until we actually begin to see directional changes in funding or contracts actually starting to be pulled to the side," he says. "Longer term, I do think there will be some type of sea change with regard to how dollars are spent."

Fittingly, U.S. aerospace and defense stocks didn't dodge Wednesday's post-election market drop. The S&P 500's aerospace and defense constituents fell 5% yesterday, in line with the broader index's decline.

Full story at Forbes.com

Green Power

In early 2000 the San Diego County Water Authority flipped the switch on the Rancho Penasquitos Pressure Control & Hydroelectric Facility. For the $22 million project, engineering firm Black & Veatch designed an intricate series of computer-controlled connections that jacked up the pressure on water moving through a 22-mile pipeline. Result: swifter water flow for the authority and enough excess hydraulic pressure to run a 4.5-megawatt turbine. That provides sufficient juice both to power the Rancho Penasquitos system and to net the authority $1 million a year in emissions-free electricity sales back to its energy utility.

Such energy-water twofers represent an emerging sweet spot for Black & Veatch, ranked 126 on our Private Companies list. This 93-year-old engineering firm has made a large part of its living from big, carbon-spewing power plants. Now it is being reborn as a green company. It will help its clients cut emissions.

Power-related projects accounted for half of the Kansas City outfit's $3.2 billion revenue last year. Water made up 38%. "This nexus of energy and water is a big deal," says Chief Executive Len C. Rodman, 59, who likes to see fuel, power and sustainability as one large-scale piece. "It's going to be a bigger deal."

Full story at Forbes.com

Labor's Green Energy Elevator Pitch

Washington, D.C.--As the notion of the "green economy" has come into vogue over the last few years, organized labor licked its chops. Take the Apollo Alliance, for example. The labor-sponsored group launched in 2004 with claims that a shift to renewable energy could create 3.3 million jobs, presumably unionized, in the U.S.

At a mid-September forum in Washington, D.C., organized by the Cleantech Group, two labor reps made their case to the venture financiers now putting money into newfangled energy technology companies. They dangled labor's political muscle, $5 trillion in union pension assets and an emphasis on flexibility and partnership.

"Partnership is the most important thing that we want to get across to you today," said Christopher Chafe, executive director of Change to Win, a federation of seven unions with 6 million members. Chafe seasoned his remarks with words like "dialogue" and "relationships"--he used some variation of "partner" at least a dozen times.

Full story at Forbes.com

$488 Billion? That'll Do, For Now

Tuesday, President Bush signed into law a giant spending bill that, among other things, appropriated $488 billion for the U.S. Department of Defense for 2009. The defense spending sum fell $4 billion short of the president's budget request but represented a 6% increase over 2008 funding levels.

"Not bad," says Cord Sterling, vice president for legislative affairs with the Aerospace Industries Association (AIA), of the $488 billion. "That's a pretty good amount of money."

But pretty good needs to be a lot better, according to the AIA. The Rosslyn, Va., trade group, with a $10 million budget and 60 staffers, is pushing the industry position that the incoming administration and Congress must set defense spending at a minimum of 4% of gross domestic product, not including supplemental wartime spending bills.

The $488 billion in defense appropriations amounts to just 3.5% of U.S. GDP.

Full story at Forbes.com