Fresh off another stock-picking triumph, researchers at Raymond James & Associates Inc. are turning a bit conservative.
The St. Petersburg-based firm came out on top again in the Wall Street Journal's latest quarterly ranking of brokerage houses based on the performance of stocks they recommend. Raymond James' picks were up 28.3 percent over the past quarter, 59.5 percent over the past year and 314.4 percent over the past five years.
Recommendations of a lot of sizzling small stocks have given Raymond James a stellar record since the Journal began including the firm in its rankings eight years ago. For performance over one-year periods, Raymond James has taken first place 16 out of 33 times in the quarterly rankings. For five-year periods, it has been No. 1 an impressive 24 times, although this year it has fallen to No. 2.
But now the firm is replacing some of the smallest stocks _ those with relatively few shares outstanding _ on its list of 29 top recommendations with bigger stocks it considers more likely to hold up in a stormy market. Suddenly, market capitalization _ the number of shares a company has outstanding _ has become a lot more important.
"We've become more defensive," said research director David A. Henwood. "We were very aggressive at the beginning of (last) quarter, saying that small cap stocks were going to lead but after the big hiccup in the market a week ago last Monday, we became more convinced that the institutional portfolio managers are going to be a lot more skittish about what they own and how they position portfolios. We're being selective, going toward higher quality names and bigger caps."
Raymond James' ratings in the Journal are based on the performance of stocks on the company's "Focus" list of recommendations the company considers most timely.
Its performance put Raymond James ahead of second-place Credit Suisse F.B. (17.2 percent gain for the quarter, 46.8 percent for the year) and far ahead of such well-known firms as PaineWebber, Smith Barney, Bear Stearns and Goldman Sachs.
But Henwood cautions that investors should not try to buy all the stocks on the list.
"That could lead to disillusionment," he said. When Raymond James recommends a stock, the move usually sends the price up, which means clients pay more and cannot replicate the performance that is reported in the Journal. That's especially true with the smaller, more thinly traded stocks.
"We want the list to be more of a shopping list to choose from," he said. "If a client is more conservative, they ought to be investing more in the total return and growth category. If they are aggressive, they should have more selections in the aggressive growth and cyclical categories."
Raymond James' picks
Here is a list of Raymond James & Associates' current stock recommendations.
Name Business return
Apartment Inv. & Mgt. REITs +37.0%
Omega Healthcare REITs +17.0%
Prentiss Properties REITs +14.4%
Carnival Corp. Entertainment cruise lines +52.6%
Gartner Group Information technology -27.1%
The Home Depot Building materials +71.9%
Laidlaw Inc. Outsourcing +21.2%
AccuStaff Inc. Alternative staffing +40.8%
Anchor Gaming Gaming +111.3%
Claire's Stores Specialty retailing +75.9%
E+Trade Group Internet/networking +195.7%
The Finish Line Inc. Specialty retailing -11.2%
IMCO Recycling Environmental services +25.8%
Ingram Micro Inc. Distribution-technology +40.8%
Medical Manager Healthcare information services +66.3%
Quorum Health Group Medical practice management +22.3%
Response Oncology Medical practice management +3.3%
Rio Hotel & Casino Gaming +43.3%
Steiner Leisure Entertainment cruise lines +120.8%
Superior Services Environmental services +36.2%
Sykes Enterprises Computer services +6.5%
Windmere Durable Florida special situations +80.9%
Apache Corp. Energy +16.9%
Burlington Resources Energy -3.2%
Comstock Resources Energy +23.1%
Furniture Brands Int'l Home furnishings +34.4%
NS Group Inc. Energy +531.0%
Precision Drilling Energy +88.8%
Veritas DGC Corp. Energy +147.3%
+ Dividends not included
Source: Raymond James & Associates