Large-Cap Lesson

Large-Cap Lesson

A year ago William Young was already watching the market with cautious eyes. Last November, the president of Buford, Dickson, Harper & Sparrow, a portfolio management and financial services company based in St. Louis, selected a portfolio of large-cap pharmaceutical and technology stocks that he felt could weather an economic storm. Since then the outlook has become only more uncertain, and his choices weren’t spared by the volatility in the market. Overall his portfolio is down 8.8%, compared with a 12% rise in the S&P 500.

The portfolio was led by Texas Instruments, which was up 7.9%-though in July the company reported a 7% decline in second-quarter revenue compared with the previous year because of lower demand across a range of products. However, Young remains bullish and says investors should continue to hold.

Just behind was San Francisco-based McKesson Corp., North America’s largest prescription drug distributor, which was up 6.1%. “Since the healthcare sector is going to continue to be one of the strong areas,” says Young, “I would definitely hold on to this stock.”

While those two stocks posted gains, Young’s portfolio was weighed down by his other choices, both of which were down more than 20%. AstraZeneca, which manufactures drugs such as Crestor and Nexium, watched its share price drop 20.2%. Despite the slide, Young feels investors should think long term and hold their positions.

However, Young is not so optimistic about Ambac Financial Group Inc., given the recent credit crisis. Its shares are down 28.7%. “The financial sector has some problems right now, and I’d take this stock out of my portfolio,” says Young.

Company (Ticker) Price 8/17/06 Price 9/7/07 Total Return*
Ambac Financial Group Inc. (ABK) $84.28 $60.08 -28.7%
AstraZeneca plc (AZN) 60.19 48.03 -20.2
McKesson Corp. (MCK) 51.72 54.88 6.1
Texas Instruments (TXN) 32.30 35.30 7.9
Total Portfolio     -8.8
S&P 500 1,297.48 1,453.55 12.03

*Reflects stock splits and dividends source: yahoo! finance