The Innovation Index edges up to 17%, maintains lead over major U.S. indices - Weekly Report 05-18-07

The Innovation Index four-peats – four week of back-to-back gains. The Innovation Index added 1% last week, and is now up 17% for the year. The Innovation Index has already surpassed the 2006 performance of 13.2%, and we are only in May 2007. The Innovation Index easily crushes the major U.S. indices including the S & P 500, NASDAQ and Dow Jones. S & P 500 added 1% point, and is now up 7% for the year; NASDAQ was unchanged, and is up 6% for the year; the Dow Jones Index gained 2% points, and is now up 9% for the year. This is the fourth week in 2007 where The Innovation Index is having double-digit gains.

The Innovation Index closed at 81.00 on May 18, 2007, up 17% from the closing price of 69.31 on December 29, 2006.

What caused The Innovation Index to add another 1% in one week? Three innovators caused the jump, the largest increase coming from America Movil (NYSE: AMX) that went up 7% in just one week on strong economic reports from Mexico and Brazil.

10 of the Top 20 Innovators showed positive gains (compared to 9 in the previous week), 7 of the Top 20 Innovators showed negative gains (compared to 9 in the previous week), and 3 Innovators were unchanged last week (compared to 1 in the previous week).

Can The Innovation Index five-peat, and have another week of gains? We will find out next week.

Weekly Advances

The news of the week was Microsoft’s (NASDAQ: MSFT) acquisition of AQuantive (NASDAQ: AQNT). Microsoft shares were unchanged last week, and are up 4% for the year. Microsoft hits a walk-off home run with Aquantive acquisition.

Besides America Movil, Amazon.com, Inc. (NASDAQ: AMZN) went up 3% last week, and is now up 60% for the year.

“Amazon.com (NASDAQ:AMZN) announced it will launch a digital music store later this year offering millions of songs in the DRM-free MP3 format from more than 12,000 record labels. EMI Music's digital catalog is the latest addition to the store. Every song and album in the Amazon.com digital music store will be available exclusively in the MP3 format without digital rights management (DRM) software. Amazon's DRM-free MP3s will free customers to play their music on virtually any of their personal devices -- including PCs, Macs(TM), iPods(TM), Zunes(TM), Zens(TM) -- and to burn songs to CDs for personal use.” – This will be in direct competition to the market leading iTunes music store. Several analysts and investors believe that Amazon will be successful in this endeavor based on its market leading online music sales (CD) and customer base.

Amazon.com (NASDAQ:AMZN) also announced “it has acquired www.dpreview.com, the web's most comprehensive site for digital camera information and reviews. Founded in 1998 by Phil Askey, dpreview.com provides unbiased reviews and original content regarding the latest in digital cameras, and offers a host of features and forums designed to make it easy for consumers to find the camera that's right for them. With its unique voice and in-depth technical reviews, dpreview.com draws millions of unique visitors each month.” – This acquisition will allow Amazon to lure more digital camera buyers to the electronics store, and will ultimately provide Amazon valuable reviews of digital cameras. This is a great example of marriage between online content and catalog. Expect Amazon to create more acquisitions along these lines.

The Board of Directors of The Procter & Gamble Company (NYSE: PG) announced “some business unit realignments and associated changes to its executive management structure effective July 1, 2007. The company's three global business units will be: Beauty Care, Global Health & Well Being, and Household Care.

"We are making these moves to realign our business units and top leadership structure to meet the changing needs of our larger, more diverse, faster-paced global business," said Mr. Lafley – Chairman and CEO of P&G. "These changes are designed to help P&G's businesses consistently win at both the first (in-store) and second (at-home) moments of truth with consumers.

"Our business has nearly doubled since 2000. We've had three major acquisitions including Clairol, Wella and Gillette. And, we have tripled the pace of our business initiatives over this same period," said Lafley.

P&G also announced full conversion of Liquid Laundry Detergent Portfolio to New 2X-Concentrated Formulation in North America in 2007-2008.

"Concentrated laundry products represent another example of how the cleaning product industry, through groundbreaking research, collaboration with ingredient and packaging suppliers, and innovative manufacturing practices, is living out its commitment to deliver valuable products to consumers while reducing their environmental impact," according to The Soap and Detergent Association (SDA).

P&G shares were up 3% last week, and are only down 1% for the year.

Weekly Declines

eBay India launched eBay Blogs and My World for the Indian market. These two new services would allow India users to express their personality and increase their engagement with each other according to TechWhack, India. eBay Inc. (NASDAQ: EBAY) was down 4% last week, and is now up 9% for the year. I attended TiEcon 2007 over the weekend, and was inspired by Meg Whitman’s keynote presentation, President and CEO of eBay. Check out: Innovation and Leadership lessons from Meg Whitman, eBay CEO and President, and top Innovator
Cisco Systems Inc. (NASDAQ: CSCO) declined 2% last week. Cisco announced that it has received foreign regulatory approvals for the WebEx acquisition (NASDAQ: WEBX).

Yearly Leaders and Laggards

Who sits on the top of The Innovation Index? Amazon.com, Inc. (NASDAQ: AMZN) gained 3% last week and leads all innovators with 60% gains for the year. Apple Inc. (NASDAQ: AAPL) is next with 30% appreciation for the year. America Movil (NYSE: AMX) notched 7% points to rise to 30% gains for the year. There are five other innovators with double-digit gains for the year, including: 3M Company (NYSE: MMM) at 10%, Intel Corporation (NYSE: INTC) at 13%, IBM (NYSE: IBM) at 11%, RIM (NASDAQ: RIMM) at 19% and Yahoo Inc. (NASDAQ: YHOO) at 16%.

Starbucks Corporation (NASDAQ: SBUX) is down 18% for the year.

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 as of December 31, 2001.

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.

Share this post