The Innovation Index rises to 13%, doubles lead over major U.S. indices - Weekly Report 05-04-07
The Innovation Index closed at 78.12 on May 4, 2007, up 13% from the closing price of 69.31 on December 29, 2006.
What caused The Innovation Index to add another 2% in one week? Four innovators caused the jump, the largest increase coming from Yahoo! Inc. (NASDAQ: YHOO) that went up 9% in just one week owing to buyout or merger rumors with Microsoft Corp (NASDAQ: MSFT), so as to compete against the search market leader Google Inc. (NASDAQ: GOOG). In post market action, the buyout rumors seem to have fizzled and it appears that Yahoo and Microsoft may be headed towards a strategic partnership instead.
13 of the Top 20 Innovators showed positive gains (compared to 15 in the previous week), 6 of the Top 20 Innovators showed negative gains (compared to 3 in the previous week), and 1 Innovator was unchanged last week (compared to 2 in the previous week).
Can The Innovation Index three-peat, and have another week of gains? We will find out next week.
Weekly Advances
Besides the large weekly gain for Yahoo, three other innovators gained 5% each in one week including 3M Company (NYSE: MMM), Cisco Systems, Inc. (NASDAQ: CSCO), and Microsoft Corporation (NASDAQ: MSFT). Yahoo stock is back in 20+% territory. 3M is still reverberating from the solid quarterly financial results and the stock buyback program. 3M is now up 9% for the year. Cisco gained owing to positive earnings anticipation (earnings are out next week), and is back in the black - +2% gains for the year. Finally, Microsoft is also back in positive territory owing to 5% jump in one week owing to a better than expected quarter. Microsoft is up 3% for the year now. General Electric Co. (NYSE: GE) made a comeback, notched 4% gain in one week, and is now unchanged for the year. GE had a solid quarter; however, investors have taken their time to reward GE’s performance.
Weekly Declines
Starbucks Corporation (NASDAQ: SBUX) had a good second quarter.
“Fiscal Second Quarter 2007 Highlights:
-- Consolidated net revenues of $2.3 billion, an increase of 20 percent
-- Net earnings of $151 million, an increase of 18 percent
-- Net earnings per share of $0.19, compared to $0.16 per share, an increase of 19 percent
-- 560 retail store openings
-- Comparable store sales growth of four percent, versus most difficult quarterly comparison this year
-- International segment revenue increased by 30 percent”
Starbucks reported an 18.5 percent rise in quarterly earnings “helped by hundreds of new stores and demand for new products including hot breakfast sandwiches and a sugar-free version of its popular Cinnamon Dolce latte.”
Starbucks even announced a new share buyback authorization of 25 million shares.
However, the unimpressed investors sold off, resulting in a loss of 4% in just one week, and the stock going down 13% for the year. The investors were apparently looking for higher same store sales growth in the U.S.
Yearly Leaders and Laggards
Who sits on the top of The Innovation Index? Amazon.com, Inc. (NASDAQ: AMZN) leads all innovators with 60% gains for the year. Amazon.com also announced that its board had approved a $500 million stock buyback over the next two years. Is stock buyback a good company strategy for creating new innovations? You decide. America Movil (NYSE: AMX) notched another percentage to rise to 21% gains for the year. Yahoo! Inc. (NASDAQ: YHOO) is also tied at 21% gains. Apple Inc. (NASDAQ: AAPL) gained 2% last week, and is up 19% for the year.
Starbucks Corporation (NASDAQ: SBUX) is down 13% for the year.
The Innovation Index Annual Report
I posted The Innovation Index Annual Report earlier in the year that included three Chapters:
Chapter One - Total Innovation Activity at the Top 20 Innovators
Chapter Two - The Top Innovator - The Innovator of Innovators
Chapter Three - The Innovation Insights and Roundup
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.
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