Several stocks accounted for the mediocre performance.

Getty Images GYI (-38%) had a disappointing quarterly earnings report. Morningstar star reduced its fair market value estimate. Investors Advisory service recommends selling GYI, noting that the company faces increased competition in the Internet photo images market. Morningstar reduced GYI’s moat rating from “wide” to “narrow.” The visual section of the stock selection guide show the downturn. See the current stock selection guide (SSG) which shows a projected average return (PAR) of only 7.6%. My bad for recommending this one. We should probably sell GYI at some point soon.

Amgen AMGN (-26.6%) has been down for the year. However, most of the analyst reports cite its pipeline and consider it a strong long term buy. Here is the current AMGN SSG. Note that the PAR of 22.7% and that assumes a relatively modest EPS growth of 11%. AMGN is definitely a hold and probably a buy. Now if the market will just recognize what we do!

Of course we had several winners YTD as well. These include INTC (+23.7%), ITW (+24.9%), JKHY (+25.2%), and OXY (+27.8%). This highlights the importance of diversification.

Here are three transactions that may improve our portfolio performance for this year.

• Replace Stryker (SYK) with Medtronics (MDT). Stryker has advanced 22% this year. The price increase has diminished its long term prospects. Morningstar rates it two stars (a little over priced). In contrast MDT is rated five stars (a bargain). Both companies are quality medical suppliers, however, the prospects are a little better for MDT.
• Sell Getty Images (GYI). We are better off selling and redeploying the cash.
• Buy Superior Energy Services (SPN). BNP Is a diversified provider of specialized oilfield services and equipment. While oilfield services are cyclical, the prices for oil and gas have not gone down and the demand for oilfield services continues. The SSG for SPN looks strong. Neither Morningstar nor Value Line cover SPN, but it received a five star rating from Standard & Poors. We should move quickly on SNP as it appears particularly undervalued now.

Stock Selection Guide Updated. The SSG for Amgen has been updated. 5-year EPS was projected using the “preferred procuredure” with the following assumptions: revenue growth of 15%, pretax margin 40.4%, tax rate of 26.5% and outstanding shares of 1,175 million. This results in a projected average return of 13.9% using an averate high PE of 29 and average low PE of 16.5. This puts Amgen in the “buy” range. Both IAS and First Call’s analysts consensus project growth at 20%, so the 15% projected growth used in the SSG is conservative.

For the fifth time, Amgen has been named one of the “100 Best Companies to Work for in America” by Fortune magazine. Also, Amgen ranked fifth in The Scientist’s annual survey of the best workplaces for 2004. Details.  Amgen also has an excellent website for investors.

From December 2004 Investor Advisory Service by IClub: IAS also has Amgen in the “buy” range. “Amgen reported continuing solid results for the third quarter of 2004 with total product sales up 23%. On an adjusted basis, excluding one-time factors relating to the company’s acquisition of Tularik, earnings per share growth was 39%. The company also increased guidance for expected earnings per share for the year from about $2.35-$2.40. The sales guidance was also improved to about $10.4 billion for the year. While the company is dependant on a limited number of products, these have continued to grow and sell well. There are also a number of interesting new possibilities in the process of development. Certainly Amgen is the most successful of the world’s biotech companies. AMGN (59.87) is a buy up to 82.”

Company Description: Amgen Inc. uses biotechnology to develop and manufacture human therapteutic agents in the areas of hematology, oncology, and inflammation. Important products: Aranesp/Epogen (19%/29% of 2003 sales) for anemia related to cancer chemotherapy and chronic kidney failure; Neulasta/Neupogen (15%/15%), a stimulator of the immune system, and Enbrel (16%) for rheumatoid arthritis. Int’l business: 13% of 2003 sales. 2003 deprec. rate: 6.3%; R&D, 20% of sales. Acquired Immunex 7/02. Has 12,900 employees; 16,000 stockholders. Officers & dir. own 4.5% of stock; other major investors, 18.2% (4/04 Proxy). Chairman & CEO: K.W. Sharer. Inc.: Delaware. Address: One Amgen Center Dr., Thousand Oaks, CA 91320. Tel.: 805-447-1000. Internet: www.amgen.com