Melton’s 13.3% gain gives him third title in 6 years

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Dwight Melton is beginning to make winning a habit.

For the third time in the six-year history of the contest, Melton, co-founder of the Hawaii Stocks and Options Group, captured top honors in the Star-Bulletin's annual survey of best investment ideas.

Melton earned a 13.3 percent gain in 2007 to boost his hypothetical $20,000 portfolio to $22,656.10. His double-digit gain, which came in spite of a housing meltdown and oil crisis that rocked the economy, easily beat three other local stock experts, as well as all the major indexes.

Richard Dole, chief executive of Honolulu investment adviser Dole Capital LLC, was the only other expert in the contest in positive territory as he eked out a 0.7 percent gain to $20,149.

Norm Caris, a Kauai resident and managing director-institutional sales for Caris and Co., was third with decline of 15.3 percent to $16,940.04.

And defending champion and value investor Barry Hyman, vice president-management team for the Maui branch of Michigan-based FIM Group Ltd., was last with a 37.3 percent decline to $12,534.77.

By contrast, the Nasdaq composite index had a total return of 10.7 percent in 2007, followed by the Dow Jones industrial average with a gain of 8.9 percent and the Standard & Poor's 500 index with an increase of 5.5 percent.

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Judging by the gyrations that already have hit the stock market in 2008, last year could have been a lot worse for investors.

Subprime became the buzzword as the housing meltdown took down banks and mortgage lenders across the country. Oil hovered around $100 a barrel. And three consecutive interest rate cuts during the last four months of the year did little to dissuade fears of a possible recession.

Still, one local stock expert, Dwight Melton, was in the right place at the right time. And for the third time in the six-year history of the contest, Melton captured top honors in the Star-Bulletin's annual survey of best investment ideas.

Melton chalked up a 13.3 percent gain to easily beat out three other local experts, as well as the three major indexes. The co-founder of the Hawaii Stocks and Options Group, and the most bullish of the local experts, turned his $20,000 hypothetical portfolio into $22,656.10.

"The stock market was underpinned for much of the recent year by mostly supportive economic data, by rising corporate earnings, and recently by a succession of interest rate reductions and by occasional reassuring words from Federal Reserve Board officials," Melton said.

Holding stocks back, he said, were record oil prices, the worsening credit crisis, a weaker dollar, the spreading housing debacle, and a sense among some market observers that the credit and housing problems would cause the economy to lapse into a recession.

Richard Dole, chief executive of Honolulu investment adviser Dole Capital LLC, was the only other expert in the contest in positive territory as he eked out a 0.7 percent gain to $20,149.

Norm Caris, a Kauai resident and managing director-institutional sales for Caris and Co., was third with decline of 15.3 percent to $16,940.04.

And defending champion and value investor Barry Hyman, vice president-management team for the Maui branch of Michigan-based FIM Group Ltd., was last with a 37.3 percent decline to $12,534.77.

By contrast, the Nasdaq composite index had a total return of 10.7 percent in 2007, followed by the Dow Jones industrial average at 8.9 percent and the Standard & Poor's 500 index at 5.5 percent

For the first time in his six years of contest participation, Melton leaned heavily toward country index funds.

That turned out to be a good move as iShares Malaysia, which he picked up after the first quarter, was the best-performing investment of any stock expert with a 21.5 percent gain in the nine months he owned it. Melton also had the distinction of having the second-best performer in apparel manufacturer Guess, which gave back a lot of its 55.2 percent gain through nine months but still held on for a 20.1 percent advance.

Melton also had a 15.8 percent gain in iShares Singapore in the nine months he owned it and an 11.3 percent gain in iShares Brazil after buying it for just the final three months of the year.

Under the contest rules, participants are allowed to alter their portfolio at the end of each quarter.

Dole, who held onto his picks for the entire year, was rewarded as PowerShares QQQ, formerly known as the Nasdaq-100 Trust, and Alexander & Baldwin, parent of Matson Navigation Co., each rose 19 percent. He also had a solid performer in defense giant Lockheed Martin, up 16 percent. Dole's performance, though, was hurt by Newport, a supplier of scientific and technical instruments, which tumbled 38.9 percent.

"The Nasdaq outperformed the other U.S. indexes in 2007, but many sectors of the Nasdaq failed to perform as well as the averages," Dole said.

Caris had only one winner at year-end in Hawaiian Holdings, the parent of Hawaiian Airlines, which rose 4.1 percent. But his cautiousness with the market, which he said "performed in line to a little better than I had expected," limited his overall losses as he ended the year with $4,911 in cash.

His big loser in 2007 was Collective Brands, formerly Payless ShoeSource, which he called undervalued because of synergies with its Stride-Rite acquisition and its leadership by successful ex-Nike and ex-Cole Haan executives. At midyear, Caris picked up 100 shares of Collective Brands -- which fell 44.9 percent over the last six months -- and then added 200 shares after the third quarter and saw those holdings decline 21.2 percent.

Hyman, the defending champion with a 19.5 percent gain in 2006, suffered his worst overall performance ever due to the blowup of Premier Wealth Management, which fell 97.2 percent to 3 cents. The European niche financial services firm -- which changed its name from Tally-Ho Ventures -- started the year at $1.06 but encountered wider losses, was forced to restate earnings and was delinquent with its financial filings.

The collapse of Premier Wealth Management marked the second time that Hyman had the misfortune of taking a big hit with a stock. In 2002, his pick of WorldCom-MCI Group tumbled 98.4 percent after the company filed for bankruptcy and eliminated MCI's hefty dividend. Later on, accounting scandals unsurfaced and Chief Executive Bernie Ebbers was sentenced to prison.

Under contest rules in place at the time that Hyman owned WorldCom-MCI, stock pickers were not allowed to change their picks each quarter and had to stay with the same selection for the entire year.

Hyman, typically a value investor, had one winner in this past year's contest with iShares Lehman 1-3 Year Treasury Bond Fund, which rose 7.4 percent. And, with another pick, Ultrashort QQQ, he might have been a bit early with the double-inverse Nasdaq-100 index fund, which fell 27.3 percent. That fund has turned out to be a big gainer so far in 2008 with a gain of 34.6 percent through Friday.

"Stocks on a whole did better than I expected given the barrage of negative news in the housing and financial sectors," Hyman said. "Global monetary conditions remained favorable and ample liquidity provided sufficient buying power to keep the broader markets in the black. That liquidity began to dry throughout the year and we began to see increased volatility."

2007 year-end forecasts

Hawaii stock experts underestimated the performance of the major indexes last year.

COMPANY	DOW	NASDAQ	S&P 500
Norm Caris	12,090	2,370	1,375 Caris and Co.
Richard Dole	12,000	2,500	1,400 Dole Capital LLC
Barry Hyman	11,000	2,000	1,200 FIM Group Ltd.
Dwight Melton	14,300	2,800	1,600 Hawaii Stocks and Options Group
Dec. 31, 2007 close	13,264.82	2,652.28	1,468.36
2007 consensus	12,347.50	2,417.50	1,393.75
2006 close	12,463.15	2,415.29	1,418.30

Star-Bulletin

A long line of winners

Champions of the Star-Bulletin's annual survey of best investment ideas:

2007
Dwight Melton
Hawaii Stocks and Options Group
+13.3%

2006
Barry Hyman
FIM Group Ltd.
+19.5%

2005
Dwight Melton
Hawaii Stocks and Options Group
+72.0%

2004
Dwight Melton
Hawaii Stocks and Options Group
+23.3%

2003
Paul Loo*
Morgan Stanley
+157.4%

2002
Richard Behnke *
Abel-Behnke Corp. Securities
+19.6%

* Deceased
Notes: 2005: The first year that investors were allowed to change picks at the end of each quarter. 2004: The first year that investors were given a hypothetical $20,000 portfolio. 2002-2003: Investors' results were calculated by averaging the return of all their selections

Best investment ideas of 2007

Hawaii stock experts began the year with a $20,000 hypothetical portfolio:

DWIGHT MELTON

Hawaii Stocks and Options Group
Position: Co-founder
2007 return: +13.3%

Company	Ticker	Sector	Shares	12/31 close	12/31 Total return	12/31 value
iShares Malaysia	EWM	Index fund	366	$12.73	+21.5%	$4,659.18
Guess*	GES	Apparel manufacturer	134*	$37.89	+20.1%	$5,077.26
iShares Singapore	EWS	Index fund	289	$13.79	+15.8%	$3,985.31
iShares Brazil	EWZ	Index fund	53	$80.70	+11.3%	$4,277.10
iShares China	FXI	Index fund	25	$170.45	-4.2%	$4,621.25
Cash**						$36.00
Total						$22,656.10

RICHARD DOLE

Dole Capital LLC
Position: Chief executive
2007 return: +0.7%

Company	Ticker	Sector	Shares	12/31 close	12/31 Total return	12/31 value
PowerShares QQQ***	QQQQ	Index fund	100	$51.22	+19.0%	$5,122.00
Alexander & Baldwin	ALEX	Ocean transportation / real estate	75	$51.66	+19.0%	$3,874.50
Lockheed Martin	LMT	Aerospace / defense	25	$105.26	+16.0%	$2,631.50
Pfizer	PFE	Medical / drugs	150	$22.73	-8.1%	$3,409.50
Newport	NEWP	Scientific and technical instruments	150	$12.79	-38.9%	$1,918.50
Cash**						$3,193.00
Total						$20,149.00

NORM CARIS

Caris and Co.
Position: Managing director for institutional sales
2007 return: -15.3%

Company	Ticker	Sector	Shares	12/31 close	12/31 Total return	12/31 value
Hawaiian Holdings	HA	Airlines	800	$5.10	+4.1%	$4,080.00
Novellus Systems	NVLS	Semiconductor equipment	120	$27.57	-13.9%	$2,732.04
Collective Brands****	PSS	Footwear retailer	300	$17.39	-44.9%	$5,217.00
Cash**						$4,911.00
Total						$16,940.04

BARRY HYMAN

FIM Group Ltd.
Position: Vice president of management team
2007 return -37.3%

Company	Ticker	Sector	Shares	12/31 close	12/31 Total return	12/31 value
iShares Lehman 1-3 Year	SHY	Index fund	62	$82.19	+7.4%	$5,095.78 Treasury Bond Fund
Mitsubishi UFJ Financial Group	MTU	Banking	401	$9.33	-24.2%	$3,741.33
Ultrashort QQQ	QID	Double inverse Nasdaq-100 index fund	91	$37.98	-27.3%	$3,456.18
Premier Wealth Management*****	PWMG	Investment management	4,716	$.03	-97.2%	$141.48
Cash**						$100.00
Total						$12,534.77

* Shares split 2 for 1 on March 12, 2007. ** Cash will receive the highest rate listed by Bankrate.com, Countrywide Bank, FSB (5.35%), at the start of the quarter. ***Changed name from Nasdaq-100 Trust on March 21, 2007. ****Changed name from Payless ShoeSource on Aug. 20, 2007. The total return listed for Collective Brands is for the last six months of 2007 for 100 shares owned in Caris' portfolio. He purchased another 200 shares after the third quarter, producing a negative 21.2 percent return. The Dec. 31 value of Caris' Collective Brands holdings includes both purchases. ***** Changed name from Tally-Ho Ventures on Oct. 10, 2007. Note: Total return for all investors includes reinvested dividends