Jim Oberweis, The Oberweis Report newsletter - (DTLK) - (SAN) - (SRM) - (OPLK)

Jim Oberweis and his team, from The Oberweis Report newsletter, explain that while year-by-year results can be volatile, disciplined investors who remain fully invested in a portfolio of high-growth equities selected using these featured experts' methodology have historically achieved an exceptional average rate of return over long periods of time. Discover what Oberweis' team has to say about their history of investing. Then take a look at a few holdings from their Current Portfolio. Commentary from October 2 Thirty years ago Jim Oberweis and his team began publishing a model portfolio with a stated objective of outperforming the Dow Jones Industrial Average (DJIA) by an absolute 10 percentage points per year. Oberweis and his team met that objective in 19 of the 29 full calendar years. Note that despite an excellent long term track record, not every year has been a winner. For example, Oberweis and the team trailed in 1993 and 1994 and had a challenging period relative to the index from 1996 through 1998. They experienced isolated one-off years of underperformance like 1984 as well. On the other hand, those challenging times were redeemed by fantastic return years, such as 1980 (+105.0%), 1991 (+87.5%), and 2003 (+74.7%). So far in 2006, Oberweis and his team are trailing the Dow by a fairly wide margin through September 30th and 2006 will likely end up as one of those years in which the types of companies targeted by Oberweis' process did not perform as well as the broader market. Of course, the number that really counts is the long term average return. Over longer periods of time, Oberweis' Model Theoretical Portfolio has substantially exceeded his expectations with a compound rate of return of 23.4% compared to 8.5% for the DJIA, 8.8% for the S&P 500 Index (excluding dividends), and 11.2% for the NASDAQ Composite. Oberweis and his team's return excludes transactions costs and dividends and is for a theoretical portfolio using closing prices on the last Friday of each month. Psychologists have repeatedly documented that the human mind tends to overweight recent experience when forecasting the future. When Oberweis' process works well, his readers think he and the team are heroes. Assets flow into their funds and subscriptions skyrocket. During years in which Oberweis and his team's style falls out of favor, they typically experience much quieter business activity. However, in their opinion, this effect is neither prudent nor rational. If there is a time to overweight, Oberweis and his team believe the most favorable risk/reward opportunities tend to fall after a period in which their style has been out of favor. In other words, in times like the present, when companies within Oberweis' universe seem to be out of style and are trading at below-average P/E valuations. Oberweis and the team believe years like 2006 tend to be great buying opportunities, though ironically such points also tend to be the time most people are least likely to buy. Over the long run, Oberweis and his team believe that these long-term results indicate the use of the “Oberweis Octagon” method of stock selection can help produce superior investment returns. This is the same stock selection process used for The Oberweis Funds, though individual stock selections may differ. Oberweis and his team believe that much of their success over the last thirty years was achieved by looking in areas where others are not. Historically, they have sought out smaller companies in the U.S. which do not tend to attract as much institutional attention. Last year they told you that they would be expanding their efforts into other countries and in October 2005 launched their China Opportunities investment strategy. In 2007, Oberweis and his team are planning to expand their international effort with yet another international strategy. As you will see, they are planning to devote significant resources in the years to come toward applying their same philosophy around the world to discover hidden values. Their research office in Hong Kong represents a significant commitment toward unlocking and discovering value in China, as evidenced in portfolio selections such as Focus Media Holding (FMCN). Through their U.S. team, their China team, and their International team, Oberweis and his team believe their opportunity to find exceptional investment ideas will be even better than it ever has been. The lesson from their long-term record is that, although year-by-year results can be volatile, disciplined investors who remain fully invested in a portfolio of high-growth equities selected using their methodology have historically achieved an exceptional average rate of return over long periods of time. A couple of holdings from the Current Portfolio… DataLink Corporation (DTLK) is an information storage architect focusing on the analysis, implementation, and support of information storage infrastructures that store, protect, and provide continuous access to information. Their core capabilities include: protection against planned/unplanned downtime while providing fast 24/7 access to information and data recovery solutions such as local and remote backup, snapshot and replication; and storage management solutions including consolidation, storage area network (SAN) management, virtualization, and storage resource management (SRM), among others. As an independent architect, the company is not tied to any one platform or set of products, providing their customers the flexibility to choose hardware and software from leading innovators. Revenues in the most recent second quarter increased 39% to $39.8 million vs. $28.7 million in the same year-ago quarter. Earnings per share in the quarter grew to $0.18 from $.04 in the prior-year second quarter. Oplink Communications' (OPLK) principal activity is to provide design, integration, and optical manufacturing solutions for optical networking components and subsystems. The company produces fiber optic subsystems, integrated modules and components for next-generation, all-optical dense wavelength division multiplexing (DWDM), optical amplification, routing, monitoring, and conditioning applications. The products are categorized into two groups: Bandwidth Creation Products which include wavelength expansion and optical amplification products. The Bandwidth Management Products include wavelength performance monitoring, protection and optical switching products. Customers include telecommunications, data communications and cable TV equipment manufacturers such as Huawei, Siemens, Tellabs, Marconi and others. Oplink has manufacturing operations in San Jose, California, Zhuhai and Fuzhou in China. The company also acquired 96% of F3 Inc in fiscal 2006. In the company's latest reported fourth quarter, sales increased 90% to $16.9m from $8.9m in the same period of 2005. Earnings per share during the same period increased 125% to $.09 vs. $.04 in the same period of 2005. Other Current Portfolio stocks include… LifeCell Corp. (LIFC) develops and markets biologic products for the repair or replacement of damaged or inadequate tissues. The company's core preservation technology produces an acellular tissue matrix, which retains the essential biochemical and structural components necessary for normal tissue regeneration. The company's product development programs include a small diameter vascular graft as an alternative to autografted blood vessels, orthopedic applications of its acellular dermal matrix and Thrombosol, a formulation for storage of platelets. Metretek Technologies, Inc. (MEK) designs, manufactures and sells natural gas metering systems and automated systems to monitor and record the energy consumption of industrial and commercial consumers; Southern Flow Companies, Inc., which provides measurement services and equipment to natural gas producers, operators and transporters. Through its two subsidiaries, the company provides a spectrum of measurement technology and services to the energy industry, including applications in field operations, transportation and distribution facilities, and consumers markets. Saba Software, Inc. (SABA) is a provider of software and services that enable businesses and governments to create and deploy global networks over the Internet that connect people to learning. The Internet-based software platform and related services enable organizations to procure and deliver learning and systematically close knowledge and competency gaps across their base of employees, customers, partners and suppliers, known as the extended enterprise. The company offers learning providers an Internet-based global marketing and distribution channel. This article highlights the commentary of James Oberweis Jr. for the Zacks.com audience. James Oberweis Jr. provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "Oberweis Report" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "Oberweis Report" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now. Here's How You Can Profit from the Pros Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. 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